Table of Contents

 

 

 

**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**x****      QUARTERLY REPORT UNDER SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For theQuarterly period ended March 31, 2010**

 

**o****         TRANSITION REPORT UNDER SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thetransition period from             to              **

 

**Commission File No. 333-133634**

 

**INTEGRATEDMANAGEMENT INFORMATION, INC.**

(Name of SmallBusiness Issuer in its charter)

 

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

 

**221Wilcox, Suite A**

**CastleRock, CO 80104**

(Address ofprincipal executive offices, including zip code)

 

Issuer’s telephonenumber, including area code:

**(303)895-3002**

 

Check whether the issuer:(1) filed all reports required to be filed by Section 13 or 15(d) ofthe Exchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports); and (2) has been subject tosuch filing requirements for the past 90 days. Yes x No o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files). Yes o No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.  See definition of “accelerated filer andlarge 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 |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o  No x

 

The number of shares ofthe registrant’s common stock, $.001 par value per share, outstanding as of May 13,2010 was 20,839,481.

 

 

 

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**Integrated Management Information, Inc.**

**Table ofContents**

**March 31, 2010**

 

 
| ** **                               | ** **                                                                                                                                            | **Page:** |
|------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
|                                     |                                                                                                                                                  |      |
| **Part 1 - Financial  Information** |
|                                     |                                                                                                                                                  |      |   |
| Item 1.                                  | Financial Statements:                                                                                                                                 |      |   |
|                                     |                                                                                                                                                  |      |   |
|                                     | Balance Sheets (unaudited), March 31, 2010  and December 31, 2009                                                                           |      | 3 |
|                                     |                                                                                                                                                  |      |   |
|                                     | Statements of Operations (unaudited),  for the first quarter ended March 31, 2010 and 2009                                                       |      | 4 |
|                                     |                                                                                                                                                  |      |   |
|                                     | Statements of Cash Flows (unaudited),  for the year to date periods ended March 31, 2010 and 2009                                                |      | 5 |
|                                     |                                                                                                                                                  |      |   |
|                                     | Statements of  Stockholders’ Equity(unaudited), for the year ended December 31, 2009  and the year to date period ended March 31, 2010 |      | 6 |
|                                     |                                                                                                                                                  |      |   |
|                                     | Notes to  Financial Statements                                                                                                                        |      | 7 |
|                                     |                                                                                                                                                  |      |   |
| Item 2.                                  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                           |      | 14 |
|                                     |                                                                                                                                                  |      |   |
| Item 4.                                  | Controls and  Procedures                                                                                                                              |      | 19 |
|                                     |                                                                                                                                                  |      |   |
| **Part II - Other  Information**    |
|                                     |                                                                                                                                                  |      |   |
| Item 1.                                  | Legal Proceedings                                                                                                                                     |      | 20 |
|                                     |                                                                                                                                                  |      |   |
| Item 2.                                  | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                                          |      | 20 |
|                                     |                                                                                                                                                  |      |   |
| Item 3.                                  | Defaults  upon Senior Securities                                                                                                                      |      | 20 |
|                                     |                                                                                                                                                  |      |   |
| Item 5.                                  | Other Information                                                                                                                                     |      | 20 |
|                                     |                                                                                                                                                  |      |   |
| Item 6.                                  | Exhibits                                                                                                                                              |      | 20 |

 

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**Integrated Management Information, Inc.**

