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 October 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)


                                 Not Applicable
         (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:  8,014,185 (as of December
1, 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 October 31, 1997               

              Unaudited Statements of Operations for the three
              months ended October 31, 1997 and 1996 and for the
              nine months ended October 31, 1997 and 1996                  

              Unaudited Statements of Cash Flows for the nine
              months ended October 31, 1997 and 1996                       

              Notes to Financial Statements                                

ITEM 2.       Management's Discussion and Analysis                         


                           PART II - OTHER INFORMATION

ITEM 2.       Changes in Securities and Use of Proceeds                    

ITEM 6.       Exhibits and Reports on Form 8-K                             


<PAGE>
                    THE SOURCE INFORMATION MANAGEMENT COMPANY

                             Unaudited Balance Sheet

                                October 31, 1997
--------------------------------------------------------------------------------

Assets (Note 3)
Current
    Cash                                                        $        17,387
    Trade receivables (net of allowance for doubtful 
       accounts of $374,841) (Note 5)                                15,760,271
    Income tax receivable                                               151,989
    Notes receivable - officer (Note 2)                                   7,351
    Other current assets                                                222,995
--------------------------------------------------------------------------------
Total Current Assets                                                 16,159,993
--------------------------------------------------------------------------------
Office equipment and furniture                                        2,109,953
Less accumulated depreciation and amortization                        1,378,829
--------------------------------------------------------------------------------
Net Office Equipment and Furniture                                      731,124
--------------------------------------------------------------------------------

Other Assets
    Notes receivable - officer (Note 2)                                  14,742
    Goodwill (net of accumulated amortization of $191,274)            3,233,763
    Other                                                               156,239
--------------------------------------------------------------------------------
Total Other Assets                                                    3,404,744
--------------------------------------------------------------------------------
                                                                $    20,295,861
--------------------------------------------------------------------------------


                 See accompanying notes to financial statements

<PAGE>
                    THE SOURCE INFORMATION MANAGEMENT COMPANY

                             Unaudited Balance Sheet


                                October 31, 1997
--------------------------------------------------------------------------------

Liabilities and Stockholders' Equity

Current
   Checks issued against future deposits                        $       856,437
   Accounts payable and accrued expenses                                640,383
   Due to retailers (Note 6)                                            183,254
   Deferred income taxes (Note 7)                                        91,000
   Current maturities of long-term debt (Note 3)                      2,207,564
--------------------------------------------------------------------------------
Total Current Liabilities                                             3,978,638
--------------------------------------------------------------------------------
Long-term Debt, less current maturities (Note 3)                      4,163,794
--------------------------------------------------------------------------------
Deferred Income Taxes (Note 7)                                          178,000
--------------------------------------------------------------------------------
Total Liabilities                                                     8,320,432
--------------------------------------------------------------------------------

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

Stockholders' Equity
   Common Stock, $.01 par - shares authorized, 
      16,528,925; outstanding 8,014,185                                  80,142
   Additional paid-in capital                                        10,616,884
   Retained earnings                                                  1,278,403
--------------------------------------------------------------------------------
Total Stockholders' Equity                                           11,975,429
--------------------------------------------------------------------------------
                                                                $    20,295,861
--------------------------------------------------------------------------------

                 See accompanying notes to financial statements

<PAGE>

<TABLE>

                    THE SOURCE INFORMATION MANAGEMENT COMPANY

                       Unaudited Statements of Operations

---------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                             Three Months Ended October 31,         Nine Months Ended October 31,
                                          -------------------------------------  ------------------------------------
                                                1997                1996                 1997               1996
---------------------------------------------------------------------------------------------------------------------

