Table of Contents

 

 

 

**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**x****     QUARTERLYREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For the Quarterly period ended September 30,2008**

** **

**o****     TRANSITIONREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

** **

**For the transition period from                        to                        **

 

**Commission File No. 333-133634**

 

**INTEGRATEDMANAGEMENT INFORMATION, INC.**

(Name of Small Business Issuer in its charter)

 

| **Colorado**                                                    |   | **43-1802805**                       |
|-----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   | (I.R.S. Employer Identification No.) |

 

**221 Wilcox, Suite A**

**Castle Rock, CO 80104**

(Address of principal executive offices, including zip code)

 

Issuer’s telephone number, including area code:

**(303) 895-3002**

 

Checkwhether the issuer: (1) filed all reports required to be filed by Section 13or 15(d) of the Exchange Act during the past 12 months (or for suchshorter period that the registrant was required to file such reports); and (2) hasbeen subject to such filing requirements for the past 90days.    Yes    x   No   o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer.  See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.

 
|   | Large  accelerated filer: | o |   | Accelerated  filer:         | o |   |
|--------|---------------------------|---|--------|-----------------------------|---|--------|
|   | Non-accelerated  filer:   | o |   | Smaller  reporting company: | x |   |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

Yeso                     No x

 

Thenumber of shares of the registrant’s common stock, $.001 par value per share,outstanding as of November 7, 2008 was 20,880,731.

 

Transitionalsmall business disclosure format (check one):   Yes o                Nox

 

 

 

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**Integrated Management Information, Inc.**

**Table ofContents**

**September 30, 2008**

 
|                                    |                                                                                        |                                                                                                                                                      | **Page:** |
|-----------------------------------------|---------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| **Part 1 - Financial Information** |                                                                                        |                                                                                                                                                      |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| Item 1.                                 | Financial Statements:                                                                       |                                                                                                                                                      |      |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
|                                    |                                                                                        | Balance Sheets  (unaudited), September 30, 2008 and December 31, 2007                                                                           |      | 3 |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
|                                    |                                                                                        | Statements of Operations (unaudited),  for the third quarter and year to date periods ended September 30, 2008  and 2007                             |      | 4 |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
|                                    |                                                                                        | Statements of Cash Flows (unaudited),  for the year to date periods ended September 30, 2008 and 2007                                                |      | 5 |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
|                                    |                                                                                        | Statements of Stockholders’ Equity(unaudited), for the  year ended December 31, 2007 and the year to date period ended  September 30, 2008 |      | 6 |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
|                                    |                                                                                        | Notes to Financial Statements                                                                                                                             |      | 7 |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| Item 2.                                 | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                                                      | 15        |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| Item 3.                                 | Controls and  Procedures                                                                    |                                                                                                                                                      | 20        |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| **Part II - Other Information**    | ** **                                                                                  | ** **                                                                                                                                                |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| Item 1.                                 | Legal Proceedings                                                                           |                                                                                                                                                      | 21        |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| Item 2.                                 | Unregistered  Sales of Equity Securities and Use of Proceeds                                |                                                                                                                                                      | 21        |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| Item 3.                                 | Defaults upon  Senior Securities                                                            |                                                                                                                                                      | 21        |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| Item 4.                                 | Submission of  Matters to a Vote of Security Holders                                        |                                                                                                                                                      | 21        |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| Item 5.                                 | Other Information                                                                           |                                                                                                                                                      | 21        |
|                                    |                                                                                        |                                                                                                                                                      |      |   |
| Item 6.                                 | Exhibits                                                                                    |                                                                                                                                                      | 21        |

 

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**Integrated Management Information, Inc.**

**BalanceSheets**

**(Unaudited)**

 
| ** **                                                                                                                                                                            | ** ** | **Sept 30,** | ** ** | **Dec 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|------------------|------------|
| ** **                                                                                                                                                                            | ** ** | **2008**          | ** ** | **2007**         | ** ** |
| **Assets**                                                                                                                                                                            | ** ** | ** **        | ** ** | ** **       | ** ** |
| Current assets:                                                                                                                                                                       |       |              |       |             |       |
| Cash and cash equivalents                                                                                                                                                             |       | $                 | 102,228    |             | $          | 170,882 |   |
| Accounts receivable, net of allowance                                                                                                                                                 |       | 539,422           |       | 193,737          |       |
| Inventories                                                                                                                                                                           |       | 12,593            |       | 18,759           |       |
| Prepaid expenses and other current assets                                                                                                                                             |       | 57,282            |       | 43,495           |       |
| Total current assets                                                                                                                                                                  |       | 711,525           |       | 426,873          |       |
| Property and equipment, net                                                                                                                                                           |       | 63,459            |       | 54,134           |       |
| Goodwill                                                                                                                                                                              |       | —            |       | 418,208          |       |
| Intangible assets, net                                                                                                                                                                |       | 1,202             |       | 28,395           |       |
| Total assets                                                                                                                                                                          |       | $                 | 776,186    |             | $          | 927,610 |   |
|                                                                                                                                                                                  |       |              |       |             |       |
| **Liabilities  and Stockholders’ Equity**                                                                                                                                        | ** ** | ** **        | ** ** | ** **       | ** ** |
| Current liabilities:                                                                                                                                                                  |       |              |       |             |       |
| Accounts payable                                                                                                                                                                      |       | $                 | 270,708    |             | $          | 259,103 |   |
| Accrued expenses and other current  liabilities                                                                                                                                       |       | 42,926            |       | 40,406           |       |
| Deferred revenues                                                                                                                                                                     |       | —            |       | 5,750            |       |
| Short-term debt and current portion of  notes payable                                                                                                                                 |       | —            |       | 420,000          |       |
| Total current liabilities                                                                                                                                                             |       | 313,634           |       | 725,259          |       |
| Notes payable and other long-term debt                                                                                                                                                |       | 300,000           |       | 300,000          |       |
| Commitments and contingencies                                                                                                                                                         |       |              |       |             |       |
| Stockholders equity:                                                                                                                                                                  |       |              |       |             |       |
| Preferred stock, $0.001 par value;  5,000,000 shares authorized; none issued or outstanding                                                                                           |       | —            |       | —           |       |
| Common stock, $0.001 par value; 95,000,000  shares authorized; 20,911,506 and 28,245,506 shares issued, respectively; and  20,863,231 and 19,995,506 shares outstanding, respectively |       | 20,911            |       | 28,246           |       |
| Additional paid-in-capital                                                                                                                                                            |       | 3,358,730         |       | 4,705,679        |       |
| Treasury stock of 48,275 and 8,250,000  shares, respectively                                                                                                                          |       | (13,690           | )          | (1,485,000       | )          |
| Accumulated deficit                                                                                                                                                                   |       | (3,203,399        | )          | (3,346,574       | )          |
| Total stockholders’ equity                                                                                                                                                       |       | 162,552           |       | (97,649          | )          |
| Total liabilities and stockholders’ equity                                                                                                                                       |       | $                 | 776,186    |             | $          | 927,610 |   |

 

The accompanying notes are an integral partof these financial statements.