**BalanceSheets**

**(Unaudited)**

 
| ** **                                                                                                                                                                             | ** ** | **March 31,** | ** ** | **Dec 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-------------|------------|
| ** **                                                                                                                                                                             | ** ** | **2010**           | ** ** | **2009**    | ** ** |
| **Assets**                                                                                                                                                                             | ** ** | ** **         | ** ** | ** **  | ** ** |
| Current  assets:                                                                                                                                                                       |       |               |       |        |       |
| Cash  and cash equivalents                                                                                                                                                             |       | $                  | 250,758    |        | $          | 214,329 |   |
| Accounts  receivable, net of allowance                                                                                                                                                 |       | 158,195            |       | 204,596     |       |
| Prepaid  expenses and other current assets                                                                                                                                             |       | 61,601             |       | 65,695      |       |
| Total  current assets                                                                                                                                                                  |       | 470,554            |       | 484,620     |       |
| Property  and equipment, net                                                                                                                                                           |       | 142,135            |       | 134,035     |       |
| Intangible  assets, net                                                                                                                                                                |       | 9,046              |       | 655         |       |
| Total  assets                                                                                                                                                                          |       | $                  | 621,735    |        | $          | 619,310 |   |
|                                                                                                                                                                                   |       |               |       |        |       |
| **Liabilities and Stockholders’  Equity**                                                                                                                                         | ** ** | ** **         | ** ** | ** **  | ** ** |
| Current  liabilities:                                                                                                                                                                  |       |               |       |        |       |
| Accounts  payable                                                                                                                                                                      |       | $                  | 144,219    |        | $          | 161,049 |   |
| Accrued  expenses and other current liabilities                                                                                                                                        |       | 39,574             |       | 51,115      |       |
| Current  portion of notes payable                                                                                                                                                      |       | 12,128             |       | 8,467       |       |
| Total  current liabilities                                                                                                                                                             |       | 195,921            |       | 220,631     |       |
| Notes  payable and other long-term debt                                                                                                                                                |       | 348,639            |       | 360,871     |       |
| 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; 20,929,006 and 20,929,006  shares issued, respectively; and 20,839,481 and 20,849,481 shares  outstanding, respectively |       | 20,929             |       | 20,929      |       |
| Additional  paid-in-capital                                                                                                                                                            |       | 3,387,193          |       | 3,387,130   |       |
| Treasury  stock of 89,525 and 79,525 shares, respectively                                                                                                                              |       | (21,421            | )          | (20,144     | )          |
| Accumulated  deficit                                                                                                                                                                   |       | (3,309,526         | )          | (3,350,107  | )          |
| Total  stockholders’ equity                                                                                                                                                       |       | 77,175             |       | 37,808      |       |
| Total  liabilities and stockholders’ equity                                                                                                                                       |       | $                  | 621,735    |        | $          | 619,310 |   |

 

The accompanying notes arean integral part of these financial statements.

 

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**IntegratedManagement Information, Inc.**

**Statementsof Operations**

**(Unaudited)**

** **
| ** **                                    | ** ** | **First Quarter ended** | ** ** |
|-----------------------------------------------|------------|-------------------------|------------|
| ** **                                    | ** ** | **March 31,**      | ** ** | **March 31,** | ** ** |
| ** **                                    | ** ** | **2010**                | ** ** | **2009** | ** ** |
|                                          |       |                    |       |   |   |
| Revenues                                      |       | $                       | 680,183    |   | $ | 477,324 |   |
| Costs  of revenues                            |       | 324,509                 |       | 279,096 |   |
| Gross  profit                                 |       | 355,674                 |       | 198,228 |   |
| Selling,  general and administrative expenses |       | 306,914                 |       | 356,307 |   |
| Gain  on sale of equipment                    |       | —                  |       | (4,000 | ) |
| Income  (loss) from operations                |       | 48,760                  |       | (154,079 | ) |
| Other  expense (income):                      |       |                    |       |   |   |
| Interest  expense                             |       | 8,469                   |       | 8,162 |   |
| Other  income, net                            |       | (290                    | )          | (263 | ) |
| Income  (loss) before income taxes            |       | 40,581                  |       | (161,978 | ) |
| Income  taxes                                 |       | —                  |       | — |   |
| Net  income (loss)                            |       | $                       | 40,581     |   | $ | (161,978 | ) |
|                                          |       |                    |       |   |   |
| Net  income (loss) per share:                 |       |                    |       |   |   |
| Basic                                         |       | $                       | —     |   | $ | (0.01 | ) |
| Diluted                                       |       | $                       | —     |   | $ | (0.01 | ) |
|                                          |       |                    |       |   |   |
| Weighted  average shares outstanding:         |       |                    |       |   |   |
| Basic                                         |       | 20,846,814              |       | 20,869,626 |   |
| Diluted                                       |       | 20,862,808              |       | 20,869,626 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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**Integrated Management Information, Inc.**