<S>                                       <C>              <C>                   <C>                 <C>            
Service Revenues                          $    2,943,766   $         2,004,343   $      8,403,434    $     4,750,601
Merchandise Revenues                                   -                95,847              8,348            108,088
---------------------------------------------------------------------------------------------------------------------
                                               2,943,766             2,100,190          8,411,782          4,858,689
---------------------------------------------------------------------------------------------------------------------
Cost of Service Revenues                       1,522,201             1,222,833          4,374,058          3,573,925
Cost of Merchandise Sold                               -                81,967             32,720             93,221
---------------------------------------------------------------------------------------------------------------------
                                               1,522,201             1,304,800          4,406,778          3,667,146
---------------------------------------------------------------------------------------------------------------------
                                               1,421,565               795,390          4,005,004          1,191,543
Selling, General and Administrative
  Expense                                        536,058               649,027          1,598,231          2,320,529
---------------------------------------------------------------------------------------------------------------------
Operating Income (Loss)                          885,507               146,363          2,406,773        (1,128,986)
---------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
            Interest income                        1,198                10,158             14,860             26,398
            Interest expense                   (192,494)              (88,276)          (608,245)          (202,454)
            Other                               (20,955)               (3,589)           (61,579)           (14,304)
---------------------------------------------------------------------------------------------------------------------
Total Other Income (Expense)                   (212,251)              (81,707)          (645,964)          (190,360)
---------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes                673,256                64,656          1,751,809        (1,319,346)
Income Tax (Expense) Benefit (Note 7)            296,000               (2,246)            785,000            476,217
---------------------------------------------------------------------------------------------------------------------
Net Income (Loss)                         $      377,256   $            62,410   $        966,809    $     (843,129)
---------------------------------------------------------------------------------------------------------------------

Earnings (Loss) per Share - Primary
and Fully Diluted                         $         0.06   $              0.01   $           0.16    $        (0.15)
---------------------------------------------------------------------------------------------------------------------

Weighted Average of Shares Out-
standing - Primary and Fully Diluted           6,746,376             5,809,050          6,158,063          5,470,010
---------------------------------------------------------------------------------------------------------------------

                 See accompanying notes to financial statements
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                    THE SOURCE INFORMATION MANAGEMENT COMPANY

                       Unaudited Statements of Cash Flows


Nine Months Ended October 31,                                                     1997                  1996
------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                  <C>
Operating Activities
   Net income (loss)                                                      $         966,809    $        (843,129)
   Adjustments to reconcile net income to cash used in operating
   activities:
        Depreciation and amortization                                               307,151               167,711
        Provision for losses on accounts receivable                                  39,224                97,636
        Impairment of investment in limited partnership                              15,000                15,000
        Loss on disposition of assets                                                 1,338                     -
        Increase in cash surrender value of life insurance                         (43,564)                     -
        Deferred income taxes                                                     (161,000)             (195,191)
        Services received in exchange for Common Stock                                8,000                21,600
        Changes in assets and liabilities:
           Increase in accounts receivable                                      (2,284,433)           (2,361,834)
           Increase in other assets                                               (101,942)             (520,839)
           Decrease in checks issued against future deposits                    (2,369,231)                     -
           Decrease in accounts payable and accrued expenses                      (177,711)             (545,734)
           (Decrease) increase in amounts due customers                            (16,321)                29,758
------------------------------------------------------------------------------------------------------------------
Cash Used in Operating Activities                                               (3,816,680)           (4,135,022)
------------------------------------------------------------------------------------------------------------------

Investment Activities
   Acquisition of Mike Kessler & Associates, Inc., net of cash acquired           (349,777)                     -
   Acquisition of Magazine Marketing, Inc.                                                -             (275,000)
   Capital expenditures                                                           (205,113)             (176,780)
   Loan to affiliate                                                               (38,000)                     -
   Collections from affiliate                                                        27,576                     -
   Loan to officer                                                                 (10,000)                     -
   Collections from related party                                                         -                22,000
   Collections on officer notes receivable                                          221,485                29,715
   Proceeds from sale of fixed assets                                                 2,000                     -
   Proceeds from surrender of life insurance policies                                83,959                     -
------------------------------------------------------------------------------------------------------------------
Cash Used in Investing Activities                                                 (267,870)             (400,065)
------------------------------------------------------------------------------------------------------------------
</TABLE>
                 See accompanying notes to financial statements

<PAGE>
<TABLE>
                    THE SOURCE INFORMATION MANAGEMENT COMPANY


                       Unaudited Statements of Cash Flows

<CAPTION>
Nine Months Ended October 31,                                                       1997                  1996
------------------------------------------------------------------------------------------------------------------

