Table ofContents

 

 

 

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

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

 

**For the Quarterly period ended September 30, 2010**

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

 

**For the transition period from                 to                 **

 

**Commission File No. 333-133634**

 

**INTEGRATED MANAGEMENT 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 “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

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

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  Yes o  No x

 

Thenumber of shares of the registrant’s common stock, $.001 par value per share,outstanding as of November 5, 2010 was 20,901,781.

 

 

 

----

Tableof Contents

 

**Integrated Management Information, Inc.**

**Table of Contents**

**September 30, 2010**

 
| ** **                              | ** **                                                                                                                                                 | **Page:** |
|-----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
| **Part 1 - Financial Information** |
|                                    |                                                                                                                                                       |      |
| Item  1.                                | Financial Statements:                                                                                                                                      |      |
|                                    |                                                                                                                                                       |      |
|                                    | Balance Sheets (unaudited), September 30, 2010 and  December 31, 2009                                                                            | 3         |
|                                    |                                                                                                                                                       |      |
|                                    | Statements of Operations (unaudited), for the third  quarter ended September 30, 2010 and 2009                                                        | 4         |
|                                    |                                                                                                                                                       |      |
|                                    | Statements of Operations (unaudited), for the year to  date period ended September 30, 2010 and 2009                                                  | 5         |
|                                    |                                                                                                                                                       |      |
|                                    | Statements of Cash Flows (unaudited), for the year to  date period ended September 30, 2010 and 2009                                                  | 6         |
|                                    |                                                                                                                                                       |      |
|                                    | Statements of Stockholders’ Equity (unaudited), for  the year ended December 31, 2009 and the year to date period ended  September 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        |

 

2

----

Table ofContents

 

**Integrated Management Information, Inc.**

**BalanceSheets**

**(Unaudited)**

 
| ** **                                                                                                                                                                            | ** ** | **Sept 30,** | ** ** | **Dec 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|------------------|------------|
| ** **                                                                                                                                                                            | ** ** | **2010**          | ** ** | **2009**         | ** ** |
| **Assets**                                                                                                                                                                            |       |
| Current assets:                                                                                                                                                                       |       |              |       |             |       |
| Cash and cash equivalents                                                                                                                                                             |       | $                 | 488,363    |             | $          | 214,329 |   |
| Accounts receivable, net of allowance                                                                                                                                                 |       | 192,796           |       | 204,596          |       |
| Prepaid expenses and other current assets                                                                                                                                             |       | 14,647            |       | 65,695           |       |
| Total current assets                                                                                                                                                                  |       | 695,806           |       | 484,620          |       |
| Property and equipment, net                                                                                                                                                           |       | 125,661           |       | 134,035          |       |
| Intangible assets, net                                                                                                                                                                |       | 16,159            |       | 655              |       |
| Total assets                                                                                                                                                                          |       | $                 | 837,626    |             | $          | 619,310 |   |
|                                                                                                                                                                                  |       |              |       |             |       |
| **Liabilities and Stockholders’ Equity**                                                                                                                                         |       |
| Current liabilities:                                                                                                                                                                  |       |              |       |             |       |
| Accounts payable                                                                                                                                                                      |       | $                 | 221,992    |             | $          | 161,049 |   |
| Accrued expenses and other current liabilities                                                                                                                                        |       | 16,268            |       | 51,115           |       |
| Current portion of notes payable                                                                                                                                                      |       | 10,359            |       | 8,467            |       |
| Total current liabilities                                                                                                                                                             |       | 248,619           |       | 220,631          |       |
| Notes payable and other long-term debt                                                                                                                                                |       |              |       |             |       |
| Commitments and contingencies                                                                                                                                                         |       | 334,049           |       | 360,871          |       |
| 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; 21,039,006 and 20,929,006 shares issued, respectively; and  20,901,781 and 20,849,481 shares outstanding, respectively |       | 21,039            |       | 20,929           |       |
| Additional paid-in-capital                                                                                                                                                            |       | 3,401,383         |       | 3,387,130        |       |
| Treasury stock of 137,225 and 79,525 shares,  respectively                                                                                                                            |       | (29,058           | )          | (20,144          | )          |
| Accumulated deficit                                                                                                                                                                   |       | (3,138,406        | )          | (3,350,107       | )          |
| Total stockholders’ equity                                                                                                                                                       |       | 254,958           |       | 37,808           |       |
| Total liabilities and stockholders’ equity                                                                                                                                       |       | $                 | 837,626    |             | $          | 619,310 |   |

 

The accompanying notes are an integral partof these financial statements.