 

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**IntegratedManagement Information, Inc.**

**Statements of Operations**

**(Unaudited)**

 
| ** **                                          | ** ** | **Third Quarter ended** | ** ** | **Year to Date Period ended** | ** ** |
|-----------------------------------------------------|------------|-----------------------------------|------------|---------------------------------------------------|------------|
| ** **                                          | ** ** | **Sept 30,  2008**                | ** ** | **Sept 30,  2007**                                | ** ** | **Sept 30,  2008** | ** ** | **Sept 30,  2007** | ** ** |
|                                                |       |                              |       |                                              |       |   |   |   |   |
| Revenues                                            |       | $                                 | 597,262    |                                              | $          | 437,691 |   | $ | 1,768,308 |   | $ | 1,133,141 |   |
| Costs of revenues                                   |       | 352,152                           |       | 145,472                                           |       | 779,754 |   | 311,260 |   |
| Gross profit                                        |       | 245,110                           |       | 292,219                                           |       | 988,554 |   | 821,881 |   |
| Selling, general and administrative expenses        |       | 391,312                           |       | 471,782                                           |       | 1,121,697 |   | 1,480,325 |   |
| Gain on sale of online business                     |       | (366,991                          | )          | —                                            |       | (366,991 | ) | — |   |
| Income (loss) from operations                       |       | 220,789                           |       | (179,563                                          | )          | 233,848 |   | (658,444 | ) |
| Other expense (income):                             |       |                              |       |                                              |       |   |   |   |   |
| Interest expense                                    |       | 7,603                             |       | 4,712                                             |       | 25,075 |   | 10,825 |   |
| Other income, net                                   |       | (875                              | )          | (3,335                                            | )          | (2,135 | ) | (6,114 | ) |
| Income (loss) before income taxes                   |       | 214,061                           |       | (180,940                                          | )          | 210,908 |   | (663,155 | ) |
| Income taxes                                        |       | —                            |       | —                                            |       | — |   | — |   |
| Income (loss) from continuing operations            |       | 214,061                           |       | (180,940                                          | )          | 210,908 |   | (663,155 | ) |
| Loss from discontinued operations                   |       | (53,071                           | )          | (6,984                                            | )          | (67,733 | ) | (25,007 | ) |
| Net income (loss)                                   |       | $                                 | 160,990    |                                              | $          | (187,924 | ) | $ | 143,175 |   | $ | (688,162 | ) |
|                                                |       |                              |       |                                              |       |   |   |   |   |
| Income (loss) per share from continuing operations: |       |                              |       |                                              |       |   |   |   |   |
| Basic                                               |       | $                                 | 0.01       |                                              | $          | (0.01 | ) | $ | 0.01 |   | $ | (0.03 | ) |
| Diluted                                             |       | $                                 | 0.01       |                                              | $          | (0.01 | ) | $ | 0.01 |   | $ | (0.03 | ) |
|                                                |       |                              |       |                                              |       |   |   |   |   |
| Loss per share from discontinued operations:        |       |                              |       |                                              |       |   |   |   |   |
| Basic                                               |       | $                                 | —     |                                              | $          | — |   | $ | — |   | $ | — |   |
| Diluted                                             |       | $                                 | —     |                                              | $          | — |   | $ | — |   | $ | — |   |
|                                                |       |                              |       |                                              |       |   |   |   |   |
| Weighted average shares outstanding:                |       |                              |       |                                              |       |   |   |   |   |
| Basic                                               |       | 20,856,009                        |       | 19,662,172                                        |       | 20,583,331 |   | 19,347,357 |   |
| Diluted                                             |       | 21,372,672                        |       | 19,662,172                                        |       | 20,646,214 |   | 19,347,357 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Integrated ManagementInformation, Inc.**

**Statementsof Cash Flows**

**(Unaudited)**

 
| ** **                                                                            | ** ** | **Year to Date Period ended Sept 30,** | ** ** |
|---------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                                            | ** ** | **2008**                                                             | ** ** | **2007** | ** ** |
| Operating activities:                                                                 |       |                                                                 |       |   |   |
| Net income (loss)                                                                     |       | $                                                                    | 143,175    |   | $ | (688,162 | ) |
| Adjustments to reconcile net income (loss)  to net cash used in operating activities: |       |                                                                 |       |   |   |
| Depreciation and amorization                                                          |       | 38,080                                                               |       | 23,941 |   |
| Stock based compensation expense                                                      |       | 5,716                                                                |       | 36,948 |   |
| Provision for doubtful accounts                                                       |       | 4,146                                                                |       | 21,026 |   |
| Amortization under advertising rights                                                 |       | 5,000                                                                |       | — |   |
| Loss on disposal of equipment                                                         |       | 4,709                                                                |       | — |   |
| Gain on sale of online businesses                                                     |       | (366,991                                                             | )          | — |   |
| Changes in assets and liabilities:                                                    |       |                                                                 |       |   |   |
| Accounts receivable                                                                   |       | (349,831                                                             | )          | (69,687 | ) |
| Inventories                                                                           |       | 6,166                                                                |       | (6,443 | ) |
| Prepaid expenses and other current assets                                             |       | (13,787                                                              | )          | 2,122 |   |
| Accounts payable                                                                      |       | 11,604                                                               |       | 66,725 |   |
| Accrued expenses and other current  liabilities                                       |       | 2,520                                                                |       | 10,569 |   |
| Deferred revenue                                                                      |       | (5,750                                                               | )          | 8,142 |   |
| Net cash used in operating activites                                                  |       | (515,243                                                             | )          | (594,819 | ) |
|                                                                                  |       |                                                                 |       |   |   |
| Investing activities:                                                                 |       |                                                                 |       |   |   |
| Acquisition of property and equipment                                                 |       | (45,521                                                              | )          | (25,894 | ) |
| Proceeds from sale of online businesses                                               |       | 800,000                                                              |       | — |   |
| Proceeds from sale of equipment                                                       |       | 800                                                                  |       | — |   |
| Net cash provided (used) in investing  activities                                     |       | 755,279                                                              |       | (25,894 | ) |
|                                                                                  |       |                                                                 |       |   |   |
| Financing activities:                                                                 |       |                                                                 |       |   |   |
| Proceeds from line of credit                                                          |       | 38,000                                                               |       | — |   |
| Repayments on line of credit                                                          |       | (108,000                                                             | )          | (86,622 | ) |
| Proceeds from Lapaesotes Note Payable                                                 |       | —                                                               |       | 300,000 |   |
| Repayment of CattleNetwork Note Payable                                               |       | (350,000                                                             | )          | — |   |
| Proceeds from issuance of common stock                                                |       | 125,000                                                              |       | 350,000 |   |
| Release of restricted cash                                                            |       | —                                                               |       | 50,000 |   |
| Stock repurchase under Buyback Program                                                |       | (13,690                                                              | )          | — |   |
| Net cash provided (used) in financing  activities                                     |       | (308,690                                                             | )          | 613,378 |   |
| Net change in cash and cash equivalents                                               |       | (68,654                                                              | )          | (7,335 | ) |
| Cash and cash equivalents at beginning of  year                                       |       | 170,882                                                              |       | 230,539 |   |
| Cash and cash equivalents at end of year                                              |       | $                                                                    | 102,228    |   | $ | 223,204 |   |

 

The accompanying notes are an integral partof these financial statements.