**Statementsof Cash Flows**

**(Unaudited)**

 
| ** **                                                                   | ** ** | **Year to Date Period ended March 31,** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                   | ** ** | **2010**                                     | ** ** | **2009** | ** ** |
| Operating  activities:                                                       |       |                                         |       |   |   |
| Net  income (loss)                                                           |       | $                                            | 40,581     |   | $ | (161,978 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |       |                                         |       |   |   |
| Depreciation  and amorization                                                |       | 18,237                                       |       | 11,776 |   |
| Stock  based compensation expense                                            |       | 63                                           |       | 11,148 |   |
| Provision  for doubtful accounts                                             |       | —                                       |       | 12,722 |   |
| Loss  (gain) on sale/disposal of equipment                                   |       | —                                       |       | (4,000 | ) |
| Changes  in assets and liabilities:                                          |       |                                         |       |   |   |
| Accounts  receivable                                                         |       | 46,401                                       |       | 30,454 |   |
| Inventories                                                                  |       | —                                       |       | 8,463 |   |
| Prepaid  expenses and other current assets                                   |       | 4,094                                        |       | 179 |   |
| Accounts  payable                                                            |       | (16,830                                      | )          | (30,006 | ) |
| Accrued  expenses and other current liabilities                              |       | (11,541                                      | )          | 16,592 |   |
| Net  cash provided by (used in) operating activites                          |       | 81,005                                       |       | (104,650 | ) |
|                                                                         |       |                                         |       |   |   |
| Investing  activities:                                                       |       |                                         |       |   |   |
| Acquisition  of property and equipment                                       |       | (34,728                                      | )          | (57,302 | ) |
| Proceeds  from sale of equipment                                             |       | —                                       |       | 4,000 |   |
| Net  cash provided by (used in) investing activities                         |       | (34,728                                      | )          | (53,302 | ) |
|                                                                         |       |                                         |       |   |   |
| Financing  activities:                                                       |       |                                         |       |   |   |
| Proceeds  from notes payable                                                 |       | 8,500                                        |       | 39,964 |   |
| Repayments  under notes payable                                              |       | (17,071                                      | )          | (4,644 | ) |
| Stock  repurchase under Buyback Program                                      |       | (1,277                                       | )          | (765 | ) |
| Net  cash provided by (used in) financing activities                         |       | (9,848                                       | )          | 34,555 |   |
| Net  change in cash and cash equivalents                                     |       | 36,429                                       |       | (123,397 | ) |
| Cash  and cash equivalents at beginning of year                              |       | 214,329                                      |       | 154,044 |   |
| Cash  and cash equivalents at end of year                                    |       | $                                            | 250,758    |   | $ | 30,647 |   |

 

Theaccompanying notes are an integral part of 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, 2008                    |       | 20,929,006       |       | $           | 20,929     |           | $          | 3,359,380    |       | $          | (3,196,916 | )              | $          | (16,124 | ) | $ | 167,269 |   |
|                                                 |       |             |       |        |       |           |       |         |       |       |       |           |       |
| Stock repurchase of 22,325 shares on the open market |       | —           |       | —      |       | —         |       | —       |       | (4,020     | )          |  

(4,020 | )          |
| Stock-based compensation expense                     |       | —           |       | —      |       | 27,750         |       | —       |       | —     |       | 27,750         |       |
| Net loss                                             |       | —           |       | —      |       | —         |       | (153,191     | )          | —     |       | (153,191       | )          |
| Balance at  December 31, 2009                   |       | 20,929,006       |       | $           | 20,929     |           | $          | 3,387,130    |       | $          | (3,350,107 | )              | $          | (20,144 | ) | $ | 37,808 |   |
|                                                 |       |             |       |        |       |           |       |         |       |       |       |           |       |
| Stock repurchase of 10,000 shares on the open market |       | —           |       | —      |       | —         |       | —       |       | (1,277     | )          |  

(1,277 | )          |
| Stock-based compensation expense                     |       | —           |       | —      |       | 63             |       | —       |       | —     |       | 63             |       |
| Net income                                           |       | —           |       | —      |       | —         |       | 40,581       |       | —     |       | 40,581         |       |
| Balance at March 31, 2010                       |       | 20,929,006       |       | $           | 20,929     |           | $          | 3,387,193    |       | $          | (3,309,526 | )              | $          | (21,421 | ) | $ | 77,175 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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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,” “our,” “we,”or “us,”) is a leading provider of verification and communication solutions forthe agriculture, livestock and food industry.

 

Weprovide our owned and operated online properties and services which specializein identification and traceability; process, production practice and supplyverification; document control for USDA verification programs, and; third-partyauditing services. We apply information technology to the agriculture, livestockand food industry by addressing the growing importance of marketing claims suchas: source of origin information, genetic background, animal treatment, animalhealth history, animal age, animal movements, nutrition, carbon credits andother credence attributes. Our solutions provide assurance regarding thoseclaims made that can not be confirmed by visual inspection once the productreaches the meat case and is marketed to the consumer. We have developed arange of proprietary web based applications, consulting methodologies, auditingprocesses, and other services to allow the livestock and food industry torecord, manage, report, and audit this information. Our solutions help ourcustomers establish their own systems, meet government regulations, createtheir own premium brand identity, gain cost efficiencies and command a higherprice for their product.

