Table ofContents

 

 

 

**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 

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

 

**For theQuarterly period ended June 30, 2010**

 

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

 

**For thetransition 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 90 days.   Yes x    No o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).   Yes o   No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer.  See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of theExchange 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).  Yes o  No x

 

Thenumber of shares of the registrant’s common stock, $.001 par value per share,outstanding as of August 9, 2010 was 20,867,481.

 

 

 

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Table of Contents

 

**Integrated Management Information, Inc.**

**Table of Contents**

**June 30, 2010**

 
|                                     |                                                                                        |                                                                                                                                                 |   | **Page:** |
|------------------------------------------|---------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|
|                                     |                                                                                        |                                                                                                                                                 |   |      |
| **Part 1 - Financial  Information** |
| ** **                               |
| Item 1.                                  | Financial Statements:                                                                       |                                                                                                                                                 |   |      |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
|                                     |                                                                                        | Balance Sheets  (unaudited), June 30, 2010 and December 31, 2009                                                                           |   |      | 3 |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
|                                     |                                                                                        | Statements of  Operations (unaudited), for the second quarter ended June 30, 2010 and  2009                                                     |   | 4         |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
|                                     |                                                                                        | Statements  of Operations (unaudited), for the year to date periods ended June 30,  2010 and 2009                                               |   | 5         |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
|                                     |                                                                                        | Statements of  Cash Flows (unaudited), for the year to date periods ended June 30, 2010  and 2009                                               |   | 6         |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
|                                     |                                                                                        | Statements of Stockholders’ Equity(unaudited), for the  year ended December 31, 2009 and the year to date period ended  June 30, 2010 |   | 7         |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
|                                     |                                                                                        | Notes to Financial Statements                                                                                                                        |   |      | 8 |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
| Item 2.                                  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                                                 | 15     |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
| Item 4.                                  | Controls and  Procedures                                                                    |                                                                                                                                                 | 21     |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
| **Part II - Other Information**     |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
| Item 1.                                  | Legal Proceedings                                                                           |                                                                                                                                                 |   | 22        |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
| Item 1A.                                 | Risk Factors                                                                                |                                                                                                                                                 |   | 22        |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
| Item 2.                                  | Unregistered  Sales of Equity Securities and Use of Proceeds                                |                                                                                                                                                 |   | 22        |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
| Item 5.                                  | Other Information                                                                           |                                                                                                                                                 |   | 22        |
|                                     |                                                                                        |                                                                                                                                                 |   |      |   |
| Item 6.                                  | Exhibits                                                                                    |                                                                                                                                                 |   | 23        |

 

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**Integrated Management Information, Inc.**

**Balance Sheets**

**(Unaudited)**

 
| ** **                                                                                                                                                                             | ** ** | **June 30,** | ** ** | **Dec 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-------------|------------|
| ** **                                                                                                                                                                             | ** ** | **2010**          | ** ** | **2009**    | ** ** |
| **Assets**                                                                                                                                                                             | ** ** | ** **        | ** ** |        | ** ** |
| Current  assets:                                                                                                                                                                       |       |              |       |        |       |
| Cash  and cash equivalents                                                                                                                                                             |       | $                 | 298,823    |        | $          | 214,329 |   |
| Accounts  receivable, net of allowance                                                                                                                                                 |       | 179,740           |       | 204,596     |       |
| Prepaid  expenses and other current assets                                                                                                                                             |       | 49,603            |       | 65,695      |       |
| Total  current assets                                                                                                                                                                  |       | 528,166           |       | 484,620     |       |
| Property  and equipment, net                                                                                                                                                           |       | 132,145           |       | 134,035     |       |
| Intangible  assets, net                                                                                                                                                                |       | 17,593            |       | 655         |       |
| Total  assets                                                                                                                                                                          |       | $                 | 677,904    |        | $          | 619,310 |   |
|                                                                                                                                                                                   |       |              |       |        |       |
| **Liabilities and Stockholders’  Equity**                                                                                                                                         | ** ** | ** **        | ** ** |        | ** ** |
| Current  liabilities:                                                                                                                                                                  |       |              |       |        |       |
| Accounts  payable                                                                                                                                                                      |       | $                 | 151,398    |        | $          | 161,049 |   |
| Accrued  expenses and other current liabilities                                                                                                                                        |       | 23,734            |       | 51,115      |       |
| Current  portion of notes payable                                                                                                                                                      |       | 11,242            |       | 8,467       |       |
| Total  current liabilities                                                                                                                                                             |       | 186,374           |       | 220,631     |       |
| Notes  payable and other long-term debt                                                                                                                                                |       | 346,366           |       | 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; 20,984,006 and  20,929,006 shares issued, respectively; and 20,867,481 and 20,849,481 shares  outstanding, respectively |       | 20,984            |       | 20,929      |       |
| Additional  paid-in-capital                                                                                                                                                            |       | 3,394,288         |       | 3,387,130   |       |
| Treasury  stock of 116,525 and 79,525 shares, respectively                                                                                                                             |       | (26,185           | )          | (20,144     | )          |
| Accumulated  deficit                                                                                                                                                                   |       | (3,243,923        | )          | (3,350,107  | )          |
| Total  stockholders’ equity                                                                                                                                                       |       | 145,164           |       | 37,808      |       |
| Total  liabilities and stockholders’ equity                                                                                                                                       |       | $                 | 677,904    |        | $          | 619,310 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Integrated Management Information, Inc.**