<S>                                                                               <C>                      <C>
Financing Activities
   Proceeds from issuance of Common Stock                                         6,828,797                30,000
   Proceeds from issuance of Preferred Stock                                              -             1,922,075
   Borrowings under credit facility                                              27,051,000               281,317
   Principal payments on credit facility                                       (30,019,000)             (104,261)
   Borrowings under short-term debt agreements                                            -             3,206,000
   Repayments under short-term debt agreements                                     (43,656)             (647,000)
   Preferred Stock dividends                                                            (3)                   (6)
   Purchase of fractional shares                                                      (322)                     -
   Proceeds from issuance of warrants                                                   200                     -
------------------------------------------------------------------------------------------------------------------
Cash Provided by Financing Activities                                             3,817,016             4,688,125
------------------------------------------------------------------------------------------------------------------

(Decrease) Increase in Cash                                                       (267,534)               153,038


Cash, beginning of period                                                           284,921                23,828
------------------------------------------------------------------------------------------------------------------
Cash, end of period                                                       $          17,387    $          176,866
------------------------------------------------------------------------------------------------------------------
</TABLE>

                 See accompanying notes to financial statements
<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 October
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 nine  months  ended  October  31,  1997 are not  necessarily
indicative of the results to be expected for the entire year.


2. Related Party Transactions

The Company  purchased  $276,000 in data processing  services from an employment
service company owned by certain  officers of the Company during the nine months
ended October 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 October 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  $169,000 and $139,000 for the nine months ended  October 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 $7,400 and $0 for the nine months ended October 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 amount of $295,293. Collections on these notes totaled $273,200
through October 31, 1997, including $221,485 collected during October, leaving a
balance  outstanding  of $22,093.  The  remaining  notes bear  interest at rates
varying from 6.96% to 7.34% per annum.

<PAGE>
                   THE SOURCE INFORMATION MANAGEMENT COMPANY
                          Notes to Financial Statements

-------------------------------------------------------------------------------

3.  Long-term Debt and Revolving Credit Facility

Long-term debt consists of:

October 31,                                                           1997
--------------------------------------------------------------------------------

Revolving Credit Facility                                         $ 4,156,000

Note payable to former  owner of Mike Kessler &  Associates,
Inc., due 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                         14,401

Obligations under capital lease                                        22,293
--------------------------------------------------------------------------------
Total Long-term Debt                                                6,371,358

Less current maturities                                             2,207,564
--------------------------------------------------------------------------------

Long-term Debt                                                 $    4,163,794
--------------------------------------------------------------------------------

The Company has an agreement  providing for a revolving loan up to  $15,000,000.
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  9.1563% at October 31,  1997).  Borrowings  are
secured  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
October 31, 1997.




<PAGE>
                   THE SOURCE INFORMATION MANAGEMENT COMPANY
                          Notes to Financial Statements

-------------------------------------------------------------------------------

4.  Supplemental Cash Flow Information

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

Nine Months Ended October 31,                      1997                 1996
--------------------------------------------------------------------------------

Interest Paid                               $      549,000    $         200,000

Income Taxes Paid                           $      925,000    $         264,000
--------------------------------------------------------------------------------

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


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 October 31, 1997 is $11,386,382 due the Company
under the Advance Pay Program (net of $2,623,508 due the program  participants).
Income from the program was  approximately  $2,876,000  and $731,000  during the
nine months ended October 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
$183,254 at October 31, 1997 under such arrangements.
<PAGE>
                   THE SOURCE INFORMATION MANAGEMENT COMPANY
                          Notes to Financial Statements

-------------------------------------------------------------------------------

7. Income Taxes 

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

Nine Months Ended October 31,                           1997             1996
--------------------------------------------------------------------------------
Current
  Federal                                        $       750,000  $    (255,458)
  State                                                  196,000        (66,759)
--------------------------------------------------------------------------------
Total Current                                            946,000       (322,217)
--------------------------------------------------------------------------------

Deferred
  Federal                                              (128,000)       (122,435)
  State                                                 (33,000)        (31,565)
--------------------------------------------------------------------------------
                                                       (161,000)       (154,000)
--------------------------------------------------------------------------------

Total Income Tax (Benefit) Expense               $       785,000  $    (476,217)
--------------------------------------------------------------------------------

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:

