##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No 001-32440
 READY MIX, INC.
  Nevada
(State or other jurisdiction of 
incorporation or organization)
    
    86-0830443
(I.R.S. Employer Identification No.)
 4602 East Thomas Road
Phoenix, Arizona 85018
(602) 957-2722
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
  3,809,500 shares of Common Stock, $.001 par value per share




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##### 



READY MIX, INC.
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2008
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Balance Sheets  As of September 30, 2008 (Unaudited) and
December 31, 2007
    
    
    3Condensed Statements of Operations (Unaudited)  Nine months and
three months
ended September 30, 2008 and 2007 and Changes in Stockholders
Equity (Unaudited)
    
    
    4Condensed Statements of Cash Flows (Unaudited)  Nine months ended
September 30, 2008 and 2007
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    24Item 4T. Controls and Procedures
    
    
    25PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 READY MIX, INC.
 
 CONDENSED BALANCE SHEETS
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)Assets:Current assets:Cash and cash equivalents
    
    $
    5,632,788
    
    
    $
    9,157,868Accounts receivable, net
    
    
    9,216,582
    
    
    
    7,892,523Inventory
    
    
    1,687,299
    
    
    
    1,151,926Prepaid expenses
    
    
    905,562
    
    
    
    1,156,086Due from affiliate
    
    
    
    
    
    
    37,859Income tax receivable
    
    
    939,619
    
    
    
    Deferred tax asset
    
    
    389,741
    
    
    
    359,396Total current assets
    
    
    18,771,591
    
    
    
    19,755,658Property and equipment, net
    
    
    24,708,480
    
    
    
    26,347,234Refundable deposits
    
    
    144,416
    
    
    
    176,188Total assets
    
    $
    43,624,487
    
    
    $
    46,279,080Liabilities and stockholders equity:Current liabilities:Accounts payable
    
    $
    3,338,638
    
    
    $
    3,888,856Accrued liabilities
    
    
    1,582,316
    
    
    
    2,023,403Notes payable
    
    
    3,247,891
    
    
    
    2,019,192Obligations under capital leases
    
    
    
    
    
    
    4,634Due to affiliate
    
    
    26,704
    
    
    
    Income tax payable
    
    
    
    
    
    
    11,738Total current liabilities
    
    
    8,195,549
    
    
    
    7,947,823Notes payable, less current portion
    
    
    6,500,670
    
    
    
    7,821,295Deferred tax liability
    
    
    1,290,823
    
    
    
    1,290,823Total liabilities
    
    
    15,987,042
    
    
    
    17,059,941Commitments and contingenciesStockholders equity:Preferred stock  $.001 par value; 5,000,000 shares authorized,
none issued and outstanding
    
    
    
    
    
    
    Common stock  $.001 par value; 15,000,000 shares authorized,
3,809,500 issued and outstanding
    
    
    3,810
    
    
    
    3,810Additional paid-in capital
    
    
    18,334,807
    
    
    
    18,190,971Retained earnings
    
    
    9,298,828
    
    
    
    11,024,358Total stockholders equity
    
    
    27,637,445
    
    
    
    29,219,139Total liabilities and stockholders equity
    
    $
    43,624,487
    
    
    $
    46,279,080
  3




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##### Table of Contents



READY MIX, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS AND
 CHANGES IN STOCKHOLDERS EQUITY
 (Unaudited)
 Nine months ended
    
    
    Three months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue:Revenue
    
    $
    48,683,689
    
    
    $
    60,520,249
    
    
    $
    16,088,023
    
    
    $
    18,705,892Revenue  related parties
    
    
    529,674
    
    
    
    1,438,142
    
    
    
    264,632
    
    
    
    387,221Total revenue
    
    
    49,213,363
    
    
    
    61,958,391
    
    
    
    16,352,655
    
    
    
    19,093,113Cost of revenue
    
    
    48,909,838
    
    
    
    56,385,409
    
    
    
    16,329,953
    
    
    
    17,978,564Gross profit
    
    
    303,525
    
    
    
    5,572,982
    
    
    
    22,702
    
    
    
    1,114,549General and administrative expenses
    
    
    3,128,390
    
    
    