**Statements of Operations**

**(Unaudited)**

 
| ** **                                    | ** ** | **Second Quarter ended** | ** ** |
|-----------------------------------------------|------------|--------------------------|------------|
| ** **                                    | ** ** | **June 30,**        | ** ** | **June 30,** | ** ** |
| ** **                                    | ** ** | **2010**                 | ** ** | **2009** | ** ** |
|                                          |       |                     |       |   |   |
| Revenues                                      |       | $                        | 799,130    |   | $ | 645,880 |   |
| Costs  of revenues                            |       | 365,648                  |       | 294,393 |   |
| Gross  profit                                 |       | 433,482                  |       | 351,487 |   |
| Selling,  general and administrative expenses |       | 359,710                  |       | 293,168 |   |
| Gain  on sale of equipment                    |       | —                   |       | — |   |
| Income  (loss) from operations                |       | 73,772                   |       | 58,319 |   |
| Other  expense (income):                      |       |                     |       |   |   |
| Interest  expense                             |       | 8,576                    |       | 9,187 |   |
| Other  income, net                            |       | (408                     | )          | (133 | ) |
| Income  (loss) before income taxes            |       | 65,604                   |       | 49,265 |   |
| Income  taxes                                 |       | —                   |       | — |   |
|                                          |       |                     |       |   |   |   |   |
| Net  income (loss)                            |       | $                        | 65,604     |   | $ | 49,265 |   |
|                                          |       |                     |       |   |   |
| Net  income (loss) per share:                 |       |                     |       |   |   |
| Basic                                         |       | $                        | —     |   | $ | — |   |
| Diluted                                       |       | $                        | —     |   | $ | — |   |
|                                          |       |                     |       |   |   |
| Weighted  average shares outstanding:         |       |                     |       |   |   |
| Basic                                         |       | 20,825,461               |       | 20,868,481 |   |
| Diluted                                       |       | 20,845,517               |       | 20,956,251 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Integrated Management Information, Inc.**

**Statements of Operations(Unaudited)**

 
| ** **                                    | ** ** | **Year to Date Period ended** | ** ** |
|-----------------------------------------------|------------|-------------------------------|------------|
| ** **                                    | ** ** | **June 30,**             | ** ** | **June 30,** | ** ** |
| ** **                                    | ** ** | **2010**                      | ** ** | **2009** | ** ** |
|                                          |       |                          |       |   |   |
| Revenues                                      |       | $                             | 1,479,313  |   | $ | 1,123,205 |   |
| Costs  of revenues                            |       | 644,389                       |       | 573,489 |   |
| Gross  profit                                 |       | 834,924                       |       | 549,716 |   |
| Selling,  general and administrative expenses |       | 712,393                       |       | 649,475 |   |
| Gain  on sale of equipment                    |       | —                        |       | (4,000 | ) |
| Income  from operations                       |       | 122,531                       |       | (95,759 | ) |
| Other  expense (income):                      |       |                          |       |   |   |
| Interest  expense                             |       | 17,045                        |       | 17,348 |   |
| Other  income, net                            |       | (698                          | )          | (394 | ) |
| Income  (loss) before income taxes            |       | 106,184                       |       | (112,713 | ) |
| Income  taxes                                 |       | —                        |       | — |   |
|                                          |       |                          |       |   |   |
| Net  income (loss)                            |       | $                             | 106,184    |   | $ | (112,713 | ) |
|                                          |       |                          |       |   |   |
| Net  income (loss) per share:                 |       |                          |       |   |   |
| Basic                                         |       | $                             | 0.01       |   | $ | (0.01 | ) |
| Diluted                                       |       | $                             | 0.01       |   | $ | (0.01 | ) |
|                                          |       |                          |       |   |   |
| Weighted  average shares outstanding:         |       |                          |       |   |   |
| Basic                                         |       | 20,825,775                    |       | 20,869,050 |   |
| Diluted                                       |       | 20,843,848                    |       | 20,869,050 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Integrated Management Information, Inc.**