 

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**Integrated Management Information, Inc.**

**Statements of Stockholders’ Equity**

**(Unaudited)**

 
| ** **                                                                                   | ** ** | ** **        | ** ** | ** **  | ** ** | **Additional** | ** ** | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-------------------|------------|-------------|------------|----------------|------------|--------------|------------|------------|------------|------------|------------|
| ** **                                                                                   | ** ** | **Common  Stock** | ** ** | **Paid-in** | ** ** | **Retained**   | ** ** | **Treasury** | ** ** | ** ** | ** ** |
| ** **                                                                                   | ** ** | **Shares**        | ** ** | **Amount**  | ** ** | **Capital**    | ** ** | **Deficit**  | ** ** | **Stock**  | ** ** | **Total**  | ** ** |
| Balance at December 31, 2006                                                            |       | 27,023,283        |       | 27,024      |       | 4,315,571      |       | (2,587,014   | )          | (1,485,000 | )          | 270,581    |       |
|                                                                                         |       |              |       |        |       |           |       |         |       |       |       | —     |       |
| Issuance of common stock in connection  with a private placement in  February 2007 |       | 555,556           |       | 555         |       | 249,445        |       |         |       |       |       | 250,000    |       |
| Issuance of common stock in connection  with a private placement in August 2007    |       | 666,667           |       | 667         |       | 99,333         |       |         |       |       |       | 100,000    |       |
| Stock-based compensation expense                                                             |       |              |       |        |       | 41,330         |       |         |       |       |       | 41,330     |       |
| Net loss                                                                                     |       | —            |       | —      |       | —         |       | (759,560     | )          | —     |       | (759,560   | )          |
| Balance at December 31, 2007                                                            |       | 28,245,506        |       | $           | 28,246     |           | $          | 4,705,679    |       | $          | (3,346,574 | )          | $          | (1,485,000 | ) | $ | (97,649 | ) |
|                                                                                         |       |              |       |        |       |           |       |         |       |       |       | —     |       |
| Stock repurchase of 48,275 shares  on the open market                                   |       |              |       |        |       |           |       |         |       | (13,690    | )          | (13,690    | )          |
| Stock-based compensation expense                                                             |       |              |       |        |       | 5,716          |       |         |       |       |       | 5,716      |       |
| Issuance of common stock in connection  with a private placement in July 2008      |       | 916,000           |       | 916         |       | 124,084        |       |         |       |       |       | 125,000    |       |
| Retirement of treasury stock                                                                 |       | (8,250,000        | )          | (8,250      | )          | (1,476,750     | )          |         |       | 1,485,000  |       | —     |       |
| Net loss                                                                                     |       | —            |       | —      |       | —         |       | 143,175      |       | —     |       | 143,175    |       |
| Balance at September 30, 2008                                                           |       | 20,911,506        |       | $           | 20,912     |           | $          | 3,358,729    |       | $          | (3,203,399 | )          | $          | (13,690 | ) | $ | 162,552 |   |

 

The accompanying notes are an integral partof these financial statements.

 

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** **

**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

****Note1 - The Company and Basis of Presentation****

 

****BusinessOverview****

 

IntegratedManagement Information, Inc. (“IMI Global,” “IMI,” the “Company” or “we”)is a leading provider of verification and communication solutions in theagricultural and livestock industry. To our customers, we provide our owned andoperated online properties and services which specialize in identification andtraceability, process, production practice and supply verification, documentcontrol for USDA verification programs and third party auditing services. Oursolutions help our customers establish their own systems, meet governmentregulations, create their own premium brand identity, gain cost efficienciesand command a higher price for their product.

 

IMIGlobal stands at the forefront of a rapidly evolving movement to tracklivestock and verify sources of beef and other livestock products. In theaftermath of the discovery of the first case of mad cow disease in the UnitedStates in December, 2003, many of the largest U.S. beef and other livestockexport markets were closed resulting in significant losses to the industry. Inresponse to the crisis, several initiatives were enacted to facilitate thereopening of key export markets. Most notably, U.S. suppliers seeking to sellbeef and other livestock products to other countries must participate in apre-approved Quality System Assessment Program so as to have an approved meansof verifying specific product requirements. In response, we were the first todevelop a USDA Quality System Assessment document management system forauditing the tracking systems used by beef and other livestock producers toverify source and age. We introduced our USVerified Source and Age Verificationsystem in 2005, and over the years we have continued to enhance and furtherdevelop programs to address other verification needs including, but not limitedto, non-hormone treated cattle (NHTC) and humane handling marketing claims.More recently, we worked with compliance programs, and marketing approaches inadvance of completion of the country of origin labeling (COOL) legislation’sfinal rule, requiring meat retailers to display the country of origin on theirmeat and produce labels.

 

****AssetSale and Discontinued Operations****

 

****On July 15,2008, we completed the sale (the “asset sale”) of three wholly-owned onlinebusinesses – CattleNetwork, CattleStore and AgNetwork – to Vance PublishingCorp. (“Vance”), a privately held provider of print and electronic media with astrong presence in the agricultural industry. The transaction included $800,000 in cash and an undeterminable value ofadvertising placements in Vance’s industry leading publications, includingDrover’s, Pork, Bovine Veterinarian and Dairy Herd Management, over a threeyear period. Vance has also contracted with us to provide network maintenanceand support for the websites as part of a separate support agreement. Inaddition, Vance has agreed to open negotiations on another IMI Global product,AgTraderIndex (www.AgTraderIndex.com).****

 

****Thewholly-owned online businesses were considered significant revenue streams;however, they historically have not contributed materially to gross profit. Theassets sold in the transaction primarily represented all of the goodwill andintangible assets recorded on the balance sheet. We sold the assets at asubstantial premium to the original purchase in 2005 and accordingly haverecorded a gain on sale of approximately $367,000 during the third quarter of2008. The advertising rights will be accounted for as a gain contingency as itinvolves uncertainties as to the possible gain that will be ultimately realized.The advertising rights are not assignable or resalable, therefore the fairmarket value is not determinable until such time as advertising actuallyoccurs.****

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

OurStatements of Operations present income (loss) from continuing operations andloss from discontinued operations. All discussions are based on income fromcontinuing operations and therefore exclude all income statement items of thecurrent and prior year’s discontinued operations.

 

****Basisof Presentation****

 

Ourfinancial statements have been prepared in conformity with accounting principlesgenerally accepted in the United States of America. The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires us to make estimates andassumptions that affect reported amounts of assets and liabilities, disclosureof contingent assets and liabilities at the date of the financial statements,and the reported amounts of revenues, costs and expenses during the reportingperiod. Actual results could differ from the estimates.

 

**RecentAccounting Pronouncements**

 

Weadopted Financial Accounting Standards Board (FASB) Statement of FinancialAccounting Standards (SFAS) No. 157, Fair Value Measurements, (SFAS 157)on January 1, 2008, which became effective for fiscal periods beginningafter November 15, 2007. SFAS 157 defines fair value, establishes aframework for using fair value to measure assets and liabilities, and expandsdisclosure about fair value measurements. SFAS 157 applies whenever otherstatements require or permit assets or liabilities to be measured at fairvalue. The adoption of SFAS 157 did not have an impact on our financialstatements.

 

Weadopted SFAS No. 159, The Fair Value Option for Financial Assets andFinancial Liabilities-Including an Amendment of FASB Statement No. 115(SFAS No. 159) on January 1, 2008, which became effective for fiscalperiods beginning after November 15, 2007. This standard permits entitiesto choose to measure many financial instruments and certain other items at fairvalue. While SFAS No. 159 became effective for our 2008 fiscal year, wedid not elect the fair value measurement option for any of our financial assetsor liabilities.