    3,464,346
    
    
    
    1,037,471
    
    
    
    1,155,825Income (loss) from operations
    
    
    (2,824,865
    )
    
    
    2,108,636
    
    
    
    (1,014,769
    )
    
    
    (41,276
    )Other income (expense):Interest income
    
    
    135,834
    
    
    
    284,252
    
    
    
    31,136
    
    
    
    100,461Interest expense
    
    
    (81,983
    )
    
    
    (109,596
    )
    
    
    (27,094
    )
    
    
    (28,638
    )Other income
    
    
    74,873
    
    
    
    228,200
    
    
    
    61,431
    
    
    
    87,550128,724
    
    
    
    402,856
    
    
    
    65,473
    
    
    
    159,373Income (loss) before income taxes
    
    
    (2,696,141
    )
    
    
    2,511,492
    
    
    
    (949,296
    )
    
    
    118,097Income tax benefit (expense)
    
    
    970,611
    
    
    
    (957,639
    )
    
    
    341,747
    
    
    
    (60,349
    )Net income (loss)
    
    $
    (1,725,530
    )
    
    $
    1,553,853
    
    
    $
    (607,549
    )
    
    $
    57,748Basic net income (loss) per common share
    
    $
    (0.45
    )
    
    $
    0.41
    
    
    $
    (0.16
    )
    
    $
    0.02Diluted net income (loss) per common share
    
    $
    (0.45
    )
    
    $
    0.41
    
    
    $
    (0.16
    )
    
    $
    0.02Basic weighted average common
shares outstanding
    
    
    3,809,500
    
    
    
    3,807,949
    
    
    
    3,809,500
    
    
    
    3,808,848Diluted weighted average common
shares outstanding
    
    
    3,809,500
    
    
    
    3,827,344
    
    
    
    3,809,500
    
    
    
    3,832,343
 Common StockNumber of
    
    
    
    
    
    
    AdditionalShares
    
    
    
    
    
    
    Paid-in
    
    
    RetainedOutstanding
    
    
    Amount
    
    
    Capital
    
    
    EarningsBalance at January 1, 2008
    
    
    3,809,500
    
    
    $
    3,810
    
    
    $
    18,190,971
    
    
    $
    11,024,358Stock based compensation
    
    
    
    
    
    
    
    
    
    
    143,836Net loss for the nine months
ended September 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,725,530
    )Balance at September 30,
2008
    
    
    3,809,500
    
    
    $
    3,810
    
    
    $
    18,334,807
    
    
    $
    9,298,828
  4




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##### Table of Contents



READY MIX, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine months endedSeptember 30,2008
    
    
    2007Increase (decrease) in cash and cash equivalents:Cash flows from operating activities:Cash received from customers
    
    $
    47,959,943
    
    
    $
    62,033,088Cash paid to suppliers and employees
    
    
    (49,478,620
    )
    
    
    (55,820,354
    )Taxes paid
    
    
    (11,091
    )
    
    
    (1,181,203
    )Interest received
    
    
    135,834
    
    
    
    284,252Interest paid
    
    
    (81,983
    )
    
    
    (109,596
    )Net cash provided by (used in) operating activities
    
    
    (1,475,917
    )
    
    
    5,206,187Cash flows from investing activities:Purchase of property and equipment
    
    
    (748,442
    )
    
    
    (3,353,966
    )Cash received from sale of equipment
    
    
    111,726
    
    
    
    206,554Net cash used in investing activities
    
    
    (636,716
    )
    
    
    (3,147,412
    )Cash flows from financing activities:Proceeds from the issuance of common stock
    
    
    
    
    
    
    22,000Received from (paid to) due to affiliate
    
    
    64,563
    
    
    
    (63,951
    )Proceeds from notes payable
    
    
    990,676
    
    
    
    2,956,120Repayment of notes payable
    
    
    (2,463,052
    )
    
    
    (4,503,426
    )Repayment of capital lease obligations
    
    
    (4,634
    )
    
    
    (245,746
    )Net cash used in financing activities
    
    
    (1,412,447
    )
    
    
    (1,835,003
    )Net increase (decrease) in cash and cash equivalents
    
    
    (3,525,080
    )
    