**Statements of Cash Flows**

**(Unaudited)**

 
| ** **                                                                   | ** ** | **Year to Date Period ended June 30,** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                   | ** ** | **2010**                                    | ** ** | **2009** | ** ** |
| Operating  activities:                                                       |       |                                        |       |   |   |
| Net  income (loss)                                                           |       | $                                           | 106,184    |   | $ | (112,713 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |       |                                        |       |   |   |
| Depreciation  and amortization                                               |       | 39,905                                      |       | 25,923 |   |
| Stock  based compensation expense                                            |       | 63                                          |       | 26,928 |   |
| Issuance  of 55,000 common shares                                            |       | 7,150                                       |       | — |   |
| Provision  for doubtful accounts                                             |       | 1,656                                       |       | 12,722 |   |
| Loss  (gain) on sale/disposal of equipment                                   |       | —                                      |       | (4,000 | ) |
| Changes  in assets and liabilities:                                          |       |                                        |       |   |   |
| Accounts  receivable                                                         |       | 23,200                                      |       | 67,978 |   |
| Inventories                                                                  |       | —                                      |       | 14,350 |   |
| Prepaid  expenses and other current assets                                   |       | 16,092                                      |       | 8,661 |   |
| Accounts  payable                                                            |       | (9,651                                      | )          | (93,307 | ) |
| Accrued  expenses and other current liabilities                              |       | (27,381                                     | )          | 58 |   |
| Net  cash provided by (used in) operating activites                          |       | 157,218                                     |       | (53,400 | ) |
|                                                                         |       |                                        |       |   |   |
| Investing  activities:                                                       |       |                                        |       |   |   |
| Acquisition  of property and equipment                                       |       | (54,953                                     | )          | (58,695 | ) |
| Proceeds  from sale of equipment                                             |       | —                                      |       | 4,000 |   |
| Net  cash provided by (used in) investing activities                         |       | (54,953                                     | )          | (54,695 | ) |
|                                                                         |       |                                        |       |   |   |
| Financing  activities:                                                       |       |                                        |       |   |   |
| Proceeds  from notes payable                                                 |       | 8,500                                       |       | 89,964 |   |
| Repayments  under notes payable                                              |       | (20,230                                     | )          | (6,600 | ) |
| Stock  repurchase under Buyback Program                                      |       | (6,041                                      | )          | (765 | ) |
| Net  cash provided by (used in) financing activities                         |       | (17,771                                     | )          | 82,599 |   |
| Net  change in cash and cash equivalents                                     |       | 84,494                                      |       | (25,496 | ) |
| Cash  and cash equivalents at beginning of year                              |       | 214,329                                     |       | 154,044 |   |
| Cash  and cash equivalents at end of year                                    |       | $                                           | 298,823    |   | $ | 128,548 |   |

 

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 37,000 shares on the open market |       | —           |       | —      |       | —         |       | —       |       | (6,041     | )          | (6,041     | )          |
| Issuance  of 55,000 common shares                     |       | 55,000           |       | 55          |       | 7,095          |       | —       |       | —     |       | 7,150      |       |
| Stock-based  compensation expense                     |       | —           |       | —      |       | 63             |       | —       |       | —     |       | 63         |       |
| Net  income                                           |       | —           |       | —      |       | —         |       | 106,184      |       | —     |       | 106,184    |       |
| Balance  at June 30, 2010                        |       | 20,984,006       |       | $           | 20,984     |           | $          | 3,394,288    |       | $          | (3,243,923 | )          | $          | (26,185 | ) | $ | 145,164 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

**Note 1 - The Company and Basis of Presentation**

 

**Business Overview**

 

IntegratedManagement Information, Inc. (“IMI Global,” “IMI,” the “Company,” “our,”“we,” or “us,”) is a leading provider of verification and communicationsolutions for the 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.**

**Notes to the Financial Statements**

 

**Interim Financial Statements**

 

The accompanying unaudited condensed financialstatements have been prepared pursuant to the rules and regulations of theSecurities and Exchange Commission (SEC) and should be read in conjunction withour audited financial statements and footnotes thereto for the year endedDecember 31, 2009 included in our Form 10-K filed on March 31,2010. Certain information and footnote disclosures normally included in financialstatements prepared in accordance with accounting principles generally acceptedin the United States of America have been omitted pursuant to suchrules and regulations. However, we believe that the disclosures areadequate to make the information presented not misleading. The financialstatements reflect all adjustments (consisting primarily of normal recurringadjustments) that are, in the opinion of management, necessary for a fairpresentation of our financial position and results of operations. The operatingresults for the second quarter and year to date period ended June 30, 2010are not necessarily indicative of the results to be expected for any otherinterim period of any future year.

 

Certain reclassifications have been made to conformpreviously reported data to the current presentation. These reclassificationshave no effect on net income or financial position as previously reported.