 

Westand at the forefront of a rapidly evolving movement to track livestock andenable the traceability through to meat products.  In the aftermath of the discovery of thefirst case of mad cow disease in the United States in December, 2003, US beefexport markets were closed resulting in significant losses to the industry. Inresponse to the crisis, several initiatives were enacted to facilitate the reopeningof key export markets. Most notably, U.S. suppliers seeking to sell beefproducts to other countries must participate in a USDA Quality SystemAssessment Program so as to have an approved means of verifying specificproduct requirements. In response, we were the first to develop a USDA QualitySystem Assessment document management system enabling companies to maintaincompliance with their export verification programs.  We also created a unique source and age supplierverification system to comply with the Japanese export market. We introducedour USVerified Source and Age Verification system in 2005, and over the yearswe have continued to enhance and further develop programs to address otherverification needs including, but not limited to, non-hormone treated cattle(NHTC) and humane handling marketing claims.

 

Morerecently, 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. In March 2009, we introduced our VerifiedGreenTMVerification program. This program caters to producers and consumers who arecommitted to reducing their carbon footprint. Then in March 2010, inresponse to consumers’ demand of increased transparency regarding the originsand safety of their food, we introduced our ‘Where Food Comes From’ consumerlabeling program. This program is a rigorous qualification protocol under whichonly those farmers, ranchers and processors who meet strict third-partyverification requirements may display the distinctive “Where Food Comes From”brand.  It is the first of its kind thatdirectly connects the consumer with the food supply chain in a way that fostersconfidence at the point of purchase. We believe that as consumers become bettereducated, they will have more confidence in their food purchase decisions. Inaddition to building consumer confidence, the ‘Where Food Comes From’ labelgives producers and processors a way to enhance, differentiate and even protecttheir valuable brands.

 

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**Integrated Management Information, Inc.**

**Notesto the Financial Statements**

 

****InterimFinancial Statements****

 

****Theaccompanying unaudited condensed financial statements have been preparedpursuant to the rules and regulations of the Securities and ExchangeCommission (SEC) and should be read in conjunction with our audited financialstatements and footnotes thereto for the year ended December 31, 2009included in our Form 10-K filed on March 31, 2010. Certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with accounting principles generally accepted in theUnited States of America have been omitted pursuant to such rules andregulations. However, we believe that the disclosures are adequate to make theinformation presented not misleading. The financial statements reflect alladjustments (consisting primarily of normal recurring adjustments) that are, inthe opinion of management, necessary for a fair presentation of our financialposition and results of operations. The operating results for the three monthsended March 31, 2010 are not necessarily indicative of the results to beexpected for any other interim period of any future year.****

 

****Certainreclassifications have been made to conform previously reported data to thecurrent presentation. These reclassifications have no effect on net income orfinancial position as previously reported.****

 

****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.

 

Thefollowing schedule is a reconciliation of the share data used in the basic anddiluted income (loss) per share computations:

 
| ** **                                       | ** ** | **First Quarter ended** | ** ** |
|--------------------------------------------------|------------|-------------------------|------------|
| ** **                                       | ** ** | **March 31,**      | ** ** | **March 31,** | ** ** |
| ** **                                       | ** ** | **2010**                | ** ** | **2009** | ** ** |
| Basic:                                           |       |                    |       |   |   |
| Weighted  average shares outstanding             |       | 20,846,814              |       | 20,869,626 |   |
|                                             |       |                    |       |   |   |
| Diluted:                                         |       |                    |       |   |   |
| Weighted  average shares outstanding             |       | 20,846,814              |       | 20,869,626 |   |
| Weighted  average effects of dilutive securities |       | 15,994                  |       | — |   |
| Total                                            |       | 20,862,808              |       | 20,869,626 |   |
|                                             |       |                    |       |   |   |
| Antidilutive  securities:                        |       | 8,541,500               |       | 8,891,310 |   |

 

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**Integrated Management Information, Inc.**

**Notesto 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-basedawards is generally subject to meeting certain performance-based objectives,the passage of time or a combination of both, and continued employment throughthe vesting period. Stock option activity under our Plans is summarized as follows:

 
| ** **                           | ** ** | ** **           | ** ** | ** **          | ** ** | ** **         | ** ** | **Weighted  Avg.**    | ** ** | ** **           | ** ** |
|--------------------------------------|------------|----------------------|------------|---------------------|------------|--------------------|------------|-----------------------|------------|----------------------|------------|
| ** **                           | ** ** | ** **           | ** ** | **Weighted  Avg.**  | ** ** | **Weighted  Avg.** | ** ** | **Remaining**         | ** ** | ** **           | ** ** |
| ** **                           | ** ** | **Number  of**       | ** ** | **Exercise  Price** | ** ** | **Fair  Value**    | ** ** | **Contractual  Life** | ** ** | **Aggregate**        | ** ** |
| ** **                           | ** ** | **Options/Warrants** | ** ** | **per  Share**      | ** ** | **per  Share**     | ** ** | **(in  years)**       | ** ** | **Intrinsic  Value** | ** ** |
|                                 |       |                 |       |                |       |               |       |                  |       |                 |       |
| Outstanding,  December 31, 2009 |       | 8,593,500            |       | $                   | 1.64       |               | $          | 0.01                  |       | 1.13                 |       |   |   |
| Granted                              |       | —               |       | $                   | —     |               | $          | —                |       | —               |       |   |   |
| Exercised                            |       | —               |       | $                   | —     |               | $          | —                |       | —               |       |   |   |
| Canceled                             |       | —               |       | $                   | —     |               | $          | —                |       | —               |       |   |   |
| Outstanding,  March 31, 2010    |       | 8,593,500            |       | $                   | 1.64       |               | $          | 0.01                  |       | 0.88                 |       | $ | 2,750 |   |
| Exercisable,  March 31, 2010    |       | 8,593,500            |       | $                   | 1.64       |               | $          | 0.01                  |       | 0.88                 |       | $ | 2,750 |   |