    
    223,772Cash and cash equivalents at beginning of period
    
    
    9,157,868
    
    
    
    8,369,875Cash and cash equivalents at end of period
    
    $
    5,632,788
    
    
    $
    8,593,647Reconciliation of net income (loss) to net cash provided by (used in)
operating activities:Net income (loss)
    
    $
    (1,725,530
    )
    
    $
    1,553,853Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    3,529,821
    
    
    
    3,230,759Loss (gain) on sale of equipment
    
    
    126,099
    
    
    
    (48,214
    )Deferred taxes, net
    
    
    (30,345
    )
    
    
    (57,149
    )Stock-based compensation expense
    
    
    143,836
    
    
    
    307,361Provision for doubtful accounts
    
    
    130,332
    
    
    
    39,915Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,454,391
    )
    
    
    (105,289
    )Prepaid expenses
    
    
    250,524
    
    
    
    174,618Inventory
    
    
    (535,373
    )
    
    
    (15,811
    )Refundable deposits
    
    
    31,772
    
    
    
    1,285,133Accounts payable
    
    
    (550,218
    )
    
    
    (719,401
    )Accrued liabilities
    
    
    (441,087
    )
    
    
    (273,173
    )Income taxes, net
    
    
    (951,357
    )
    
    
    (166,415
    )Net cash provided by (used in) operating activities
    
    $
    (1,475,917
    )
    
    $
    5,206,187
  5




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READY MIX, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies and Use of Estimates:
 Presentation of Interim Information:
  Seasonal Variations:
  Nature of Corporation:
  Accounting Estimates:
   Revenue Recognition:
  
    
    The contract has been evidenced by the customers signature on the
delivery ticket;
    
    A price per unit has been determined; and
    
    Collectibility has been reasonably assured either by credit
authorization of the customer or by COD terms.
  Earnings per Share:
  6




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##### Table of Contents



READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies and Use of Estimates (Continued):
 Earnings per Share (Continued):
  Stock-Based Compensation:
   
    
    Expected term is determined using a weighted average of the contractual term and vesting
period of the award;
    
    Expected volatility is measured using the average of historical daily changes in the
market price of the Companys common stock over the expected term of the award;
    
    Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury
bonds with a remaining maturity equal to the expected term of the awards; and
    
    Forfeitures are based on the history of cancellations of similar awards granted by the
Company and managements analysis of potential forfeitures.
 Recent Accounting Pronouncements:
     7




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##### Table of Contents



READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies and Use of Estimates (Continued):
 Recent Accounting Pronouncements (Continued):
     2. Stock-Based Compensation:
   Equity Incentive Plan:
   8




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##### Table of Contents



READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
 2. Stock-Based Compensation (Continued):
   Awards grantedduring the nine
    
    Awards grantedmonths ended
    
    prior toSeptember 30, 2008
    
    January 1, 2008Dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    35.5
    %
    
    
    21.4% - 39.1
    %Weighted-average volatility
    
    
    35.50
    %
    
    
    27.18
    %Risk-free interest rate
    
    
    3.00
    %
    
    
    5.00
    %Expected life of options (in years)
    
    
    5
    
    
    
    3-5Weighted-average grant-date fair
value
    
    $
    2.31
    
    
    $
    2.40
   Weighted AverageWeighted Average
    
    
    Remaining
    
    
    Aggregate
    
    
    AggregateExercise Price
    
    
    Contractual
    
    
    Fair
    
    
    IntrinsicShares
    
    
    per Share
    
    
    Term (1)
    
    
    Value
    
    
    Value (2)Outstanding January 1, 2008
    
    
    366,125
    
    
    $
    11.01
    
    
    
    2.75
    
    
    $
    935,166Granted
    
    
    20,000
    
    
    
    6.40
    
    
    
    
    
    
    
    46,200Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (7,000
    )
    
    
    11.00
    
    
    
    
    
    
    
    (13,650
    )Outstanding September 30, 2008
    
    
    379,125
    
    
    $
    10.76
    
    
    
    2.13
    
    
    $
    967,716
    
    
    $
    Exercisable September 30, 2008
    
    
    305,708
    
    
    $
    10.82
    
    
    