 

**Note 2 - 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:

 
| ** **                                       | ** ** | **Second Quarter ended** | ** ** | **Year to Date ended** | ** ** |
|--------------------------------------------------|------------|--------------------------|------------|------------------------|------------|
| ** **                                       | ** ** | **June 30,**        | ** ** | **June 30,**      | ** ** | **June 30,** | ** ** | **June 30,** | ** ** |
| ** **                                       | ** ** | **2010**                 | ** ** | **2009**               | ** ** | **2010** | ** ** | **2009** | ** ** |
| Basic:                                           |       |                     |       |                   |       |   |   |   |   |
| Weighted  average shares outstanding             |       | 20,825,461               |       | 20,868,481             |       | 20,825,775 |   | 20,869,050 |   |
|                                             |       |                     |       |                   |       |   |   |   |   |
| Diluted:                                         |       |                     |       |                   |       |   |   |   |   |
| Weighted  average shares outstanding             |       | 20,825,461               |       | 20,868,481             |       | 20,825,775 |   | 20,869,050 |   |
| Weighted  average effects of dilutive securities |       | 20,056                   |       | 87,770                 |       | 18,073 |   | — |   |
| Total                                            |       | 20,845,517               |       | 20,956,251             |       | 20,843,848 |   | 20,869,050 |   |
|                                             |       |                     |       |                   |       |   |   |   |   |
| Antidilutive  securities:                        |       | 8,541,500                |       | 7,062,810              |       | 8,541,500 |   | 8,831,310 |   |

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

**Note 3 - 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.

 

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 endedJune 30, 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 toNovember 15, 2006. The risk-free interest rate is based on the U.S.Treasury yield curve in effect at the time of grant for periods correspondingwith the expected term of the options. The expected term of options representsthe period of time that options granted are expected to be outstanding givingconsideration to vesting schedules.

 

Ourstock-based compensation cost for the second quarters ended June 30, 2010and 2009 was $0 and $15,779, respectively, and has been included in general andadministrative expenses. Stock-based compensation cost for the year to dateperiods ended June 30, 2010 and 2009 was $63 and $26,978, respectively. Notax benefits were recognized for these costs due to our cumulative losses aswell as a full valuation reserve on our deferred tax assets.

 

**StockOption Plan Activity**

 

Stockoption 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,  June 30, 2010     |       | 8,593,500            |       | $                   | 1.64       |               | $          | 0.01                  |       | 0.63                 |       | $ | 1,804 |   |
| Exercisable,  June 30, 2010     |       | 8,593,500            |       | $                   | 1.64       |               | $          | 0.01                  |       | 0.63                 |       | $ | 1,804 |   |

 

Theaggregate intrinsic value represents the total pre-tax intrinsic value (theaggregate difference between the closing price of our common stock onJune 30, 2010 and the exercise price for the in-the-money options) thatwould have been received by the option holders if all the in-the-money optionshad been exercised on June 30, 2010.

 

**StockGrant**

 

OnJune 30, 2010, we granted 55,000 shares of fully vested stock at $0.13 pershare with an aggregate value of $7,150 in connection with investor relationsservices performed by Pfeiffer High.

 

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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. As of June 30, 2010, wehave repurchased a total of 116,525 shares under the Stock Buyback Plan. During2010, we repurchased 37,000 shares at an average price of $0.16 per share.Total cash consideration for the repurchased shares was $6,041. The repurchasedshares are recorded as part of treasury stock and are accounted for under thecost method.

 

Ourstock buyback plan has been and will be used to return capital to shareholdersand to minimize the dilutive impact of stock options and other share-basedawards. In the future, we may consider additional share repurchases under ourplan based on several factors, including our cash position, share price,operational liquidity, and planned investment and financing needs.

 

**Note 5 — 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 (NOL) carry forwards are the most significant component ofour deferred income tax assets; however, the ultimate realization of ourdeferred income tax assets is dependent upon generation of future taxableincome. We consider past history, the scheduled reversal of taxable temporarydifferences, projected future taxable income, and tax planning strategies inmaking this assessment. Utilization of our NOL carry forwards reduces ourfederal and state income tax liability incurred.

 

Asof June 30, 2010 and December 31, 2009, we believe it is more likelythan not that our net deferred tax asset will not be realized beyond theprovision for income taxes due on taxable earnings for the year endedDecember 31, 2010; and accordingly, we have recorded a valuation allowanceagainst the deferred tax assets.

 

Wewill continue to assess the need for a valuation allowance that results fromuncertainty regarding our ability to realize the benefits of our deferred taxassets. The ultimate realization of deferred income tax assets is dependentupon the generation of future taxable income during periods in which thosetemporary differences become taxable. Although we achieved net income for theyear to date period ended June 30, 2010, we will continue to reviewvarious qualitative and quantitative data in regards to the realization of ourdeferred tax assts, including:

 

·                  The levels ofhistorical taxable income and projections for future taxable income overperiods in which the deferred tax assets would be deductible;

·                  Accumulation ofincome (loss) before taxes utilizing a look-back period of three years;

·                  Events withinour industry;

·                  The cyclicalnature of our business;

·                  The health ofthe economy; and

·                  Historicaltrending.