October 31,                                                              1997
--------------------------------------------------------------------------------
Deferred Tax Assets
   Allowance for doubtful accounts                               $     148,000
   Deferred compensation                                                28,000
   Other                                                                16,000
--------------------------------------------------------------------------------
Total Deferred Tax Assets                                              192,000
--------------------------------------------------------------------------------
Deferred Tax Liabilities
   Income not previously taxed under cash
     basis of accounting for income tax purposes                       401,000
   Depreciation                                                         26,000
   Other                                                                34,000
--------------------------------------------------------------------------------
Total Deferred Tax Liabilities                                         461,000
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Net Deferred Tax Liability                                             269,000
--------------------------------------------------------------------------------
Classified as:
   Current                                                              91,000
   Non-current                                                         178,000
--------------------------------------------------------------------------------
Net Deferred Tax Liability                                       $     269,000
--------------------------------------------------------------------------------

<PAGE>
                   THE SOURCE INFORMATION MANAGEMENT COMPANY
                          Notes to Financial Statements

-------------------------------------------------------------------------------

The following  summary  reconciles income taxes at the maximum federal statutory
rate with the effective rate for the first nine months of fiscal 1998 and 1997:

Nine Months Ended October 31,                              1997           1996
--------------------------------------------------------------------------------
Income tax expense (benefit) at statutory rate     $      596,000    $ (449,000)
                                                                  
State income tax expense (benefit), net of
  federal income tax benefit                              129,000       (65,000)
Non-deductible meals and entertainment                     15,000        28,000
Non-deductible goodwill amortization                       40,000         9,000
Non-deductible officers' life insurance                    (6,000)        20,00
Other, net                                                 11,000       (19,217)
--------------------------------------------------------------------------------
Income Tax Expense (Benefit)                       $      785,000   $  (476,217)
--------------------------------------------------------------------------------


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,  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  exceeded the fair value of the assets  acquired in the amount of
$2,330,004.


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 166,667
shares of Common  Stock and  non-transferable  warrants,  expiring  in 2000,  to
purchase 310,709 shares of Common Stock at an exercise price of $3.00 per share.
Such exchange resulted in a constructive dividend of $109,937 which was reported
in the fiscal quarter ended July 31, 1997.

<PAGE>
                   THE SOURCE INFORMATION MANAGEMENT COMPANY
                          Notes to Financial Statements

-------------------------------------------------------------------------------

10.  Common Stock    

In  October  1997,  the  Company  sold in a public  offering  (the  "Offering"),
2,000,000  shares of the Company's  Common Stock.  Concurrent with the Offering,
the Company effected the 1 for 1.21 reverse stock split  previously  approved by
the  Company's  shareholders.  The  weighted  average  number of  common  shares
presented in the financial  statements have been retroactively  restated to give
effect to such reverse stock split.

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 in 2000,  to purchase an aggregate of 89,289  shares of Common Stock at
an exercise price of $3.00 per share.  These warrants will vest at a rate of 25%
on August 1, 1998,  25% on November 1, 1998,  25% on February 1, 1999 and 25% on
May 1, 1999. Thus,  expense of approximately  $54,000 will be recognized ratably
over those periods.


11.  Earnings Per Share 

In calculating  earnings per share, Net Income for the nine months ended October
31, 1997 was reduced by a constructive dividend of $109,936, which resulted from
the  exchange of all 5,600  outstanding  shares of  Preferred  Stock for 166,667
shares of Common  Stock and  non-transferable  warrants,  expiring  in 2000,  to
purchase 310,709 shares of Common Stock at an exercise price of $3.00 per share.

<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 more  than 725  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.
<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 October 31,     Nine Months Ended October 31,
                                         1997                    1996      1997                    1996
                                         ----                    ----      ----                    ----

<S>                                      <C>                     <C>       <C>                     <C>  
Service Revenues                         100.0%                  95.4%     99.9%                   97.8%

Merchandise Revenues                         -%                   4.6%      0.1%                    2.2%

Total Revenues                           100.0%                 100.0%    100.0%                  100.0%

Cost of Service Revenues                  51.7%                  58.2%     52.0%                   73.6%

Cost of Merchandise Sold                     -%                   3.9%      0.4%                    1.9%

Gross Profit                              48.3%                  37.9%     47.6%                   24.5%