    1.91
    
    
    $
    726,545
    
    
    $
    
 
 (1)
    
    Remaining contractual term is presented in years.(2)
    
    The aggregate intrinsic value is calculated as the difference between the
exercise price of the underlying awards and the closing price of our common stock as of
September 30, 2008, for those awards that have an exercise price currently below the
closing price as of September 30, 2008. Awards with an exercise price above the closing
price as of September 30, 2008 are considered to have no intrinsic value. 9




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##### Table of Contents



READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
 2. Stock-Based Compensation (Continued):
  Weighted AverageGrant-DateShares
    
    Fair ValueNonvested stock options at January 1, 2008
    
    
    149,375
    
    
    $
    2.61Granted
    
    
    20,000
    
    
    
    2.31Vested
    
    
    (91,458
    )
    
    
    2.03Forfeited
    
    
    (4,500
    )
    
    
    1.95Nonvested stock options at September 30, 2008
    
    
    73,417
    
    
    $
    3.28
  3. Statement of Cash Flows:
 Non-Cash Investing and Financing Activities:
    10




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READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
 4. Notes Payable:
  September 30,
    
    
    December 31,2008
    
    
    20075.99% note payable, with monthly payments of $471, due
September 28, 2008, collateralized by a vehicle
    
    $
    
    
    
    $
    4,1385.31% note payable, with monthly payments of $1,730, due
March 22, 2009, collateralized by vehicles
    
    
    
    
    
    
    4,8585.31% note payable, with monthly payments of $788, due
April 8, 2009, collateralized by a vehicle
    
    
    
    
    
    
    11,4086.21% note payable, with monthly payments of $4,921 and a
principal payment of $443,902, due April 16, 2009, collateralized
by land
    
    
    456,682
    
    
    
    479,0436.34% note payable, with monthly payments of $3,450 and a
principal payment of $309,412, due April 16, 2009, collateralized
by land
    
    
    318,194
    
    
    
    333,6525.22% note payable, with monthly payments of $10,398, due
May 25, 2008, collateralized by equipment
    
    
    
    
    
    
    51,3467.05% note payable, with monthly payments of $2,930 and a
principal
payment of $254,742, due August 27, 2009, collateralized by land
    
    
    266,745
    
    
    
    278,6015.90% note payable, with monthly payments of $593, due
December 15, 2009, collateralized by a vehicle
    
    
    
    
    
    
    13,3985.90% notes payable, with combined monthly payments
of $5,322, due dates ranging from January 31, 2010
to March 11, 2010, collateralized by vehicles
    
    
    
    
    
    
    127,0877.25% note payable, with monthly payments of $4,153, due
May 4, 2009, collateralized by equipment
    
    
    
    
    
    
    66,4557.50% notes payable, with combined monthly principal payments
of $11,212 plus interest, due September 1, 2008, collateralized
by equipment
    
    
    
    
    
    
    89,6976.85% notes payable, with combined monthly payments of $1,098,
due September 28, 2010, collateralized by vehicles
    
    
    
    
    
    
    32,9466.85% note payable, with a monthly payment of $522, due
October 13, 2010, collateralized by a vehicle
    
    
    
    
    
    
    16,0867.99% note payable, with monthly principal payments of $14,362 plus interest, due March 25, 2011, collateralized
by equipment
    
    
    430,857
    
    
    
    560,1148.14% note payable, with monthly principal payments of
$30,470 plus interest, due March 28, 2011, collateralized
by equipment
    
    
    914,112
    
    
    
    1,188,346$
    2,386,590
    
    
    $
    3,257,175
 11




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READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
 4. Notes Payable (Continued):
  September 30,
    
    
    December 31,2008
    
    
    2007Total from previous page
    
    $
    2,386,590
    
    
    $
    3,257,1758.45% notes payable, with combined monthly principal
payments of $26,182 plus interest, due June 28, 2011,
collateralized by equipment
    
    
    864,023
    
    
    
    1,099,6657.46% note payable, with a monthly payment of $13,867,
due
May 26, 2021, collateralized by a building and land
    
    
    1,359,646
    
    
    