 

Ifat some future time we conclude that our prospects for the realization of ourdeferred tax assets are more likely than not, we will then reduce our valuationallowance as appropriate and credit income tax

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

expense.The amount of the deferred tax asset considered realizable, however, could bereduced if estimates of future taxable income during the carry-forward periodsare reduced.

 

**Note 6 - Notes Payable**

 

Notespayable consist of the following:

 
| ** **                                                      | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                      | ** ** | **2010**          | ** ** | **2009**              | ** ** |
|                                                            |       |              |       |                  |       |
| Equipment  Note Payable                                         |       | $                 | 25,158     |                  | $          | 29,338 |   |
| Lapaesotes  Note Payable                                        |       | $                 | 330,000    |                  | $          | 340,000 |   |
| Integriflex  Note Payable                                       |       | 2,450             |       | —                |       |
|                                                            |       | $                 | 357,608    |                  | $          | 369,338 |   |
| Less  current portion of notes payable and other long-term debt |       | 11,242            |       | 8,467                 |       |
| Notes  payable and other long-term debt                         |       | $                 | 346,366    |                  | $          | 360,871 |   |

 

**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. InApril 2009, an additional $50,000 was obtained under the same financingterms. The notes are held by a major shareholder; bear an interest rate of 9%per annum, payable quarterly. The principal balance is due on September 12,2011.

 

DuringJuly 2010, we paid an additional $10,000 towards the principal balance. Weintend to continue making principal payments towards the balance as additionalfunds become available. We are currently working towards renegotiating thematurity due date to some date beyond September 12, 2011. We are hopefulthat we will have accomplished this task during the third quarter of 2010 butat this time we are unable to guarantee that an agreement of terms will bereached.

 

**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.

 

**Note 7 - 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.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

**Note 8 - 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 June 30, 2010, future minimum lease payments for our headquarters areas follows:

 
| **Years Ending December 31,** | ** ** | **Amount** | ** ** |
|------------------------------------|------------|------------|------------|
| 2010                               |       | 23,955     |       |
| 2011                               |       | 48,509     |       |
| 2012                               |       | 24,554     |       |
| Thereafter                         |       | —     |       |
| Total  lease commitments           |       | $          | 97,018     |   |
|                                    |            |            |            |  |

 

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

 

**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,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.

 

**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.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

**Note 9 - 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, overallimprovement in our performance and our ability to secure additional financing,we believe that we have sufficient cash on hand to execute our current BusinessPlan although we can give 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 opportunity arises.

 

**Note 10- Recent Accounting Pronouncements**

 

Thepronouncements that we adopted for the year to date period ended June 30,2010 did not have a material impact on the consolidated financial statements.

 

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

 

**General**

 

Thisinformation should be read in conjunction with the consolidated financialstatements and the notes included in Item 1 of Part I of this QuarterlyReport and the audited consolidated financial statements and notes, andManagement’s Discussion and Analysis of Financial Condition and Results ofOperations, contained in the Form 10-K for the fiscal year endedDecember 31, 2009. The following discussion and analysis includeshistorical and certain forward-looking information that should be readtogether with the accompanying consolidated financial statements, relatedfootnotes and the discussion below of certain risks and uncertainties thatcould cause future operating results to differ materially from historicalresults or from the expected results indicated by forward-lookingstatements.

 

**Business Overview**

 

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 supply verification;document control for USDA verification programs, and; third-party auditingservices. We apply information technology to the agriculture, livestock andfood industry by addressing the growing importance of marketing claims such as: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 beef exportmarkets 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

 

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purchasedecisions. In addition to building consumer confidence, the ‘Where Food ComesFrom’ label gives producers and processors a way to enhance, differentiate andeven protect their valuable brands.

 

**CurrentMarketplace Conditions**

 

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

 

·                  InJuly 2010, Korea announced that it will establish a “nationwide hog farmmanagement system” that will enable a comprehensive farm-to-slaughter managementof hogs to improve the farming environment and prevent swine fever. Earlierthis year, Korea fully implemented a mandatory domestic beef tracing system.Korea also announced that by December 2010 all imported beef would also besubject to the mandatory beef tracing system. We believe this will continue toprovide significant international verification opportunities in predominatelyAsian markets which have historically been difficult for US markets topenetrate.

 

·                  InSeptember 2009, the Democratic Party of Japan (DPJ) scored an overwhelmingvictory in Japan’s elections. Of particular concern for the U.S. meat industryis the fact that the DPJ has taken a relatively harder line against expandedaccess for beef imports from the United States (US). Thus, it looks that in thenear term, with Japan focused on a transitional government, and being moreprotectionist in nature, the current agreement for supplying Japan—cattle mustbe age verified as 20 months of age or less—will stay intact. This sets thestage for continued growth in IMI’s third party source and age verificationservices.