 

Theaggregate intrinsic value represents the total pre-tax intrinsic value (theaggregate difference between the closing price of our common stock on March 31,2009 and the exercise price for the in-the-money options) that would have beenreceived by the option holders if all the in-the-money options had beenexercised on March 31, 2010.

 

Thefair value of stock options is estimated using the Black-Scholes option-pricingmodel. No stock options have been granted during the year to date periods endedMarch 31, 2010 and 2009.

 

Dividendyield is based on our historical and anticipated policy of not paying cashdividends. Expected volatility is based on the “calculated value” method setforth in ASC Topic Nos. 718 and 505 (based on historical volatilities ofappropriate industry sector indices) because our stock did not have sufficienthistoric share price data 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 ineffect at the time of grant for periods corresponding with the expected term ofthe options. 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 first quarter ended March 31, 2010and 2009 was $63 and $11,148, respectively, and has been included in generaland administrative expenses. No tax benefits were recognized for these costsdue to our cumulative losses as well as a full valuation reserve on ourdeferred tax assets.

 

**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, 2010.

 

Asof March 31, 2010, we have repurchased a total of 89,525 shares under theStock Buyback Plan. During 2010, we repurchased 10,000 shares at an averageprice of $0.13 per share. Total cash consideration for the repurchased shareswas $1,277. The repurchased shares are recorded as part of treasury stock andare accounted for under the cost method.

 

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**Integrated Management Information, Inc.**

**Notesto the Financial Statements**

 

****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 whenthese differences are expected to reverse. In assessing the reliability ofdeferred tax assets, management considers whether it is more likely than notthat some portion or all of the deferred tax assets will not be realized. Ournet operating 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 March 31, 2010 and December 31, 2009, we believe itis more likely than not that our net deferred tax asset will not be realizedand accordingly 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 bereduced if estimates of future taxable income during the carry-forward periodsare reduced.

 

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

 

Notespayable consist of the following:

 
| ** **                                                      | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                      | ** ** | **2010**           | ** ** | **2009**              | ** ** |
|                                                            |       |               |       |                  |       |
| Equipment  Note Payable                                         |       | $                  | 27,267     |                  | $          | 29,338 |   |
| Lapaesotes  Note Payable                                        |       | $                  | 330,000    |                  | $          | 340,000 |   |
| Integriflex  Note Payable                                       |       | 3,500              |       | —                |       |
|                                                            |       | $                  | 360,767    |                  | $          | 369,338 |   |
| Less  current portion of notes payable and other long-term debt |       | 12,128             |       | 8,467                 |       |
| Notes  payable and other long-term debt                         |       | $                  | 348,639    |                  | $          | 360,871 |   |

 

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**Integrated Management Information, Inc.**

**Notesto the Financial Statements**

 

**EquipmentNote Payable**

 

OnJanuary 31, 2009, we issued a note payable in the amount of $35,963 forthe purchase of a vehicle used primarily for business purposes. Under the Note,interest and principal payments are due in equal monthly installments of$870.55 over 4 years beginning March 17, 2009. The Note is fully securedby the vehicle.

 

**LapaseotesNote Payable**

 

InSeptember 2007, we obtained $300,000 in unsecured debt financing. In April 2009,an additional $50,000 was obtained under the same financing terms. The notesare held by a major shareholder; bear an interest rate of 9% per annum, payablequarterly. The principal balance is due on September 12, 2011.

 

**IntegriflexNote Payable**

 

DuringMarch 2010, we purchased the rights to the Nebraska VerifiedTM  trademark for $8,500. In connection with thepurchase of this intangible asset, we paid $5,000 in cash and financed theremaining $3,500 payable in equal monthly installments of $350 over the next 10months.