 

InMarch 2008, the FASB issued SFAS No. 161, Disclosures aboutDerivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133(SFAS 161). This statement changes the disclosure requirements for derivativeinstruments and hedging activities.  SFAS161 requires enhanced disclosures about (a) how and why an entity usesderivative instruments, (b) how derivative instruments and related hedgeditems are accounted for under SFAS 133 and its related interpretations, and (c) howderivative instruments and related hedged items affect an entity’s financialposition, financial performance, and cash flows.  SFAS 161 is effective as of the beginning ofour 2009 fiscal year. We are currently evaluating the potential impact, if any,of the adoption of SFAS 161 on our financial statements.

 

InApril 2008, the FASB issued FASB Staff Position No. FAS 142-3,Determination of the Useful Life of Intangible Assets (FSP 142-3).  FSP 142-3 amends the factors that should beconsidered in developing renewal or extension assumptions that are used todetermine the useful life of a recognized intangible asset under FASB StatementNo. 142, Goodwill and Other Intangible Assets and requires enhancedrelated disclosures.  FSP 142-3 must beapplied prospectively to all intangible assets acquired as of and subsequent tofiscal years beginning after December 15, 2008.  We are currently evaluating the impact thatFSP 142-3 will have on our financial statements.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

InMay 2008, the FASB issued SFAS No. 162, The Hierarchy of GenerallyAccepted Accounting Principles (SFAS 162). SFAS 162 identifies the sources ofaccounting principles to be used in the preparation of financial statements ofnongovernmental entities that are presented in conformity with generallyaccepted accounting principles (GAAP) in the United States (the GAAPhierarchy). This Statement will be effective November 15, 2008. TheCompany currently adheres to the hierarchy of GAAP as presented in SFAS 162 anddoes not expect its adoption will have a material impact on its results ofoperations and financial condition.

 

Wehave considered all other recently issued accounting pronouncements and do notbelieve the adoption of such pronouncements will have a material impact on ourconsolidated financial statements.

 

****Note2 - Basic and Diluted Income (Loss) per Share****

 

Basicincome (loss) per share was computed by dividing income (loss) available tocommon shareholders by the weighted average number of common shares outstandingduring the period. Diluted income (loss) per share is based on the assumptionthat all dilutive convertible shares and stock options were converted orexercised. Dilution is computed by applying the treasury stock method. Underthis method, options and warrants are assumed to be exercised at the beginningof the period (or at the time of issuance, if later), and as if funds obtainedthereby were used to purchase common stock at the average market price duringthe period. Weighted average number of shares used to compute basic and dilutedloss per share is the same in these financial statements since the effect ofdilutive securities is anti-dilutive.

 

Thefollowing is a reconciliation of the share data used in the basic and dilutedincome (loss) per share computations:

 
| ** **                                      | ** ** | **Third Quarter ended** | ** ** | **Year to Date Period ended** | ** ** |
|-------------------------------------------------|------------|-----------------------------------|------------|---------------------------------------------------|------------|
| ** **                                      | ** ** | **Sept 30,    2008**         | ** ** | **Sept 30,    2007**                         | ** ** | **Sept 30,    2008** | ** ** | **Sept 30,    2007** | ** ** |
| Basic:                                          |       |                              |       |                                              |       |   |   |   |   |
| Weighted average shares outstanding             |       | 20,856,009                        |       | 19,662,172                                        |       | 20,583,331 |   | 19,347,357 |   |
|                                            |       |                              |       |                                              |       |   |   |   |   |
| Diluted:                                        |       |                              |       |                                              |       |   |   |   |   |
| Weighted average shares outstanding             |       | 20,856,009                        |       | 19,662,172                                        |       | 20,583,331 |   | 19,347,357 |   |
| Weighted average effects of dilutive securities |       |                              |       |                                              |       |   |   |   |   |
| Stock options under Plans                       |       | 516,663                           |       | —                                            |       | 62,883 |   | — |   |
| Stock options granted to Founders               |       | —                            |       | —                                            |       | — |   | — |   |
| Warrants                                        |       | —                            |       | —                                            |       | — |   | — |   |
| Total                                           |       | 21,372,672                        |       | 19,662,172                                        |       | 20,646,214 |   | 19,347,357 |   |
|                                            |       |                              |       |                                              |       |   |   |   |   |
| Antidilutive securities:                        |       |                              |       |                                              |       |   |   |   |   |
| Stock options under Plans                       |       | 3,537,500                         |       | 3,657,500                                         |       | 3,537,500 |   | 3,657,500 |   |
| Stock options granted to Founders               |       | 6,000,000                         |       | 6,000,000                                         |       | 6,000,000 |   | 6,000,000 |   |
| Warrants                                        |       | 922,810                           |       | 922,810                                           |       | 922,810 |   | 922,810 |   |
| Total                                           |       | 10,460,310                        |       | 10,580,310                                        |       | 10,460,310 |   | 10,580,310 |   |

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

****Note3 - Stock-Based Compensation****

 

Ourstock based award plans (collectively referred to as the “Plans”) provide forthe issuance of stock-based awards to employees, officers, directors andconsultants. The Plans permit the granting of stock awards and stockoptions.  The vesting of stock-based awardsis generally subject to meeting certain performance based objectives, thepassage of time or a combination of both, and continued employment through thevesting period. Stock option activity under our Plans is summarized as follows:

 
| ** **                           | ** ** | **Number  of Options** | ** ** | **Weighted Avg.  Exercise Price  per Share** | ** ** |
|--------------------------------------|------------|------------------------|------------|---------------------------------------------------|------------|
|                                 |       |                   |       |                                              |       |
| Outstanding,  December 31, 2007 |       | 3,657,500              |       | $                                                 | 0.78       |   |
| Granted                              |       | 1,758,000              |       | $                                                 | 0.24       |   |
| Exercised                            |       | —                 |       | $                                                 | —     |   |
| Forfeited                            |       | —                 |       | $                                                 | —     |   |
| Outstanding, September 30, 2008 |       | 5,415,500              |       | $                                                 | 0.60       |   |
| Exercisable, September 30, 2008 |       | 4,429,000              |       | $                                                 | 0.69       |   |

 

Thefair value of stock options is estimated using the Black-Scholes option-pricingmodel with the following weighted average assumptions:

 
| ** **                                  | ** ** | **For the Quarter ended** | ** ** | **For the Year to Date Period ended** | ** ** |
|---------------------------------------------|------------|------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                  | ** ** | **Sept 30,  2008**                  | ** ** | **Sept 30,  2007**                                             | ** ** | **Sept 30,  2008** | ** ** | **Sept 30,  2007** | ** ** |
|                                        |       |                                     |       |                                                                |       |   |   |   |   |
| Expected life of options from date of grant |       | 3.0  years                               |       | 3  - 4 years                                                        |       | 3.0  years |   | 2  - 4 years |   |
| Risk free interest rate                     |       | 2.8  - 2.9%                              |       | 4.7  - 4.9%                                                         |       | 2.5  - 2.9% |   | 4.7  - 4.9% |   |
| Expected volatility                         |       | 35.9%                                    |       | 35.9%                                                               |       | 35.9% |   | 35.9% |   |
| Assumed dividend yield                      |       | 0.0%                                     |       | 0.0%                                                                |       | 0.0% |   | 0.0% |   |

 

Dividendyield is based on our historical and anticipated policy of not paying cashdividends. Expected volatility is based on the “calculated value” method setforth in FAS 123R (based on historical volatilities of appropriate industrysector indices) because our stock did not have sufficient historic share pricedata available, as it was not publicly traded prior to November 15, 2006.The risk-free interest rate is based on the U.S. Treasury yield curve in effectat the time of grant for periods corresponding with the expected term of theoptions. The expected term of options represents the period of time thatoptions granted are expected to be outstanding giving consideration to vestingschedules.