 

·                  U.S. beef hasbeen largely absent from the European Union (EU) for the past 19 years. Withlimited domestic and Brazilian supply into the EU and a newly negotiated andimplemented, as of August 2009, duty-free beef quota, there is greatoptimism in US beef demand in the EU. Currently the new quota is limited tonon-hormone-treated beef (NHTC), which requires third party verification, butwith duty-free access significantly lowering the cost of doing business inEurope, we believe that it offers significantly more potential for third partyNHTC verification services and our new product line, High Quality Beefverification services.

 

·                  With increasedconsumer consciousness generated by movies such as “Food, Inc.” and TimeMagazine’s August 2009 cover article “The Real Cost of Cheap Food”,consumers are looking for answers to questions including food productionpractices and overall food safety and regulation. Additionally, there has beena shift in attitude within the new administration that is uniquely positioningthe agricultural industry. “Know Your Farmer Know Your Food” is a new USDAinitiative to help more Americans understand where their food comes from andhow they can support development of local and regional food systems. We believethat as consumers become better educated they will have more confidence intheir food purchase decisions. This demand should accelerate the growth of our“Where Food Comes From” labeling program.

 

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**Management’sStrategy**

 

Formany quarters, management has been focusing its efforts on building a strongfoundation to enhance profitability for the long term. Initially our effortsfocused on our age and source verification services. Throughout 2009, weintroduced a more robust offering of verification services. We also internallydeveloped automated processes which improved our efficiency and reduced ouremployee headcount. As a direct result, total verification sales and hardwaresales improved. We were able to provide more verification certifications (amultiple service offering) in a single audit but this type of service hasmarginal increases in revenue with declining profit margins as compared to oursingle service offerings. Interestingly enough, because our customers wereseeing more profit per head from multiple verifications at a minimal increasein cost per verification service, they increased the number of cattle withineach group audited. We benefitted from increased hardware sales which hashigher profit margins due to our process automation.

 

Inearly 2009, we understood that all this work was necessary to build a solidfoundation but we also recognized a “potential market saturation and decreasingprofits dilemma” early on and began working toward a solution. Through ourresearch and development, we learned that we needed to be on the cutting edgeof this industry and that the most significant person to influence the foodindustry was the consumer. We were concerned about various food claims that theindustry made without any third party verification. In response, we identifiedopportunities for horizontal and vertical integration. In addition to ourcurrent business structure, we knew we needed to develop a self-sustainingrevenue stream with minimal management and labor costs, while simultaneouslyaddressing food concerns near to our heart. We had built a company with strongcredibility in the industry and we had the technical expertise to make ourprocesses operate very efficiently.  Theopportunities that we identified in early 2009 are built upon the verificationservices we provide and the solid reputation we have built.

 

Inearly 2010, we began to see some of the fruits of our labor. We were able toconnect food processors and packers to those suppliers that provided productverified for the specific credence attributes demanded, thereby generating anew revenue stream based upon coordination within the food supply chain. Wealso introduced the “Where Food Comes From” (WFCF) brand. Revenue to begenerated from WFCF is based upon a similar supply chain sales model. Many longhours of research went into this project and currently we are working hard tomarket this program to the consumer. Research indicates that transparency infood production is becoming more and more important to consumers. We believe thatthe future growth of verification services will be achieved only throughconsumer awareness and demand. WFCF is a labeling program that reconnects theconsumer to the farmers and ranchers that produce the food. For the consumer,it is a seal of approval on a package or an individual product that providesassurance that those marketing claims are authentic and have been verified byan accredited, unbiased third party.

 

Duringthe first half of 2010, management, along with the assistance of industry consultingexperts, intentionally made the decision to invest heavily in marketing ourservices and our WFCF labeling program to build consumer awareness. In February 2010, we announced ouralliance with cowboy poet Baxter Black to promote our verification, identificationand traceability solutions on RFD-TV’s “Cattlemen to Cattlemen” televisionprogram. In July 2010, Leann Saunders, our president, was afeatured guest in an episode of Lifetime Television’s “The Balancing Act” todiscuss our latest effort to connect consumers with the farmers that raisetheir food. For a replay of the video/television coverage, checkout this link:www.imiglobal.com/media/videogallery.asp.

 

Forthe third quarter of 2010, we anticipate generating a small revenue stream fromour WFCF program. We will continue to invest heavily in marketing ourverification services and our WFCF brand to build consumer awareness and demandthrough the use of videos, television exposure, word-of-mouth and the internet.We believe we our positioning ourselves to benefit significantly in 2011 andbeyond, but, of course, no assurance can be given that this investment willgenerate future revenue nor can we determine for how long, if at all.

 

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**FinancialHighlights**

 

·                  Revenues forthe second quarter and year to date period ended June 30, 2010 increased23.7% and 31.7%, respectively, over the same comparable periods in 2009. We areexperiencing significant growth in our US Verified product line and our supplychain coordination efforts.