 

3

----

Table ofContents

 

**Integrated Management Information, Inc.**

**Statementsof Operations**

**(Unaudited)**

 
| ** **                                   | ** ** | **Third Quarter ended** | ** ** |
|----------------------------------------------|------------|-----------------------------------|------------|
| ** **                                   | ** ** | **Sept 30,**                 | ** ** | **Sept 30,** | ** ** |
| ** **                                   | ** ** | **2010**                          | ** ** | **2009** | ** ** |
|                                         |       |                              |       |   |   |
| Revenues                                     |       | $                                 | 923,701    |   | $ | 778,736 |   |
| Costs of revenues                            |       | 433,671                           |       | 391,446 |   |
| Gross profit                                 |       | 490,030                           |       | 387,290 |   |
| Selling, general and administrative expenses |       | 376,740                           |       | 308,030 |   |
| Gain on sale of equipment                    |       | —                            |       | — |   |
| Income from operations                       |       | 113,290                           |       | 79,260 |   |
| Other expense (income):                      |       |                              |       |   |   |
| Interest expense                             |       | 8,199                             |       | 9,114 |   |
| Other income, net                            |       | (426                              | )          | (250 | ) |
| Income before income taxes                   |       | 105,517                           |       | 70,396 |   |
| Income taxes                                 |       | —                            |       | — |   |
| Net income                                   |       | $                                 | 105,517    |   | $ | 70,396 |   |
|                                         |       |                              |       |   |   |
| Net income per share:                        |       |                              |       |   |   |
| Basic                                        |       | $                                 | 0.01       |   | $ | — |   |
| Diluted                                      |       | $                                 | 0.01       |   | $ | — |   |
|                                         |       |                              |       |   |   |
| Weighted average shares outstanding:         |       |                              |       |   |   |
| Basic                                        |       | 20,863,573                        |       | 20,868,481 |   |
| Diluted                                      |       | 20,883,133                        |       | 20,996,910 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

4

----

Table ofContents

 

**Integrated Management Information, Inc.**

**Statementsof Operations**

**(Unaudited)**

 
| ** **                                   | ** ** | **Year to Date Period ended** | ** ** |
|----------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                   | ** ** | **Sept 30,**                                 | ** ** | **Sept 30,** | ** ** |
| ** **                                   | ** ** | **2010**                                          | ** ** | **2009** | ** ** |
|                                         |       |                                              |       |   |   |
| Revenues                                     |       | $                                                 | 2,403,014  |   | $ | 1,901,941 |   |
| Costs of revenues                            |       | 1,078,060                                         |       | 964,935 |   |
| Gross profit                                 |       | 1,324,954                                         |       | 937,006 |   |
| Selling, general and administrative expenses |       | 1,089,132                                         |       | 957,505 |   |
| Gain on sale of equipment                    |       | —                                            |       | (4,000 | ) |
| Income (loss) from operations                |       | 235,822                                           |       | (16,499 | ) |
| Other expense (income):                      |       |                                              |       |   |   |
| Interest expense                             |       | 25,244                                            |       | 26,462 |   |
| Other income, net                            |       | (1,123                                            | )          | (644 | ) |
| Income (loss) before income taxes            |       | 211,701                                           |       | (42,317 | ) |
| Income taxes                                 |       | —                                            |       | — |   |
| Net income (loss)                            |       | $                                                 | 211,701    |   | $ | (42,317 | ) |
|                                         |       |                                              |       |   |   |
| Net income (loss) per share:                 |       |                                              |       |   |   |
| Basic                                        |       | $                                                 | 0.01       |   | $ | — |   |
| Diluted                                      |       | $                                                 | 0.01       |   | $ | — |   |
|                                         |       |                                              |       |   |   |
| Weighted average shares outstanding:         |       |                                              |       |   |   |
| Basic                                        |       | 20,845,714                                        |       | 20,868,859 |   |
| Diluted                                      |       | 20,864,238                                        |       | 20,868,859 |   |

 

The accompanying notes are an integral partof these financial statements.