 

Ourstock-based compensation cost for the third quarters ended September 30,2008 and 2007 was $2,000 and $1,733, respectively, and has been included ingeneral and administrative expenses. Stock-based compensation cost for the yearto date periods ended September 30, 2008 and 2007 was $5,716 and $36,948,respectively. No tax benefits were recognized for these costs due to ourcumulative losses as well as a full valuation reserve on our deferred taxassets.

 

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** **

**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

** **

**Note 4- Stock Buyback Plan**

 

OnJanuary 7, 2008, we announced our intention to buy back up to one millionshares of our common stock from the open market over the first six months of2008. Our Board of Directors extended the period of time in which we can buyback shares until June 30, 2009.

 

Asof September 30, 2008, we have repurchased 48,275 shares at an averageprice of $0.26 per share. Total cash consideration for the repurchased shareswas $13,690. The repurchased shares are recorded as part of treasury stock andare accounted for under the cost method.

 

****Note5 – Income Taxes****

 

Deferredtax assets and liabilities have been determined based upon the differencesbetween the financial statement amounts and the tax bases of assets andliabilities as measured by enacted tax rates expected to be in effect when thesedifferences are expected to reverse. In assessing the reliability of deferredtax assets, management considers whether it is more likely than not that someportion or all of the deferred tax assets will not be realized. Our netoperating loss carry forwards are the most significant component of ourdeferred income tax assets; however, the ultimate realization of our deferredincome tax assets is dependent upon generation of future taxable income. Weconsider past history, the scheduled reversal of taxable temporary differences,projected future taxable income, and tax planning strategies in making thisassessment. As of September 30, 2008 and 2007, we believe it is morelikely than not that our net deferred tax asset will not be realized andaccordingly we have recorded a valuation allowance against the deferred taxassets.

 

Wewill continue to assess the need for a valuation allowance that results fromuncertainty regarding our ability to realize the benefits of our deferred taxassets. As we move closer towards achieving net income for a full year, we willreview qualitative and quantitative data, including events within our industry,the nature of our business, our future forecasts and historical trending. If weconclude that our prospects for the realization of our deferred tax assets aremore likely than not, we will then reduce our valuation allowance asappropriate and credit income tax expense after considering the followingfactors:

 

·                  The levels of historical taxable income andprojections for future taxable income over periods in which the deferred taxassets would be deductible, and

·                  Accumulation of net income before taxutilizing a look-back period of three years.

 

Theamount of the deferred tax asset considered realizable, however, could be reducedif estimates of future taxable income during the carry-forward periods arereduced.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

****Note6 - Notes Payable****

 

Notespayable consist of the following:

 
| ** **                                                     | ** ** | **Sept 30,  2008** | ** ** | **December 31,   2007** | ** ** |
|----------------------------------------------------------------|------------|-------------------------|------------|------------------------------|------------|
|                                                           |       |                    |       |                         |       |
| Platte Valley Line of Credit                                   |       | $                       | —     |                         | $          | 70,000 |   |
| Cattlefeeding.com Note                                         |       | —                  |       | 350,000                      |       |
| Lapaesotes Note Payable                                        |       | 300,000                 |       | 300,000                      |       |
|                                                           |       | $                       | 300,000    |                         | $          | 720,000 |   |
| Less current portion of notes payable and other long-term debt |       | —                  |       | 420,000                      |       |
| Notes payable and other long-term debt                         |       | $                       | 300,000    |                         | $          | 300,000 |   |

 

**PlatteValley Line of Credit**

 

Concurrentwith the closing of the asset sale on July 15, 2008 as previouslydiscussed, $94,000 of the proceeds were used to settle our line of credit withPlatte Valley Bank********and release all security agreements. The lineof credit was secured by the personal guarantees of our two foundingshareholders and the accounts receivable of the company. Interest was payablemonthly based on the prime rate with a floor and ceiling cap of 6.75% and13.75%, respectively.

 

**Cattlefeeding.comNote**

 

Inconnection with the 2005 acquisition of the assets of Cattlefeeding.com, weissued a note payable to Cattlefeeding.com, Inc. in the amount of$350,000. Under the Note, interest in the amount of 5% of outstanding principalwas payable on a monthly basis, with all outstanding principal and interestpayable on June 12, 2008. In June 2008, the maturity of the note wasextended until July 15, 2008. Concurrent with the closing of the assetsale on July 15, 2008 as previously discussed, $350,000 of the proceedswere used to pay the Cattlefeeding.com note payable in full.

 

**LapaseotesNote Payable**

 

InSeptember 2007, we obtained $300,000 in unsecured debt financing. The$300,000 note held by a major shareholder, bears an interest rate of 9% perannum, payable quarterly. The principal balance is due on September 12,2011.

 

****Note7 - Related Party Transactions****

 

InSeptember 2007, we obtained $300,000 in unsecured debt financing. The$300,000 note is held by a major shareholder who is related to Pete Lapaseotes,a director. The note bears an interest rate of 9% per annum, payable quarterly.The principal balance is due on September 12, 2011.

 

****Duringthe third quarter of 2008, we completed a private placement with a board memberand a major shareholder for our common stock. We issued 916,000 shares of ourcommon stock at $0.14 per share, netting total consideration of $125,000.****

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

****Note8 - Commitments and Contingencies****

 

**OperatingLeases**

 

InJune 2006, we entered into a building lease for our headquarters in CastleRock, Colorado. The lease is for a period of five years and can be extended foran additional five years. In addition to the primary rent, the lease requiresadditional payments for operating costs and other common area maintenancecosts.

 

Asof September 30, 2008, the annual primary lease payments are as follows:

 
| **Years Ending December 31,** | ** ** | **Amount** | ** **   |
|----------------------------------------------|------------|------------|--------------|
| 2008                                         |       | $          |  11,400 |   |
| 2009                                         |       | 46,171     |         |
| 2010                                         |       | 47,326     |         |
| 2011                                         |       | 48,509     |         |
| 2012                                         |       | 24,554     |         |
| Thereafter                                   |       | —     |         |
| Total lease commitments                      |       | $          | 177,960      |   |

 

Welease a copier machine which requires a base rent of $189.00 per month or$2,268 annually. The lease expires in September 2009.

 

**EmploymentAgreements**

 

InJanuary 2006, we entered into an employment contract with John Saunders asour President and Chief Executive Officer for an annual salary of $90,000subject to annual performance review adjustments. The agreement automaticallyrenews annually unless a 60-day notice of non-renewal is provided by either theCompany or the employee.

 

InJanuary 2006, we entered into an employment contract with Leann Saundersas our Vice President of Quality Control for an annual salary of $90,000subject to annual performance review adjustments. The agreement automaticallyrenews annually unless a 60-day notice of non-renewal is provided by either theCompany or the employee. In September 2008, Mrs. Saunders waspromoted to the position of President. There was no adjustment to Mrs. Saundersannual salary.

 

InFebruary 2007, we entered into an employment contract with Rob Streight asour Chief Operating Officer for an annual salary of $150,000 subject to annual performancereview adjustments. The agreement automatically renews annually unless a 60-daynotice of non-renewal is provided by either the Company or the employee. In September 2008,Mr. Streight began working on an as-needed basis and his salary is beingadjusted accordingly.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

** **

**Legalproceedings**

 

TheCompany is and may be involved in various unresolved legal actions,administrative proceedings and claims in the ordinary course of business.Although it is not possible to predict with certainty the outcome of theseunresolved actions, we do not believe, based on current knowledge, that anylegal proceeding or claim is likely to have a material effect on its financialposition, results of operation or cash flows.