    1,406,6897.55% note payable, with a monthly payment of $550, due
July 20, 2011, collateralized by a vehicle
    
    
    
    
    
    
    20,6547.90% note payable, with monthly principal payments of
$10,774 plus interest, due November 30, 2011,
collateralized by equipment
    
    
    409,422
    
    
    
    506,3917.04% note payable, with monthly principal payments of
$4,496 plus interest, due September 30, 2009,
collateralized by equipment
    
    
    53,956
    
    
    
    94,4237.13% note payable, with monthly principal payments of
$34,966 plus interest, due February 28, 2013,
collateralized by equipment
    
    
    1,853,221
    
    
    
    2,167,9197.94% note payable, with a monthly payment of $2,654,
due
January 13, 2012, collateralized by vehicles
    
    
    
    
    
    
    110,7367.13% note payable, with monthly principal payments of
$5,375 plus interest, due February 28, 2012,
collateralized by equipment
    
    
    220,389
    
    
    
    268,7677.35% note payable, with monthly principal payments of
$2,793 plus interest, due September 28, 2012,
collateralized by equipment
    
    
    134,049
    
    
    
    159,1836.77% note payable, with a monthly payment of $1,745,
due
September 17, 2012, collateralized by vehicles
    
    
    
    
    
    
    84,8736.25% notes payable, with combined monthly principal
payments of $5,705 plus interest, due January 28, 2012,
collateralized by equipment
    
    
    228,214
    
    
    
    5.39% note payable, with monthly principal payments of
$2,695 plus interest, due March 21, 2012,
collateralized by equipment
    
    
    113,195
    
    
    
    5.65% note payable, with monthly principal payments of
$11,440 plus interest, due April 18, 2013,
collateralized by equipment
    
    
    629,224
    
    
    
    $
    8,251,929
    
    
    $
    9,176,475
 12




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##### Table of Contents



READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
 4. Notes Payable (Continued):
  September 30,
    
    
    December 31,2008
    
    
    2007Total from previous page
    
    $
    8,251,929
    
    
    $
    9,176,4756.25% note payable, with monthly principal payments of
$5,448 plus interest, due June 26, 2011,
collateralized by equipment
    
    
    179,773
    
    
    
    6.8% notes payable, with combined monthly principal
payments of $9,782 plus interest, due June 26, 2013 and
June 26, 2014, collateralized by equipment
    
    
    656,015
    
    
    
    Line of credit, variable interest rate was 5.25% at
September 30,
2008, interest only payments until December 31, 2008,
36 equal
monthly principal payments plus interest therafter,
collateralized
by all of the Companys assets
    
    
    660,844
    
    
    
    664,0129,748,561
    
    
    
    9,840,487Less: current portion
    
    
    (3,247,891
    )
    
    
    (2,019,192
    )$
    6,500,670
    
    
    $
    7,821,295
  2009
    
    $
    3,247,8912010
    
    
    2,212,5692011
    
    
    1,854,2682012
    
    
    934,2192013
    
    
    457,996Subsequent to 2013
    
    
    1,041,618$
    9,748,561
 5. Line of Credit:
   13




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READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
 6. Commitments:
  2009
    
    $
    783,2752010
    
    
    1,134,3752011
    
    
    1,546,8752012
    
    
    1,650,0002013
    
    
    1,650,000After 2013
    
    
    2,612,500$
    9,377,025
    7. Earnings per Share:
  14




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READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
 7. Earnings per Share (Continued):
  Nine months ended
    
    
    Three months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Weighted average common
shares
outstanding
    
    
    3,809,500
    
    
    
    3,807,949
    
    
    
    3,809,500
    
    
    
    3,808,848Dilutive effect of:Stock options and warrants
    
    
    
    
    
    
    19,395
    
    
    
    
    
    
    
    23,495Weighted average common
shares
outstanding assuming dilution
    
    
    3,809,500
    
    
    
    3,827,344
    
    
    
    3,809,500
    
    
    
    3,832,343
   8. Income Taxes:
  15




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statement Disclosure
    General
   16




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Overview
   Critical Accounting Policies, Estimates and Judgments
 