 

5

----

Table ofContents

 

**Integrated Management Information, Inc.**

**Statementsof Cash Flows**

**(Unaudited)**

 
| ** **                                                                   | ** ** | **Year to Date Period ended Sept 30,** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                                   | ** ** | **2010**                                                             | ** ** | **2009** | ** ** |
| Operating activities:                                                        |       |                                                                 |       |   |   |
| Net income (loss)                                                            |       | $                                                                    | 211,701    |   | $ | (42,317 | ) |
| Adjustments to reconcile net loss to net cash used  in operating activities: |       |                                                                 |       |   |   |
| Depreciation and amortization                                                |       | 60,006                                                               |       | 39,525 |   |
| Stock based compensation expense                                             |       | 63                                                                   |       | 27,568 |   |
| Issuance of 110,000 common shares                                            |       | 14,300                                                               |       | — |   |
| Provision for doubtful accounts                                              |       | 1,656                                                                |       | 12,722 |   |
| Loss (gain) on sale/disposal of equipment                                    |       | —                                                               |       | (4,000 | ) |
| Changes in assets and liabilities:                                           |       |                                                                 |       |   |   |
| Accounts receivable                                                          |       | 10,144                                                               |       | 71,086 |   |
| Inventories                                                                  |       | —                                                               |       | 14,350 |   |
| Prepaid expenses and other current assets                                    |       | 51,048                                                               |       | 24,209 |   |
| Accounts payable                                                             |       | 60,943                                                               |       | (15,560 | ) |
| Accrued expenses and other current liabilities                               |       | (34,847                                                              | )          | (15,408 | ) |
| Net cash provided by (used in) operating activites                           |       | 375,014                                                              |       | 112,175 |   |
|                                                                         |       |                                                                 |       |   |   |
| Investing activities:                                                        |       |                                                                 |       |   |   |
| Acquisition of property and equipment                                        |       | (67,136                                                              | )          | (95,471 | ) |
| Proceeds from sale of equipment                                              |       | —                                                               |       | 4,000 |   |
| Net cash provided by (used in) investing  activities                         |       | (67,136                                                              | )          | (91,471 | ) |
|                                                                         |       |                                                                 |       |   |   |
| Financing activities:                                                        |       |                                                                 |       |   |   |
| Proceeds from notes payable                                                  |       | 8,500                                                                |       | 89,964 |   |
| Repayments under notes payable                                               |       | (33,430                                                              | )          | (18,595 | ) |
| Stock repurchase under Buyback Program                                       |       | (8,914                                                               | )          | (765 | ) |
| Net cash provided by (used in) financing  activities                         |       | (33,844                                                              | )          | 70,604 |   |
| Net change in cash and cash equivalents                                      |       | 274,034                                                              |       | 91,308 |   |
| Cash and cash equivalents at beginning of year                               |       | 214,329                                                              |       | 154,044 |   |
| Cash and cash equivalents at end of period                                   |       | $                                                                    | 488,363    |   | $ | 245,352 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

6

----

Table ofContents

 

**Integrated Management Information, Inc.**

**Statementsof 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 57,700 shares on the open  market |       | —                |       | —      |       | —         |       | —       |       | (8,914     | )          | (8,914     | )          |
| Issuance of 110,000 common shares                     |       | 110,000               |       | 110         |       | 14,190         |       | —       |       | —     |       | 14,300     |       |
| Stock-based compensation expense                      |       | —                |       | —      |       | 63             |       | —       |       | —     |       | 63         |       |
| Net income                                            |       | —                |       | —      |       | —         |       | 211,701      |       | —     |       | 211,701    |       |
| Balance at September 30, 2010                    |       | 21,039,006            |       | $           | 21,039     |           | $          | 3,401,383    |       | $          | (3,138,406 | )          | $          | (29,058 | ) | $ | 254,958 |   |

 

The accompanying notes are an integral partof these financial statements.