 

**Other**

 

OnJune 3, 2008, Tyson Foods, Inc. filed a petition to cancel thetrademark “Beef Born & Raised in the USA®”.  On July 14, 2008, Born & Raisedin the USA® filed a motion to dismiss the cancellation action.  Both motions are pending before the UnitedStates Patent and Trademark Office.

 

IntegratedManagement Information, Inc. (IMI Global) is the exclusive worldwidemarketing partner for the Born & Raised in the USA® labeling program,which includes unique and distinctive labeling for beef, pork, poultry, lamb,fish and game.  As such, IMI Global ismarketing the label and providing USDA compliance to retailers who must displayon meat packaging a label identifying the country of origin (COOL) for meatproducts beginning in the fall of 2008.

 

IMIGlobal supports Born & Raised in the USA® in its decision to defendits trademarked labeling, believing that the trademarks were legally issued andare fully enforceable.  IMI Globalcontinues to market the label and verification program and has expressed itsdesire to work closely with Tyson Foods on this program.

 

****Note9 - Liquidity****

 

Historically,our growth has been funded through a combination of convertible debt fromprivate investors and private placement offerings. We continually evaluate allfunding options including additional offerings of our securities to private,public and institutional investors and other credit facilities as they becomeavailable.

 

Theprimary driver of our operating cash flow is our third-party verificationsolutions, specifically the gross margin generated from services provided.Therefore we focus on the elements of those operations including revenue growthand long term projects that ensure a steady stream of operating profits toenable us to meet our cash obligations. On a weekly basis we review theperformance of each of our revenue streams focusing on third party verificationsolutions compared with prior periods and our operating plan. Based on thecontinued sales growth and ****overall improvement in our performance, we believe that we will achieveprofitability for the year ended December 31, 2008. The culmination of allour efforts toward profitability has brought opportunities to us including:increased investor confidence and renewed interest in our company, third-partyinterest in our expertise to develop and enhance websites, as well as thepotential to develop business relationships with long term strategic partners.In keeping with our core business, we will continue to review our businessmodel with a focus on profitability, long term capital solutions and thepotential impact of acquisitions or divestitures, if such an opportunityarises.****

 

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**** ****

****ITEM 2.**** ****MANAGEMENT’SDISCUSSION AND ANALYSIS****

 

****BusinessOverview****

 

Weare a recognized leader providing third-party verification and communicationsolutions for the agriculture industry. To our customers, we provide our ownedand operated online properties and services which specialize in identificationand traceability, process, production practice and supply verification,document control for USDA verification programs and third party auditingservices. Our solutions help our customers establish their own systems, meetgovernment regulations, create their own premium brand identity, gain costefficiencies and command a higher price for their product.

 

IMIGlobal stands at the forefront of a rapidly evolving movement to tracklivestock and verify sources of beef and other livestock products. In theaftermath of the discovery of the first case of mad cow disease in the UnitedStates in December, 2003, many of the largest U.S. beef and other livestockexport markets were closed resulting in significant losses to the industry. Inresponse to the crisis, several initiatives were enacted to facilitate thereopening of key export markets. Most notably, U.S. suppliers seeking to sellbeef and other livestock products to other countries must participate in apre-approved Quality System Assessment Program so as to have an approved meansof verifying specific product requirements. In response, we were the first todevelop a USDA Quality System Assessment document management system forauditing the tracking systems used by beef and other livestock producers toverify source and age. We introduced our USVerified Source and Age Verificationsystem in 2005, and over the years we have continued to enhance and furtherdevelop programs to address other verification needs including, but not limitedto, non-hormone treated cattle (NHTC) and humane handling marketing claims.More recently, we worked with compliance programs, and marketing approaches inadvance of completion of the country of origin labeling (COOL) legislation’sfinal rule, requiring meat retailers to display the country of origin on theirmeat and produce labels.

 

****AssetSale and Discontinued Operations****

 

****On July 15,2008, we completed the sale (the “asset sale”) of three wholly-owned onlinebusinesses – CattleNetwork, CattleStore and AgNetwork – to Vance PublishingCorp. (“Vance”), a privately held provider of print and electronic media with astrong presence in the agricultural industry. The transaction included $800,000 in cash and an undeterminable value ofadvertising placements in Vance’s industry leading publications, includingDrover’s, Pork, Bovine Veterinarian and Dairy Herd Management, over a threeyear period. Vance has also contracted with us to provide network maintenanceand support for the websites as part of a separate support agreement. Inaddition, Vance has agreed to open negotiations on another IMI Global product,AgTraderIndex (www.AgTraderIndex.com).****

 

****The wholly-ownedonline businesses were considered significant revenue streams; however, theyhistorically have not contributed materially to gross profit. The assets soldin the transaction primarily represented all of the goodwill and intangibleassets recorded on the balance sheet. We sold the assets at a substantialpremium to the original purchase in 2005 and accordingly have recorded a gainon sale of approximately $367,000 during the third quarter of 2008. Theadvertising rights will be accounted for as a gain contingency as it involvesuncertainties as to the possible gain that will be ultimately realized. Theadvertising rights are not assignable or resalable, therefore the fair marketvalue is not determinable until such time as advertising actually occurs.****

 

OurStatements of Operations present income (loss) from continuing operations andloss from discontinued operations. All discussions are based on income fromcontinuing operations and therefore exclude all income statement items of thecurrent and prior year’s discontinued operations.

 

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**2008Performance Highlights**

 
| Revenues        |   | Our  revenues for the third quarter 2008 increased approximately 37% to $597,262  compared to revenue of $437,691 during third quarter 2007. We experienced  significant growth in program development and web based development services  in connection with our third party verification programs. |
|-----------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                                                                                                                                                                                                 |
| Net  Income     |   | For  the third quarter 2008 we had net income of $160,990. This represents our  second consecutive quarter of net income in our history.                                                                                                                                                             |
|            |   |                                                                                                                                                                                                                                                                                                 |
| Debt  Repayment |   | In  connection with the closing of the asset sale, $350,000 of the proceeds was used  to pay the Cattlefeeding.com note payable in full. Additionally, we repaid  amounts outstanding under our line of credit.                                                                                      |

 

****Liquidityand Capital Resources****

 

AtSeptember 30, 2008, we had cash and cash equivalents of $102,228 comparedto $170,882 of cash and cash equivalents at December 31, 2007. Our workingcapital at September 30, 2008 was $397,891 compared to a deficit of$298,386 at December 31, 2007.

 

Netcash used by operating activities during the year to date period ended September 30,2008 was $515,243 compared to $594,819 during the same period in 2007. Cashused by operating activities (continuing and discontinued operations) is drivenby our net loss and adjusted by non-cash items. Non-cash adjustments primarilyinclude depreciation, amortization of intangible assets and stock basedcompensation expense. The improvement was primarily driven by better operatingperformance yields over a greater volume of sales at consistent overhead levelsoffset by increased expenses associated with the sale of the online businesses.Additionally, the timing of cash receipts and cash disbursements affects ouroperating assets and cash balances.