Selling, General &
  Administrative Expenses                 18.2%                  30.9%     19.0%                   47.8%

Operating Income (Loss)                   30.1%                   7.0%     28.6%                 (23.3)%

Interest, Net                            (6.5)%                 (3.7)%    (7.1)%                  (3.6)%

Other Income (Expense), Net              (0.7)%                 (0.2)%    (0.7)%                  (0.3)%

Income (Loss) Before
  Income Taxes                            22.9%                   3.1%     20.8%                  (27.2)%

Net Income (Loss)                         12.8%                   3.0%     11.5%                  (17.4)%

</TABLE>

Service Revenues

         Increased  retailer  participation  in the  Advance  Pay  Program,  the
acquisition of Mike Kessler and Associates, Inc. and the growth in subscriptions
to PIN contributed to an increase in service revenue during both the quarter and
the nine month  period  ended  October 31, 1997 of  approximately  $940,000  and
$3,653,000,  respectively,  over the  comparable  periods  in fiscal  1997.  The
increases consisted of approximately $836,000 and $3,036,000,  respectively,  of
claims,  PIN and Advance  Pay Program  revenue  over the  comparable  periods in
fiscal 1997. Also, space design revenue  increased from $183,000 for the quarter
ended  October 31, 1996 to $287,000 for the quarter  ended  October 31, 1997 and
from  $365,000 for the nine month period ended  October 31, 1996 to $982,000 for
the nine  month  period  ended  October  31,  1997.  Currently,  the  Company is
negotiating flat fee arrangements; however, historically, space

<PAGE>
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.

Cost of Service Revenues and Selling, General and Administrative Expense ("Total
Costs")

         Total Costs for the nine month period ended October 31, 1997  increased
approximately  $78,000  compared  to the same  period  in the  prior  year.  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.  Wages also increased as a result of hiring
individuals formerly employed by Data-Pros, Inc., a service company purchased on
January 1, 1997.  However,  a decrease in the expenses  for the data  processing
area more than offset the increase in wages.  Travel and entertainment  expenses
decreased $26,000 and $19,000, respectively.  Lastly, bad debt expense decreased
$56,000 over the same period in the prior year.

         Total Costs for the third quarter  increased  over the third quarter of
the  prior  year by  $186,000.  The  acquisition  of MKA  resulted  in  costs of
approximately $295,000 during the quarter ended October 31, 1997.  Additionally,
legal  costs,  depreciation  expense,  deferred  compensation  costs  and  costs
associated with filings  required by the Securities and Exchange  Commission and
Nasdaq increased  approximately  $63,000.  All other expenses  included in Total
Costs combined for a decrease of approximately $172,000.

         Although Total Costs  increased  over the prior year,  Total Costs as a
percentage of Revenues decreased dramatically. This decrease is due primarily to
improved sales growth and the Company's cost containment initiative.

Interest Expense

         Interest  Expense  increased  for the three  month  and the nine  month
periods ended October 31, 1997  $104,000 and  $406,000,  respectively,  over the
comparable  periods  in the  prior  year.  This  increase  is  due to  increased
borrowings  necessary to fund the Advance Pay Program.  Because the net proceeds
of the offering  have been  temporarily  applied to reduce the amounts due under
the Company's  credit  facility,  interest  expense is expected to decrease next
quarter.

Income Tax (Expense) Benefit

         The  effective  income  tax rates for the  three  month and nine  month
periods ended October 31, 1997 were 44.0% and 44.8%,  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 nine months ended
October 31,  1997 was reduced by a  constructive  dividend  of  $109,936,  which
resulted from the exchange of all 5,600  outstanding  shares of Preferred  Stock
for 166,667 shares of Common Stock and  non-transferable  warrants,  expiring in
2000, to purchase  310,709  shares of Common Stock at an exercise price of $3.00
per share.


<PAGE>
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  maintenance  of
existing accounts and the solicitation of new clients. 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 decreased from $4,135,000 during
the nine months  ended  October 31,  1996 to  $3,817,000  during the nine months
ended  October  31,  1997.  During  the nine  months  ended  October  31,  1997,
$2,369,000 was used to cover checks drawn against future deposits at January 31,
1997, net cash used for the Advance Pay Program was approximately  $71,000,  net
cash paid for income taxes was $925,000 and cash paid for interest was $549,000.