 

7

----

Table ofContents

 

**Integrated ManagementInformation, Inc.**

**Notesto 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 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.

 

8

----

Table ofContents

 

**Integrated ManagementInformation, Inc.**

**Notes to the FinancialStatements**

 

**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 ended December 31,2009 included 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 third quarterand year to date period ended September 30, 2010 are not necessarilyindicative of the results to be expected for any other interim period of anyfuture 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:

 
| ** **                                      | ** ** | **Third Quarter ended** | ** ** | **Year to Date ended** | ** ** |
|-------------------------------------------------|------------|-----------------------------------|------------|---------------------------------------|------------|
| ** **                                      | ** ** | **Sept 30,**                 | ** ** | **Sept 30,**                     | ** ** | **Sept 30,** | ** ** | **Sept 30,** | ** ** |
| ** **                                      | ** ** | **2010**                          | ** ** | **2009**                              | ** ** | **2010** | ** ** | **2009** | ** ** |
| Basic:                                          |       |                              |       |                                  |       |   |   |   |   |
| Weighted average shares outstanding             |       | 20,863,573                        |       | 20,868,481                            |       | 20,845,714 |   | 20,868,859 |   |
|                                            |       |                              |       |                                  |       |   |   |   |   |
| Diluted:                                        |       |                              |       |                                  |       |   |   |   |   |
| Weighted average shares outstanding             |       | 20,863,573                        |       | 20,868,481                            |       | 20,845,714 |   | 20,868,859 |   |
| Weighted average effects of dilutive securities |       | 19,560                            |       | 128,429                               |       | 18,524 |   | — |   |
| Total                                           |       | 20,883,133                        |       | 20,996,910                            |       | 20,864,238 |   | 20,868,859 |   |
|                                            |       |                              |       |                                  |       |   |   |   |   |
| Antidilutive securities:                        |       | 8,541,500                         |       | 7,062,810                             |       | 8,541,500 |   | 8,831,310 |   |

 

9

----

Table ofContents

 

**Integrated ManagementInformation, Inc.**

**Notes to the FinancialStatements**

 

**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 stock options.  The vesting of stock-based awards isgenerally subject to meeting certain performance-based objectives, the passageof time or a combination of both, and continued employment through the vestingperiod.

 

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 endedSeptember 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 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 third quarters ended September 30,2010 and 2009 was $0 and $640, respectively, and has been included in generaland administrative expenses. Stock-based compensation cost for the year to dateperiods ended September 30, 2010 and 2009 was $63 and $27,568,respectively. No tax benefits were recognized for these costs due to ourcumulative losses as well as a full valuation reserve on our deferred taxassets.

 

**StockOption Plan Activity**

 

Stock option activity under our Plans is summarizedas 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, September 30, 2010 |       | 8,593,500            |       | $                       | 1.64       |                   | $          | 0.01                      |       | 0.38                     |       | $ | 4,774 |   |
| Exercisable, September 30, 2010 |       | 8,593,500            |       | $                       | 1.64       |                   | $          | 0.01                      |       | 0.38                     |       | $ | 4,774 |   |

 

Theaggregate intrinsic value represents the total pre-tax intrinsic value (theaggregate difference between the closing price of our common stock on September 30,2010 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 September 30, 2010.

 

**StockGrant**

 

OnJune 30, 2010 and September 30, 2010, we granted 55,000 and 55,000shares, respectively, of fully vested stock at $0.13 per share with anaggregate value of $14,300 in connection with investor relations servicesperformed by Pfeiffer High.

 

10

----

Table ofContents

 

**Integrated ManagementInformation, Inc.**

**Notes to the FinancialStatements**

 

**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 September 30, 2010,we have repurchased a total of 137,225 shares under the Stock Buyback Plan.During 2010, we repurchased 57,700 shares at an average price of $0.15 pershare. Total cash consideration for the repurchased shares was $8,914. Therepurchased shares are recorded as part of treasury stock and are accounted forunder the cost 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 September 30, 2010 and December 31, 2009, we believe it is morelikely than not that our net deferred tax asset will not be realized beyond theprovision for income taxes due on taxable earnings for the year ended December 31,2010; and accordingly, we have recorded a valuation allowance against thedeferred 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 September 30, 2010, we will continue to reviewvarious qualitative and quantitative data in regards to the realization of ourdeferred tax assts, including:

 

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

·                  Accumulation of income (loss) before taxesutilizing a look-back period of three years;

·                  Events within our industry;

·                  The cyclical nature of our business;

·                  The health of the economy; and

·                  Historical trending.

 

11

----

Table ofContents

 

**Integrated ManagementInformation, Inc.**

**Notes to the FinancialStatements**

 

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 expense. The amount of thedeferred tax asset considered realizable, however, could be reduced ifestimates of future taxable income during the carry-forward periods arereduced.