 

Netcash provided by investing activities of $755,279 is primarily attributable tothe sale of the online businesses during the third quarter ended September 30,2008. Our capital expenditures were $45,521 and $25,894 for the year to dateperiods ended September 30, 2008 and 2007, respectively. Our capitalexpenditures are primarily related to purchases and internal development ofinformation technology assets to support our product and service offerings.As we anticipate continued growth, we expect to continue investingadditional capital in our information technology assets.

 

Netcash used by financing activities of $308,690 during the year to date periodended September 30, 2008 was primarily related to the repayment of theCattleNetwork Note Payable. Cash provided by financing activities of $613,378during 2007 was due to the completion of a private placement offering of ourcommon stock and issuance of new unsecured debt.

 

Historically,our growth has been funded through a combination of convertible debt fromprivate investors and private placement offerings. We continually evaluate allfunding options including additional offerings of our securities to private,public and institutional investors and other credit facilities as they becomeavailable.

 

Ourplan for continued growth is primarily based upon intensifying our focus oninternational markets. We believe that there are significant growthopportunities available to us because often the only way to 

 

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accessvarious restrictions as imposed on international market imports/exports is viaa quality verification program, like our USVerifiedTM.com product line.

 

Theprimary driver of our operating cash flow is our third-party verificationsolutions, specifically the gross margin generated from services provided.Therefore we focus on the elements of those operations including revenue growthand long term projects that ensure a steady stream of operating profits toenable us to meet our cash obligations. On a weekly basis we review theperformance of each of our revenue streams focusing on third party verificationsolutions compared with prior periods and our operating plan. Based on thecontinued sales growth and overall improvement in our performance, we believethat we will achieve profitability for the year ended December 31, 2008.The culmination of all our efforts toward profitability has broughtopportunities to us ****including: increased investor confidence and renewed interest in ourcompany,**** third-party interest in our expertise todevelop and enhance websites, as well as the potential to develop businessrelationships with long term strategic partners. In keeping with our corebusiness, we will continue to review our business model with a focus onprofitability, long term capital solutions and the potential impact ofacquisitions or divestitures, if such an opportunity arises.

 

**OffBalance Sheet Arrangements**

 

Asof September 30, 2008, we had no off-balance sheet arrangements of anytype.

 

****RESULTSOF OPERATIONS****

 

****ThirdQuarter and Year to Date Periods ended September 30, 2008 compared to SamePeriods in 2007****

 

OurStatements of Operations present income (loss) from continuing operations andloss from discontinued operations. All discussions are based on income fromcontinuing operations and therefore exclude all income statement items of thecurrent and prior year’s discontinued operations.

 

****Revenues****

 

Revenuesare derived from sales of our USVerified identification and verificationsolutions, consulting services, web-based development and hardware sales.Revenues for the third quarter and year to date period ended September 30,2008 were $597,262 and $1,768,308, an improvement of 37% and 56% over the sameperiods in 2007, respectively. The improvement in sales was primarily due tosignificant growth in program development and web based development services inconnection with our third party verification programs.

 

Duringthe third quarter ended September 30, 2008, our third party verificationrevenue, which includes sales of our USVerified solutions and relatedconsulting, program development and web-based development services, increased40% to $441,564 in second quarter 2008 from $316,628 in the same quarter 2007.For the year to date period ended September 30, 2008, sales increased 57% to$1,462,235 compared to $932,709 in the same 2007 period.

 

Webelieve that customer demand for third party verification services willcontinue to increase with the reopening of key export markets, increasingdemand for verification of NHTC and humane handling marketing claims. We alsobelieve the demand for verification will continue to grow and present otheropportunities for our business in light of the many recent product recalls infresh produce and with the advent of the new legislation concerning country oforigin labeling (COOL). Effective September 30, 2008, all muscle cuts andground beef (including veal), lamb, chicken, goat and pork produced and 

 

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packagedafter September 30, 2008, must be labeled at retail to include a countryof origin label (COOL). The rule also covers perishable agriculturalcommodities (fresh and frozen fruits and vegetables), macadamia nuts, pecans,ginseng and peanuts. We are the exclusive worldwide marketing partner for Born &Raised in the USA® — a labeling program that we believe is ideally suited tohelp producers, packers and retailers comply with the new labeling requirements.

 

Revenuesderived from sales of hardware, primarily sales of cattle identification eartags, increased 36% to $148,198 in the third quarter 2008 compared to $108,823in the third quarter 2007. For the year to date period ended September 30,2008, sales increased 35% to $253,323 compared to $188,193 in the same 2007period.

 

Oure-learning solutions represent a new revenue stream for us in 2008 andgenerated $52,750 for the year to date period ended September 30, 2008.

 

****Costof Sales and Gross Margin****

 

Costof sales for the third quarter 2008 were $352,152 compared to $145,472 duringthe third quarter 2007 and $779,754 for the 2008 year to date period comparedto $311,260 in the 2007 period. Gross margin for the third quarter 2008declined by approximately 26 basis points to 41% of revenues compared to 67%for the third quarter 2007 and approximately 17 basis points to 56% of revenuesfor the 2008 year to date period compared to 73% for the same 2007 period. Thechange was partially due to the addition of dedicated personnel providingprogram development and web based development services in connection with ourthird party verification programs coupled with shifts in the sales mix of ourlower margin hardware sales. Due to our focus on margins, our commitment tolong term growth and the scalability of the programs we develop, we anticipatethat our margins will continue to be impacted for the next few quarters.

 

**Selling,General and Administrative Expenses**

 

Selling,general and administrative expenses for the third quarter 2008 were $391,312, adecrease of $80,470, or 17% over the third quarter 2007 amount of $471,782. Thedecrease was primarily due to a $27,741 reduction in spending for contractedservices and other professional service fees, $29,811 decrease in travelexpenses and an overall decrease in expenses due to management’s efforts toaggressively control costs.

 

Forthe year to date period ended September 30, 2008, expenses were$1,121,697, a decrease of $358,628, or 24% compared to $1,480,325 for the sameperiod in 2007. The decrease was primarily due to a $31,233 reduction in stockbased compensation expense, $144,513 reduction in spending for contractedservices and other professional service fees, $77,532 decrease travel expensesand an overall decrease in expenses due to management’s efforts to aggressivelycontrol costs.

 

**Gain onSale of Online Businesses**

 

OnJuly 15, 2008, we completed the sale of three wholly-owned onlinebusinesses – CattleNetwork, CattleStore and AgNetwork – to Vance PublishingCorp. (“Vance”), a privately held provider of print and electronic media with astrong presence in the agricultural industry. The assets sold in thetransaction primarily represented all of the goodwill and intangible assetsrecorded on the balance sheet. We sold the assets at a substantial premium tothe original purchase in 2005 and accordingly have recorded a gain on sale ofapproximately $367,000 during the third quarter of 2008.

 

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****OtherExpense (Income)****

 

Interestexpense for the third quarter 2008 increased to $7,603 compared to $4,712 forthe third quarter 2007 and $25,075 for the year to date period ended September 30,2008 compared to $10,825 for the same period in 2007. The increase during 2008was primarily attributable to more interest expense incurred on a greaterborrowing base at higher interest rates during part of 2008 as compared to2007.

 

Inconnection with the closing of the asset sale previously described, w****e recorded a gain on saleof approximately $367,000 during the third quarter of 2008.****

 

****Income(Loss) from Continuing Operations****

 

Asa result of the foregoing, income from continuing operations for the thirdquarter 2008 was $214,061 or $0.01 per basic and diluted common share, comparedto loss from continuing operations of $180,940 or $0.01 loss per basic anddiluted common share for the third quarter 2007. Income from continuingoperations for the year to date period ended September 30, 2008 was$143,175 or $0.01 per basic and diluted common share, compared to loss fromcontinuing operations of $688,162 or $0.03 loss per basic and diluted commonshare for the same period in 2007.