 

·                  For the year todate period ended June 30, 2010 we achieved positive cash flow fromoperations of $157,218 compared to cash consumption of $53,400 for the sameperiod 2009.

 

·                  Net income forthe year to date period ended June 30, 2010 was $106,184, or $0.01 netincome per share, compared to net loss of $112,713 for the same period 2009.This is our second consecutive quarter to achieve net income and we believethis is significant 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.

 

**Liquidity and Capital Resources**

 

AtJune 30, 2010, we had cash and cash equivalents of $298,823 compared to$214,329 of cash and cash equivalents at December 31, 2009. Our workingcapital at June 30, 2010 was $341,793 compared to $263,989 atDecember 31, 2009.

 

Netcash provided by operating activities during the year to date period endedJune 30, 2010 was $157,218 compared to cash consumed of $53,400 during thesame period in 2009. Cash provided by operating activities is driven by our netincome and adjusted by non-cash items. Non-cash adjustments primarily includedepreciation, amortization of intangible assets and stock based compensationexpense. The improvement was primarily driven by better operating performance.Additionally, the timing of cash receipts and cash disbursements affects ouroperating assets and cash balances.

 

Netcash used in investing activities of $54,953 is attributable to capitalexpenditures. Our capital expenditures were $54,953 and $58,695 for the year todate periods ended June 30, 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 $17,771 during the year to date periodended June 30, 2010 was primarily due to net repayments made under ournotes payable. Net cash provided by financing activities of $82,599 during theyear to date period ended June 30, 2009 was primarily related to $50,000additional financing acquired under an existing note payable and approximately$40,000 in new debt acquired in connection with the purchase of 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

 

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partyverification solutions compared with prior periods and our operating plan.Based on the continued sales growth and overall improvement in our performance,we believe that we will achieve profitability for the year endedDecember 31, 2010. The culmination of all our efforts toward profitabilityhas 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.

 

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 means to entry as imposedon international market imports/exports is via a quality verification program,like our USVerifiedTM product line.

 

**OffBalance Sheet Arrangements**

 

Asof June 30, 2010, we had no off-balance sheet arrangements of any type.

 

**RESULTS OF OPERATIONS**

 

**Second Quarter and Year to Date Periods ended June 30,2010 compared to the Same Periods in Fiscal Year 2009**

 

**Revenues**

 

Revenuesare derived from sales of our USVerified identification and verificationsolutions, consulting services, web-based development and hardware sales.Revenues for the second quarter and year to date period ended June 30,2010 were $799,130 and $1,479,313, respectively, compared to $645,880 and$1,123,205 in the 2009 comparable periods, an improvement of 23.7% and 31.7%,respectively. We continue to experience double-digit sales growth quarter overquarter and we believe this is significant performance in light of the currenteconomic conditions severely impacting the food industry.

 

Duringthe second quarter ended June 30, 2010, our third party verificationrevenue, which includes sales of our USVerified solutions and relatedconsulting, program development and web-based development services, increased20.3% to $652,629 compared to $542,391 in the same quarter 2009. For the yearto date period ended June 30, 2010, third party verification revenueincreased 28.5% to $1,226,887 compared to $955,030 in the same 2009period.  The improvement is due in largepart to increased demand in our US Verified NHTC product line and revenuegenerated from our supply chain coordination efforts.

 

Revenuesderived from sales of hardware, primarily sales of cattle identification eartags, increased 51.2% to $146,601 in the second quarter 2010 compared to$96,990 in the second quarter 2009. For the year to date period endedJune 30, 2010, hardware sales increased 61.7% to $252,426 compared to$156,085 in the same 2009 period.

 

**Cost of Sales and Gross Margin**

 

Costof sales for the second quarter 2010 were $365,648 compared to $294,393 duringthe second quarter 2009. Gross margin for the second quarter 2010 remainedrelatively flat at 54.2% of revenues compared to 54.4% for the second quarter2009. For the year to date period ended June 30, 2010, cost of sales was$644,389 compared to $573,489 for the same 2009 period. Gross margins improved7.5 basis points to 56.4% in 2010 compared to 48.9% in the same 2009 period.

 

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Improvementin our gross margins for the year to date period ended June 30, 2010compared to 2009 were partially due to the absorption of certain costs whichare generally fixed in nature over a greater volume of sales coupled withshifts in our sales mix of higher margin supply chain coordination revenue. Fora more detailed discussion regarding profitability, read “Management’sStrategy” above.

 

**Selling,General and Administrative Expenses**

 

Selling,general and administrative expenses for the second quarter 2010 were $359,710,an increase of $66,542, or 22.7% over the second quarter 2009 amount of$293,168. For the year to date period ended June 30, 2010, expensesincreased $62,918, or 9.7% to $712,393 compared to $649,475 in the same year todate 2009 period.