 

**Note 6 - Notes Payable**

 

Notes payable consist of the following: 

 
| ** **                                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                      | ** ** | **2010**               | ** ** | **2009**              | ** ** |
|                                                            |       |                   |       |                  |       |
| Equipment Note Payable                                          |       | $                      | 23,008     |                  | $          | 29,338 |   |
| Lapaesotes Note Payable                                         |       | $                      | 320,000    |                  | $          | 340,000 |   |
| Integriflex Note Payable                                        |       | 1,400                  |       | —                |       |
|                                                            |       | $                      | 344,408    |                  | $          | 369,338 |   |
| Less current portion of notes payable and other  long-term debt |       | 10,359                 |       | 8,467                 |       |
| Notes payable and other long-term debt                          |       | $                      | 334,049    |                  | $          | 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. 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 was due on September 12, 2011 but duringthe quarter ended September 30, 2010, the maturity date was extended to September 12,2012.

 

DuringFebruary and July 2010, we paid an additional $10,000 and $10,000,respectively, towards the principal balance. We intend to continue makingprincipal payments towards the balance as additional funds become available.

 

**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 $320,000 payable of unsecured debtpayable to a major shareholder who is related to Pete Lapaseotes, a director.

 

12

----

Table ofContents

 

**Integrated ManagementInformation, Inc.**

**Notes to the FinancialStatements**

 

**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 September 30, 2010, future minimum lease payments for our headquartersare as follows:

 
| **Years Ending December 31,** | ** ** | **Amount** | ** ** |
|----------------------------------------------|------------|------------|------------|
| 2010                                         |       | 11,978     |       |
| 2011                                         |       | 48,509     |       |
| 2012                                         |       | 24,554     |       |
| Thereafter                                   |       | —     |       |
| Total lease commitments                      |       | $          | 85,041     |   |
|                                              |            |            |            |  |

 

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.

 

13

----

Table ofContents

 

**Integrated ManagementInformation, Inc.**

**Notes to the FinancialStatements**

 

**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 opportunityarises.

 

**Note 10- Recent Accounting Pronouncements**

 

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

 

14

----

Tableof Contents

 

**ITEM 2.** **MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS**

 

**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 ended December 31,2009. The following discussion and analysis includes historical and certainforward-looking information that should be read together with theaccompanying consolidated financial statements, related footnotes and thediscussion below of certain risks and uncertainties that could cause futureoperating results to differ materially from historical results or from theexpected results indicated by forward-looking statements.

 

**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 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 

 

15

----

Table ofContents

 

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:

 

·                  In July 2010,Korea announced that it will establish a “nationwide hog farm management system”that will enable a comprehensive farm-to-slaughter management of hogs toimprove the farming environment and prevent swine fever. Earlier this year,Korea fully implemented a mandatory domestic beef tracing system. Korea alsoannounced that by December 2010 all imported beef would also be subject tothe mandatory beef tracing system. We believe this will continue to providesignificant international verification opportunities in predominately Asianmarkets which have historically been difficult for US markets to penetrate.

 

·                  In September 2009,the Democratic Party of Japan (DPJ) scored an overwhelming victory in Japan’selections. Of particular concern for the U.S. meat industry is the fact thatthe DPJ has taken a relatively harder line against expanded access for beefimports from the United States (US). Thus, it looks that in the near term, withJapan focused on a transitional government, and being more protectionist innature, the current agreement for supplying Japan—cattle must be age verifiedas 20 months 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 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 for 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 “WhereFood Comes From” labeling program.

 

16

----

Table ofContents

 

**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.

 

During2010, management, along with the assistance of industry consulting experts, intentionallymade the decision to invest heavily in marketing our services and our WFCFlabeling program to build consumer awareness. In February 2010, we announced our alliance with cowboy poet BaxterBlack to promote our verification, identification and traceability solutions onRFD-TV’s “Cattlemen to Cattlemen” television program. In July 2010,Leann Saunders, our president, was a featured guest in an episode of LifetimeTelevision’s “The Balancing Act” to discuss our latest effort to connectconsumers with the farmers that raise their food. For a replay of thevideo/television coverage, checkout this link:www.imiglobal.com/media/videogallery.asp.