   17




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New Accounting Pronouncements
  18




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19




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Results of Operations
  Nine months ended
    
    
    Three months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(dollars in thousands)
    
    (Unaudited)
    
    
    (Unaudited)Revenue
    
    $
    48,684
    
    
    
    98.9
    %
    
    $
    60,520
    
    
    
    97.7
    %
    
    $
    16,088
    
    
    
    98.4
    %
    
    $
    18,706
    
    
    
    98.0
    %Related party revenue
    
    
    529
    
    
    
    1.1
    %
    
    
    1,438
    
    
    
    2.3
    %
    
    
    265
    
    
    
    1.6
    %
    
    
    387
    
    
    
    2.0
    %Total revenue
    
    
    49,213
    
    
    
    100.0
    %
    
    
    61,958
    
    
    
    100.0
    %
    
    
    16,353
    
    
    
    100.0
    %
    
    
    19,093
    
    
    
    100.0
    %Gross profit
    
    
    304
    
    
    
    0.6
    %
    
    
    5,573
    
    
    
    9.0
    %
    
    
    23
    
    
    
    0.1
    %
    
    
    1,115
    
    
    
    5.8
    %General and
administrative expenses
    
    
    3,128
    
    
    
    6.4
    %
    
    
    3,464
    
    
    
    5.6
    %
    
    
    1,037
    
    
    
    6.3
    %
    
    
    1,156
    
    
    
    6.0
    %Income (loss) from operations
    
    
    (2,825
    )
    
    
    -5.7
    %
    
    
    2,109
    
    
    
    3.4
    %
    
    
    (1,015
    )
    
    
    -6.2
    %
    
    
    (41
    )
    
    
    -0.2
    %Interest income
    
    
    136
    
    
    
    0.3
    %
    
    
    284
    
    
    
    0.5
    %
    
    
    31
    
    
    
    0.2
    %
    
    
    100
    
    
    
    0.5
    %Interest expense
    
    
    (82
    )
    
    
    -0.2
    %
    
    
    (110
    )
    
    
    -0.2
    %
    
    
    (27
    )
    
    
    -0.2
    %
    
    
    (29
    )
    
    
    -0.2
    %Income tax benefit (expense)
    
    
    971
    
    
    
    2.0
    %
    
    
    (958
    )
    
    
    -1.5
    %
    
    
    342
    
    
    
    2.1
    %
    
    
    (60
    )
    
    
    -0.3
    %Net income (loss)
    
    $
    (1,726
    )
    
    
    -3.5
    %
    
    $
    1,554
    
    
    
    2.5
    %
    
    $
    (608
    )
    
    
    -3.7
    %
    
    $
    58
    
    
    
    0.3
    %Depreciation and
amortization
    
    $
    3,530
    
    
    
    7.2
    %
    
    $
    3,231
    
    
    
    5.2
    %
    
    $
    1,191
    
    
    
    7.3
    %
    
    $
    1,125
    
    
    
    5.9
    %
 Nine months ended September 30, 2008 compared to nine months ended September 30, 2007
 Revenue
 Gross Profit.
 Depreciation and Amortization.
 General and Administrative Expenses.
 20




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Interest Income and Expense.
 Income Taxes.
 Net Income (loss).
 Three months ended September 30, 2008 compared to three months ended September 30, 2007
 Revenue
 Gross Profit.
 Depreciation and Amortization.
 General and Administrative Expenses.
 Interest Income and Expense.
 21




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Income Taxes.
 Net income (loss).
 Liquidity and Capital Resources
    September 30, 2008
    
    December 31, 2007Minimum /
    
    
    
    
    
    Minimum /(amounts in thousands)
    
    Maximum
    
    Actual
    
    Maximum
    
    ActualMinimum Net Worth (1)
    
    
    21,156
    
    
    
    39,700
    
    
    
    21,156
    
    
    
    34,527Maximum Leverage (2)
    
    
    n/a
    
    
    
    n/a
    
    
    
    3.0 to 1.0
    
    
    
    1.58 to 1.0Maximun Funded Debt to EBITDA (3)
    
    
    3.0 to 1.0
    
    
    
    .92 to 1.0
    
    
    