         The average  collection  period for the nine months  ended  October 31,
1997 was 134 days  compared  to 163 days for the nine months  ended  October 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.

         The Company is primarily engaged in the business of providing  services
to its retailer clients;  therefore,  its capital  expenditure  requirements are
minimal.  At  October  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  $15,000,000  with Wachovia Bank,  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 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. At October 31, 1997,
the Company was in compliance  with all financial  ratios  imposed by the Credit
Agreement.  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 October 31, 1997, the Company's  total  long-term  debt  obligations
were $6,371,000.  Of such amount,  $2,208,000 matures in the next 12 months. The
Company  anticipates that the funds necessary to satisfy these  obligations will
be derived from additional bank borrowings and/or cash flows from operations.

         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 166,667 shares of
Common  Stock at an  effective  price of $3.00 per  share  and  non-transferable
warrants,  expiring in 2000,  to purchase  310,709  shares of Common Stock at an
exercise  price of $3.00 per share.  Such  exchange  resulted in a  constructive
dividend of $109,937  which was reported in the fiscal  quarter  ending July 31,
1997.
<PAGE>

         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 in 2000, to purchase an aggregate of 89,289 shares of Common
Stock at an exercise  price of $3.00 per share.  These  warrants  will vest at a
rate of 25% on August 1, 1998,  25% on November 1, 1998, 25% on February 1, 1999
and  25% on May  1,  1999.  Thus,  expense  of  approximately  $54,000  will  be
recognized ratably over those periods.
<PAGE>
                           PART II - OTHER INFORMATION


Item 2.  Changes in Securities and Use of Proceeds.

      (c)       During the quarter ended October 31, 1997, 89,289 warrants, each
                to  purchase  one share of Common  Stock at $3.00,  expiring  in
                September,  2000,  were  issued  to  certain  directors  of  the
                Company.  These  transactions  were made in  reliance on Section
                4(2) of the  Securities  Act of 1933,  as  amended  ("Securities
                Act").

      (d)       On October 7, 1997, the Company sold 2,000,000  shares of Common
                Stock in a public offering for an aggregate price of $8,000,000.
                Additionally,  certain selling  shareholders sold 300,000 shares
                of Common  Stock which were  offered  through an  over-allotment
                option for an aggregate  price of $1,200,000.  The  registration
                statement  on Form SB-2 (No.  333-32733)  under which the Common
                Stock was  offered  was  filed  under the  Securities  Act.  The
                managing underwriter was Donald & Co. Securities Inc.

                As of October 31, 1997, the total amount of expenses incurred in
                connection  with the  issuance  and  distribution  of the Common
                Stock was  $1,171,203.  Underwriting  discounts  were  $640,000,
                expenses  paid  to the  underwriters  were  $177,146  and  other
                expenses  totaled  $354,057.  None  of the  expenses  were  paid
                directly or indirectly to directors,  officers,  persons  owning
                ten (10)  percent or more of any class of equity  securities  or
                affiliates of the Company.

                Pending the use of net proceeds of  $6,808,797  from the sale of
                the shares of Common Stock,  such funds have been used to reduce
                the principal balance under the Company's credit facility.  Such
                credit  facility   provides  for  the   availability  of  up  to
                $15,000,000 of borrowings until  termination by Wachovia Bank on
                not less than thirteen months prior notice. At October 31, 1997,
                the   unused    availability    thereunder   was   approximately
                $10,844,000.  The Company intends to make additional  borrowings
                under the credit  facility for the  expansion of the Advance Pay
                Program,  development of new or enhanced  products and services,
                acquisition  of one  or  more  business  and  general  corporate
                purposes,  including  the  continued  upgrade  of the  Company's
                computer systems.


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 October 31, 1997.


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


<PAGE>
                                  EXHIBIT INDEX

Exhibit
Number                     Description

10.26                      Amendment to Credit Agreement dated October 31, 1997
                           by and between The Source Information Management
                           Company and Wachovia Bank, N.A.

11.1                       Statement re:  computation of per share earnings

27.1                       Financial Data Schedule (Filed in EDGAR version only)