 

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

 

Aspreviously discussed in Note 6, we have $330,000 payable of unsecured debtpayable to a major shareholder who is related to Pete Lapaseotes, a director.

 

****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 March 31, 2010, future minimum lease payments for our headquarters areas follows:

 
| **Years Ending December 31,** | ** ** | **Amount** | ** ** |
|------------------------------------|------------|------------|------------|
| 2010                               |       | 35,641     |       |
| 2011                               |       | 48,509     |       |
| 2012                               |       | 24,554     |       |
| Thereafter                         |       | —     |       |
| Total  lease commitments           |       | $          | 108,704    |   |
|                                    |            |            |            |  |

 

Wealso lease a copier machine with a base rent of $375.00 per month or $4,500annually, which includes maintenance and all necessary copier supplies. The60-month lease expires April 2014.

 

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**Integrated Management Information, Inc.**

**Notesto the Financial Statements**

 

**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.

 

**Legalproceedings**

 

TheCompany is 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 effect on its financial position, results ofoperation or cash flows.

 

**Concentrationof Risks**

 

Livestockidentification tags sold in connection with our verification offerings arepurchased primarily from Allflex. However, there are numerous other companieswhich manufacture and market such ear tags.

 

****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, ****overall improvement in our performance and our ability to secureadditional financing, we believe that we have sufficient cash on hand toexecute our current Business Plan a****lthough we cangive no assurance****. The culmination of all our efforts has brought opportunities to usincluding: increased investor confidence and renewed interest in our company,third-party interest in our expertise to develop and enhance websites, as wellas the potential to develop business relationships with long term strategicpartners. In keeping with our core business, we will continue to review ourbusiness model with a focus on profitability, long term capital solutions andthe potential impact of acquisitions or divestitures, if such an opportunityarises.****

 

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**Integrated Management Information, Inc.**

**Notesto the Financial Statements**

 

**Note 10- Recent Accounting Pronouncements**

 

InJanuary 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06,Fair Value Measurements and Disclosures, which adds new disclosure requirementsfor transfers into and out of Levels 1 and 2 in the fair value hierarchy andadditional disclosures about purchases, sales, issuances, and settlementsrelating to Level 3 fair value measurements. This ASU also clarifies existingfair value disclosures about the level of disaggregation about inputs andvaluation techniques used to measure fair value. The ASU is effective for thefirst reporting period beginning after December 15, 2009, except for therequirement to provide the Level 3 activity on a gross basis, which iseffective for fiscal year-ends beginning after December 15, 2010 andinterim periods within those years. The adoption did not have a material effecton our financial condition or results of operations.

 

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.

 

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****ITEM 2.**** ****MANAGEMENT’S DISCUSSION AND ANALYSIS****

 

****BusinessOverview****

 

Weare a leading provider of verification and communication solutions for theagriculture, livestock and food industry.

 

Weprovide our owned and operated online properties and services which specializein identification and traceability; process, production practice and supplyverification; document control for USDA verification programs, and; third-partyauditing services. We apply information technology to the agriculture,livestock and food industry by addressing the growing importance of marketingclaims such as: source of origin information, genetic background, animaltreatment, animal health history, animal age, animal movements, nutrition,carbon credits and other credence attributes. Our solutions provide assuranceregarding those claims made that can not be confirmed by visual inspection oncethe product reaches the meat case and is marketed to the consumer. We havedeveloped a range of proprietary web based applications, consultingmethodologies, auditing processes, and other services to allow the livestockand food industry to record, manage, report, and audit this information. 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.

 

Westand at the forefront of a rapidly evolving movement to track livestock andenable the traceability through to meat products.  In the aftermath of the discovery of thefirst case of mad cow disease in the United States in December, 2003, US beefexport 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 products to other countries must participate in a USDA Quality SystemAssessment Program so as to have an approved means of verifying specificproduct requirements. In response, we were the first to develop a USDA QualitySystem Assessment document management system enabling companies to maintaincompliance with their export verification programs.  We also created a unique source and agesupplier verification system to comply with the Japanese export market. Weintroduced our USVerified Source and Age Verification system in 2005, and overthe years we have continued to enhance and further develop programs to addressother verification needs including, but not limited to, non-hormone treatedcattle (NHTC) and humane handling marketing claims.

 

Morerecently, 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. In March 2009, we introduced our VerifiedGreenTMVerification program. This program caters to producers and consumers who arecommitted to reducing their carbon footprint. Then in March 2010, inresponse to consumers’ demand of increased transparency regarding the originsand safety of their food, we introduced our ‘Where Food Comes From’ consumerlabeling program. This program is a rigorous qualification protocol under whichonly those farmers, ranchers and processors who meet strict third-partyverification requirements may display the distinctive “Where Food Comes From”brand.  It is the first of its kind thatdirectly connects the consumer with the food supply chain in a way that fostersconfidence at the point of purchase. We believe that as consumers become bettereducated, they will have more confidence in their food purchase decisions. Inaddition to building consumer confidence, the ‘Where Food Comes From’ labelgives producers and processors a way to enhance, differentiate and even protecttheir valuable brands.