 

Theincrease was directly attributed to increased spending in consulting, marketingand advertising. During the second quarter 2010, management, along with theassistance of industry consulting experts, intentionally made the decision toinvest heavily in marketing our “Where Food Comes From” labeling program tobuild consumer awareness. We believe that the future growth of verificationservices will be achieved only through consumer awareness and demand. Werecognize that we have allocated significant funds to this effort but we areconfident that we are heading in the right direction. This marketing decisionand the decision to invest these funds in our future were made at a time whenwe recognized that our operations consistently generated sufficient cash flow.We cannot guarantee that this investment will generate future revenue nor canwe determine for how long, if at all. Therefore, this investment must beexpensed in accordance with accounting principles generally accepted in theUnited States. For a more detailed discussion regarding our “Where Food ComesFrom” labeling program, read “Management’s Strategy” above.

 

**Net Income (Loss) and Per Share Information**

 

Asa result of the foregoing, net income for the second quarter endedJune 30, 2010 was $65,604 or less than a penny per basic and dilutedcommon share, compared to net income of $49,265 or less than a penny per basicand diluted common share for the second quarter ended June 30, 2009. Netincome for the year to date period ended June 30, 2010 was $106,184 or$0.01 per basic and diluted common share, compared to net loss of $112,713 or$0.01 loss per basic and diluted common share for the same 2009 period.

 

**CRITICAL ACCOUNTING 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 financial statements.We believe that the following critical accounting policies reflect the moresignificant 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

 

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representativeof future behavior. We estimate the volatility of our common stock on the dateof grant based on the implied volatility of publicly traded options on ourcommon stock, with a term of one year or greater. We believe that impliedvolatility calculated based on actively traded options on our common stock is abetter indicator of expected volatility and future stock price trends thanhistorical volatility. Therefore, expected volatility was based on amarket-based implied volatility. The assumptions used in calculating the fairvalue of stock-based awards represent our best estimates, but these estimatesinvolve inherent uncertainties and the application of management judgment. As aresult, if factors change and we use different assumptions, our stock-basedcompensation expense could be materially different in the future. In addition,we are required to estimate the expected forfeiture rate and only recognizeexpense for those shares expected to vest. We estimate the forfeiture ratebased on historical experience of our stock-based awards that are granted,exercised and cancelled. If our actual forfeiture rate is materially differentfrom our estimate, the stock-based compensation expense could be significantlydifferent from what we have recorded in the current period.

 

**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, have concludedthat our disclosure controls and procedures are effective at a reasonableassurance level based on his evaluation of these controls and procedures as requiredby 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) and15d-15(f) under the Exchange Act) during the most recent fiscal quarterthat have materially affected, or are reasonably likely to materially affect,the Company’s internal control 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 will periodicallyreevaluate 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 1A. RISK FACTORS**

 

Our business is subject to a number of risks,including those identified in Item 1A. — “Risk Factors” of our 2009 AnnualReport on Form 10-K, that could have a material effect on ourbusiness, results of operations, financial condition and/or liquidity and thatcould cause our operating results to vary significantly from period to period.As of June 30, 2010, there have been no material changes to the risksdisclosed in our most recent Annual Report on Form 10-K. We may alsodisclose changes to such factors or disclose additional factors from time totime in our future filings with the SEC.

 

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

 

OnJune 30, 2010, we granted 55,000 shares of fully vested stock at $0.13 pershare with an aggregate value of $7,150 in connection with investor relationsservices performed by Pfeiffer High.

 

Theissuance of these shares of our common stock described above was pursuant tothe exemption from registration provided by Section 4(2) of theSecurities Act of 1933, as amended and related state private offeringexemptions. All of the investors were Accredited Investors as defined in theSecurities Act who took their shares for investments purposes without a view todistribution and had access to information concerning the company and itsbusiness prospects, as required by the Securities Act.

 

Inaddition, there was no general solicitation or advertising for the purchase ofthese shares. All certificates for these shares issued pursuant toSection 4(2) contain a restrictive legend. Finally, our stocktransfer agent has been instructed not to transfer any of such shares, unlesssuch shares are registered for resale or there is an exemption with respect totheir transfer.

 

**ITEM 5.  OTHERINFORMATION**

 

TheCompany held its Annual Meeting of Shareholders on December 3, 2009. Atthe Annual Meeting, shareholders were asked to consider two proposals:

 

1.               The re-electionof John Saunders, Dr. Gary Smith, Adam Larson, Robert Van Schoick II andPeter C. Lapaseotes, Jr. to serve as the five (5) directors of theCompany to hold office until the next annual meeting of shareholders or untiltheir successors are duly elected and qualified; and

2.               To ratify theappointment of Gruber & Company, LLC, an independent registered publicaccounting firm, as our independent auditors for the fiscal year endingDecember 31, 2009.

 

Eachproposal was passed by at least a majority of the shares entitled to vote atthe meeting.

 

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**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 |

 

**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:  August 12, 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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