 

****CRITICALACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES****

 

Ourdiscussion and analysis of our financial condition and results of operations isbased upon our financial statements, which have been prepared in accordancewith GAAP. The preparation of these consolidated financial statements requiresus to make estimates, judgments and assumptions that affect the reportedamounts of assets, liabilities, revenues and expenses, and the relateddisclosure of contingent assets and liabilities. We base our estimates onhistorical experience and on various other assumptions that we believe arereasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from theseestimates.

 

Anaccounting policy is considered to be critical if it requires an accountingestimate to be made based on assumptions about matters that are highlyuncertain at the time the estimate is made, and if different estimates thatreasonably could have been used, or changes in the accounting estimate that arereasonably likely to occur, could materially impact the consolidated financialstatements. We believe that the following critical accounting policies reflect themore significant estimates and assumptions used in the preparation of theconsolidated financial statements.

 

****Goodwilland Other Intangible Assets****

 

****Goodwillis tested for impairment at the reporting unit level (operating segment or onelevel below an operating segment) on an annual basis and between annual testsin certain circumstances. Application of the goodwill impairment test requiresjudgment, including the identification of reporting units, assigning assets andliabilities to reporting units, assigning goodwill to reporting units, anddetermining the fair value of each reporting unit. Significant judgmentsrequired to estimate the fair value of reporting units include estimatingfuture cash flows, and determining appropriate discount rates, growth rates andother assumptions. Changes in these estimates and assumptions could materiallyaffect the determination of fair value for each reporting unit which couldtrigger impairment. Based on our 2007 impairment test, there would have to be asignificant unfavorable change to our assumptions used in such calculations foran impairment to exist.****

**** ****

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****Weamortize other intangible assets over their estimated useful lives. We recordan impairment charge on these assets when we determine that their carryingvalue may not be recoverable. The carrying value is not recoverable if itexceeds the undiscounted future cash flows resulting from the use of the assetand its eventual disposition. When there is existence of one or more indicatorsof impairment, we measure any impairment of intangible assets based on aprojected discounted cash flow method using a discount rate determined by ourmanagement to be commensurate with the risk inherent in our business model. Ourestimates of future cash flows attributable to our other intangible assetsrequire significant judgment based on our historical and anticipated resultsand are subject to many factors. Different assumptions and judgments couldmaterially affect the calculation of the fair value of our other intangibleassets which could trigger impairment.****

 

****Aspreviously described, the assets sold in connection with the sale of three wholly-ownedonline businesses – CattleNetwork, CattleStore and AgNetwork – primarilyrepresented all of the goodwill and intangible assets recorded on the balancesheet. We sold the assets at a substantial premium to the original purchase in2005 and accordingly have recorded a gain on sale of approximately $367,000during the third quarter of 2008.****

 

**Stock-BasedCompensation Expense**

 

Calculatingstock-based compensation expense requires the input of highly subjectiveassumptions, including the expected term of the stock-based awards, stock pricevolatility, and the pre-vesting option forfeiture rate. We estimate theexpected life of options granted based on historical exercise patterns, whichwe believe are representative of future behavior. We estimate the volatility ofour common stock on the date of grant based on the implied volatility ofpublicly traded options on our common stock, with a term of one year orgreater. We believe that implied volatility calculated based on actively tradedoptions on our common stock is a better indicator of expected volatility andfuture stock price trends than historical volatility. Therefore, expectedvolatility for the year to date period ended September 30, 2008 and forthe year ended December 31, 2007 was based on a market-based impliedvolatility. The assumptions used in calculating the fair value of stock-basedawards represent our best estimates, but these estimates involve inherentuncertainties and the application of management judgment. As a result, iffactors change and we use different assumptions, our stock-based compensationexpense could be materially different in the future. In addition, we arerequired to estimate the expected forfeiture rate and only recognize expensefor those shares expected to vest. We estimate the forfeiture rate based onhistorical experience of our stock-based awards that are granted, exercised andcancelled. If our actual forfeiture rate is materially different from ourestimate, the stock-based compensation expense could be significantly differentfrom what we have recorded in the current period.

 

****ITEM 3. CONTROLS AND PROCEDURES****

 

**DisclosureControls and Procedures**

 

TheCompany’s management, with the participation of the Company’s principalexecutive officer and principal financial officer, has evaluated theeffectiveness of the Company’s disclosure controls and procedures (as such termis defined in Rules 13a-15(e) and 15d-15(e) under the ExchangeAct) as of the end of the period covered by this report. Based on suchevaluation, the Company’s principal executive officer and principal financialofficer have concluded that, as of the end of such period, the Company’sdisclosure controls and procedures were effective.

 

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**InternalControl Over Financial Reporting**

 

Therehave not been any changes in the Company’s internal control over financialreporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) underthe Exchange Act) during the most recent fiscal quarter that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

****PART II – OTHERINFORMATION****

 

****ITEM 1.****             ****LEGAL PROCEEDINGS****

 

Weare and may be involved in various unresolved legal actions, administrativeproceedings and claims in the ordinary course of business. Although it is notpossible to predict with certainty the outcome of these unresolved actions, wedo not believe, based on current knowledge, that any legal proceeding or claimis likely to have a material adverse effect on our financial position, resultsof operations or cash flows.

 

****ITEM 2.********            ********UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS****

 

****Duringthe third quarter of 2008, we completed a private placement of our common stockand issued 916,000 shares of our common stock at an average price of $0.14 pershare, netting total consideration of $125,000. The proceeds from the sale ofthe shares will be used for general working capital purposes.****

 

****Commonstock issued was offered and sold by us in reliance upon the exemption fromregistration under Section 4(2) of the Securities Act, relating tosales by an issuer not involving a public offering. The sales of securitieswere made without the use of an underwriter. All recipients either receivedadequate information about us or had access, through relationships with us, toinformation about us.****

 

****ITEM 3.********            ********DEFAULTS UPONSENIOR SECURITIES****

 

****None****

 

****ITEM 4.********            ********SUBMISSION OFMATTERS TO A VOTE OF SECURITY HOLDERS****

 

****None****

 

****ITEM 5.********         ********OTHERINFORMATION****

 

****None****

 

****ITEM 6.********            ********EXHIBITS****

 

****(a) ****Exhibits

 
| **Number** | ** ** | **Description**                       |
|------------|------------|---------------------------------------|
| 31.1       |       | Section 302 Certification of CEO |
| 31.2       |       | Section 302 Certification of CFO |
| 32.1       |       | Section 906 Certification of CEO |
| 32.2       |       | Section 906 Certification of CFO |

 

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****SIGNATURES****

 

Inaccordance with Section 13 or 15(d) of the Exchange Act, theregistrant caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 
| Date:  November 14, 2008 |   | Integrated  Management Information, Inc. |
|-------------------------------|--------|-----------------------------------------------|
|                          |   |                                          |
|                          |   | By:                                           | /s/  John K. Saunders |
|                          |   |                                          |   |
|                          |   |                                          | Chief  Executive Officer |
|                               |        |                                               |  |  |

 
|   |   | By:    | /s/  Dannette D. Boyd    |
|--------|--------|--------|--------------------------|
|   |   |   |                     |
|   |   |   | Chief  Financial Officer |

 

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