 

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**CurrentMarketplace Conditions**

 

Webelieve the following recent events will drive our business forward effectivelyincreasing consumer demand for third party verification services and presentingadditional opportunities:

 

·                  In September 2009, the Democratic Partyof Japan (DPJ) scored an overwhelming victory in Japan’s elections. Ofparticular concern for the U.S. meat industry is the fact that the DPJ hastaken a relatively harder line against expanded access for beef imports fromthe United States (US). Thus, it looks that in the near term, with Japanfocused on a transitional government, and being more protectionists in nature,the current agreement for supplying Japan—cattle must be age verified as 20months of age or less—will stay intact. This sets the stage for continuedgrowth in IMI’s third party source and age verification services.

 

·                  U.S. beef has been largely absent from theEuropean Union (EU) for the past 19 years. With limited domestic and Braziliansupply into the EU and a newly negotiated and implemented, as of August 2009,duty-free beef quota, there is great optimism in US beef demand in the EU.Currently the new quota is limited to non-hormone-treated beef (NHTC), whichrequires third party verification, but with duty-free access significantlylowering the cost of doing business in Europe, we believe that it offerssignificantly more potential for third party NHTC verification services and ournew product line, High Quality Beef verification services.

 

·                  With increased consumer consciousnessgenerated by movies such as “Food, Inc.” and Time Magazine’s August 2009cover article “The Real Cost of Cheap Food”, consumers are looking for answersto questions including food production practices and overall food safety andregulation. Additionally, there has been a shift in attitude within the newadministration that is uniquely positioning the agricultural industry. “KnowYour Farmer Know Your Food” is a new USDA initiative to help more Americansunderstand where their food comes from and how they can support development oflocal and regional food systems. We believe that as consumers become bettereducated they will have more confidence in their food purchase decisions. Thisdemand should accelerate the growth of our “Where Food Comes From” labelingprogram.

 

**FinancialHighlights**

 

·                  Revenues for the first quarter ended March 31,2010 increased 42.5% over the same quarter in 2009. We are experiencingsignificant growth in our US Verified product line and our supply chaincoordination efforts.

 

·                  For the quarter ended March 31, 2010 weachieved positive cash flow from operations of $81,005 compared to cashconsumption of $104,650 for the same quarter 2009.

 

·                  Net income for first quarter 2010 was $40,581compared to net loss of $161,978 for the same quarter 2009. We believe this issignificant considering the seasonality in our business.

 

**Seasonality**

 

Ourbusiness is subject to seasonal fluctuations. Significant portions of ourrevenues are typically realized during the second and third quarters of thefiscal year when the calf marketings are at their peak. Because of theseasonality of the business and our industry, results for any quarter are notnecessarily indicative of the results that may be achieved for any otherquarter or for the full fiscal year.

 

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****Liquidityand Capital Resources****

 

AtMarch 31, 2010, we had cash and cash equivalents of $250,758 compared to$214,329 of cash and cash equivalents at December 31, 2009. Our workingcapital at March 31, 2010 was $274,633 compared to $263,989 at December 31,2009.

 

Netcash provided by operating activities during the first quarter 2010 was $81,005compared to cash consumed of $104,650 during the same period in 2009. Cashprovided by operating activities is driven by our net income and adjusted bynon-cash items. Non-cash adjustments primarily include depreciation, amortizationof intangible assets and stock based compensation expense. The improvement wasprimarily driven by better operating performance. Additionally, the timing ofcash receipts and cash disbursements affects our operating assets and cashbalances.

 

Netcash used in investing activities of $34,728 is attributable to capitalexpenditures. Our capital expenditures were $34,728 and $57,302 for the firstquarters ended March 31, 2010 and 2009, 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 in financing activities of $9,848 during the first quarter ended March 31,2010 was primarily due to net repayments made under our notes payable. Net cashprovided by financing activities of $34,555 during the first quarter ended March 31,2009 was primarily related to new debt acquired in connection with the purchaseof equipment.

 

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 believethat we will achieve profitability for the year ended December 31, 2010.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.

 

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 access variousrestrictions as imposed on international market imports/exports is via aquality verification program, like our USVerifiedTM product line.

 

**OffBalance Sheet Arrangements**

 

Asof March 31, 2010, we had no off-balance sheet arrangements of any type.