    3.0 to 1.0
    
    
    
    1.19 to 1.0Minimum CF/CPLTD (4)
    
    
    n/a
    
    
    
    n/a
    
    
    
    1.25 to 1.0
    
    
    
    2.58 to 1.0
  September 30, 2008
    
    December 31, 2007Minimum
    
    Actual
    
    Minimum
    
    ActualMinimum CF/CPLTD (4)
    
    
    n/a
    
    
    
    n/a
    
    
    
    1.25 to 1.0
    
    
    
    2.84 to 1.0
 
 (1)
    
    Minimum Net Worth is defined as the sum of common stock, additional paid in
capital, retained earnings minus goodwill and other intangible assets, all determined
in accordance with United States Generally Accepted Accounting Principles. Base net
worth of $14,000,000 as of September 15, 2005 plus 75% of net profit for every fiscal
year thereafter, beginning December 31, 2005. Measured quarterly.(2)
    
    Leverage is defined as total liabilities to Net Worth. Measured at fiscal year
end.(3)
    
    Funded Debt to EBITDA is defined as all interest bearing notes, loans and
capital leases divided by the sum of net profit, interest expense, taxes, depreciation
and amortization less interest income, dividends, plus or minus extraordinary expenses
or gains, to be determined at WFEs sole discretion, for the previous four fiscal
quarterly periods. Measured quarterly.(4)
    
    Minimum CF to CPLTD is defined as cash flow (the sum of net profit,
depreciation and amortization, less dividends, plus or minus extraordinary expenses or
gains, to be determined at WFEs sole discretion) divided by the current portion of
long term debt. Measured at fiscal year end.n/a
    
    Not required to be calculated at the interim period. 22




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##### Table of Contents



Nine months endedSeptember 30,2008
    
    2007(dollars in thousands)
    
    (Unaudited)Cash flows provided by (used in) operating
activities
    
    $
    (1,476
    )
    
    $
    5,206Cash flows used in investing activities
    
    
    (637
    )
    
    
    (3,147
    )Cash flows used in financing activities
    
    
    (1,412
    )
    
    
    (1,835
    )
    23




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##### Table of Contents



Summary of Contractual Obligations and Commercial Commitments
  Payments Due by PeriodLess than
    
    
    1 - 3
    
    
    4 - 5
    
    
    AfterTotal
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years(dollars in thousands)Contractual ObligationsLong-term debt obligations
    
    $
    9,749
    
    
    $
    3,248
    
    
    $
    4,067
    
    
    $
    1,392
    
    
    $
    1,042Interest payments on
long-term debt (1)
    
    
    1,643
    
    
    
    654
    
    
    
    624
    
    
    
    230
    
    
    
    135Operating lease obligations
    
    
    4,914
    
    
    
    2,290
    
    
    
    2,596
    
    
    
    28
    
    
    
    Purchase obligations
    
    
    30,363
    
    
    
    4,313
    
    
    
    8,090
    
    
    
    8,040
    
    
    
    9,920Other long term liabilities (2)
    
    
    66
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    46,735
    
    
    $
    10,571
    
    
    $
    15,377
    
    
    $
    9,690
    
    
    $
    11,097
 
 (1)
    
    Interest payments are based on the individual interest rates of each
obligation, which range from 5.25% to 8.45% per annum. We do not assume an increase in
the variable interest rate. See Note 4Notes payable in the accompanying condensed
financial statements.(2)
    
    Other long-term liabilities include an administrative services agreement with
Meadow Valley in the amount of $22,000 per month expiring December 31, 2008. Website Access
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
    24




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Item 4T. Controls and Procedures
     
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  25




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Item 5. Other Information
  
 Item 6. Exhibits
  31.1
    
    Certification of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14 of
the Securities Exchange Act of 193431.2
    
    Certification of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14 of
the Securities Exchange Act of 193432
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
 SIGNATURE
  By
    
    /s/ Bradley E. LarsonBradley E. LarsonChief Executive OfficerNovember 11, 2008By
    
    /s/ Clint TryonClint TryonChief Financial Officer,
Secretary and Treasurer(Principal Accounting Officer)November 11, 2008
 26