 

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****RESULTSOF OPERATIONS****

 

****FirstQuarter ended March 31, 2010 compared to the Same Period in 2009****

 

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. Revenuesfor the first quarter ended March 31, 2010 were $680,183 compared to$477,324 in the 2009 comparable quarter, an improvement of 42.5%. We believethis is significant improvement in light of the current economic conditionsseverely impacting the food industry.

 

Duringthe first quarter ended March 31, 2010, our third party verificationrevenue, which includes sales of our USVerified solutions and relatedconsulting, program development and web-based development services, increased39.2% to $574,359 compared to $412,639 in the same quarter 2009. Theimprovement is due in part to increased demand in our US Verified product lineand revenue generated from our supply chain coordination efforts.

 

Revenuesderived from sales of hardware, primarily sales of cattle identification eartags, increased 79.1% to $105,824 in the first quarter 2010 compared to $59,095in the first quarter 2009.

 

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

 

Costof sales for the first quarter 2010 were $324,509 compared to $279,096 duringthe first quarter 2009. Gross margin for the first quarter 2010 improvedapproximately 11 basis points to 52.3% of revenues compared to 41.5% for thefirst quarter 2009.

 

Theincrease in our gross margins for first quarter 2010 compared to first quarter2009 were partially due to the absorption of certain costs which are generallyfixed in nature over a greater volume of sales coupled with shifts in our salesmix of higher margin supply chain coordination revenue. Due to our intensefocus on margins and customer service over the past two years, we are finallyseeing the results of our hard work. We will continue to focus on long termgrowth and the scalability of the programs we develop.

 

**Selling,General and Administrative Expenses**

 

Selling,general and administrative expenses for the first quarter 2010 were $306,914, adecrease of $49,393, or 13.9% over the first quarter 2009 amount of $356,307.The decrease was primarily due to a net reduction in salaries due to a lessernumber of office support personnel offset by adjustments to salaries for costsof living and annual performance reviews.

 

****NetIncome (Loss) and Per Share Information****

 

Asa result of the foregoing, net income for the first quarter ended March 31,2010 was $40,581 or less than a penny per basic and diluted common share,compared to net loss of $161,978 or $0.01 per basic and diluted common sharefor the first quarter ended March 31, 2009.

 

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****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 reflectthe more significant estimates and assumptions used in the preparation of theconsolidated financial statements.

 

**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 was based on a market-based implied volatility. The assumptions usedin calculating the fair value of stock-based awards represent our bestestimates, but these estimates involve inherent uncertainties and theapplication of management judgment. As a result, if factors change and we usedifferent assumptions, our stock-based compensation expense could be materiallydifferent in the future. In addition, we are required to estimate the expectedforfeiture rate and only recognize expense for those shares expected to vest.We estimate the forfeiture rate based on historical experience of ourstock-based awards that are granted, exercised and cancelled. If our actualforfeiture rate is materially different from our estimate, the stock-basedcompensation expense could be significantly different from what we have recordedin the current period.

 

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****ITEM 4. CONTROLS AND PROCEDURES****

 

**Evaluationof Disclosure Controls and Procedures**

 

OurChief Executive Officer and Chief Financial Officer, after evaluating theeffectiveness of the Company’s “disclosure controls and procedures” (as definedin the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) or15d-15(e)) as of the end of the period covered by this report, has concludedthat our disclosure controls and procedures are effective at a reasonableassurance level based on his evaluation of these controls and procedures asrequired by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

 

**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.

 

**Lack ofSegregation of Duties**

 

Managementis aware that there is a lack of segregation of duties at the Company due tothe small number of employees dealing with general administrative and financialmatters. However, at this time management has decided that considering theabilities of the employees now involved and the control procedures in place,the risks associated with such lack of segregation are low and the potentialbenefits of adding employees to clearly segregate duties do not justify thesubstantial expenses associated with such increases. Management willperiodically reevaluate this situation.

 

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****PART II — OTHER INFORMATION****

 

****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.  UNREGISTERED SALES OFEQUITY SECURITIES AND USE OF PROCEEDS****

 

****None****

 

****ITEM 3.  DEFAULTS UPON SENIORSECURITIES****

 

****None****

 

****ITEM 5.  OTHER INFORMATION****

 

****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:  May 13, 2010 |   | Integrated  Management Information, Inc. |
|--------------------------|--------|-----------------------------------------------|
|                     |   |                                          |
|                     |   |                                          | By: | /s/  John K. Saunders |
|                     |   |                                          |   | Chief  Executive Officer |
|                     |   |                                          |   |   |
|                     |   |                                          | By: | /s/  Dannette D. Henning |
|                     |   |                                          |   | Chief  Financial Officer |

 

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