 

Forthe third quarter of 2010, we generated a small revenue stream from our WFCFprogram. We will continue to invest heavily in marketing our verificationservices and our WFCF brand to build consumer awareness and demand through theuse of videos, television exposure, word-of-mouth and the internet. We believewe are positioning ourselves to benefit significantly in 2011 and beyond, but,of course, no assurance can be given that this investment will generate futurerevenue nor can we determine for how long, if at all.

 

17

----

Table ofContents

 

**FinancialHighlights**

 

·                  Revenues forthe third quarter and year to date period ended September 30, 2010increased 18.6% and 26.3%, respectively, over the same comparable periods in2009. We are experiencing significant growth in our US Verified product lineand our supply chain coordination efforts.

 

·                  Profit marginsfor the third quarter and year to date period ended September 30, 2010improved 3.3 and 5.9 basis points, respectively over the same comparableperiods in 2009.

 

·                  For the year todate period ended September 30, 2010 we achieved positive cash flow fromoperations of $375,014 compared to $112,175 for the same period 2009.

 

·                  Net income forthe year to date period ended September 30, 2010 was $211,701, or $0.01net income per share, compared to net loss of $42,317 for the same period 2009.This is our third consecutive quarter to achieve net income and we believe thisis significant considering current economic conditions severely impacting thefood industry.

 

**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 not necessarilyindicative of the results that may be achieved for any other quarter or for thefull fiscal year.

 

**Liquidity and Capital Resources**

 

AtSeptember 30, 2010, we had cash and cash equivalents of $488,363 comparedto $214,329 of cash and cash equivalents at December 31, 2009. Our workingcapital at September 30, 2010 was $447,187 compared to $263,989 at December 31,2009.

 

Netcash provided by operating activities during the year to date period ended September 30,2010 was $375,014 compared to cash provided of $112,175 during the same periodin 2009. Cash provided by operating activities is driven by our net income andadjusted 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 $67,136 is attributable to capitalexpenditures. Our capital expenditures were $67,136 and $95,471 for the year todate periods ended September 30, 2010 and 2009, respectively. Our capitalexpenditures are primarily related to purchases and internal development of informationtechnology assets to support our product and service offerings. As weanticipate continued growth, we expect to continue investing additional capitalin our information technology assets.

 

Netcash used in financing activities of $33,844 during the year to date periodended September 30, 2010 was primarily due to net repayments made underour notes payable. Net cash provided by financing activities of $70,604 duringthe year to date period ended September 30, 2009 was primarily related to$50,000 additional financing acquired under an existing note payable andapproximately $40,000 in new debt acquired in connection with the purchase ofequipment.

 

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.

 

18

----

Tableof Contents

 

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 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 September 30, 2010, we had no off-balance sheet arrangements of anytype.

 

**RESULTS OF OPERATIONS**

 

**Third Quarter and Year to Date Periods ended September 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 third quarter and year to date period ended September 30,2010 were $923,701 and $2,403,014, respectively, compared to $778,736 and$1,901,941 in the 2009 comparable periods, an improvement of 18.6% and 26.3%,respectively. We continue to experience double-digit sales growth from quarterover comparable quarter and we believe this is significant performance in lightof the current economic conditions severely impacting the food industry.

 

Duringthe third quarter ended September 30, 2010, our third party verificationrevenue, which includes sales of our USVerified solutions and relatedconsulting, program development and web-based development services, increased20.4% to $699,282 compared to $581,032 in the same quarter 2009. For the yearto date period ended September 30, 2010, third party verification revenueincreased 25.4% to $1,926,169 compared to $1,536,062 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 17.3% to $224,419 in the third quarter 2010 compared to$191,254 in the third quarter 2009. For the year to date period ended September 30,2010, hardware sales increased 37.3% to $476,845 compared to $347,339 in thesame 2009 period.

 

**Cost of Sales and Gross Margin**

 

Costof sales for the third quarter 2010 were $433,671 compared to $391,446 duringthe third quarter 2009. Gross margin for the third quarter 2010 improved 3.3basis points to 53.1% of revenues compared to 49.7% for the third quarter 2009.For the year to date period ended September 30, 2010, cost of sales was$1,078,060 compared to 

 

19

----

Table ofContents

 

$964,935for the same 2009 period. Gross margins improved 5.9 basis points to 55.1% in2010 compared to 49.3% in the same 2009 period.

 

Improvementin our gross margins for the year to date period ended September 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’s Strategy”above.

 

**Selling,General and Administrative Expenses**

 

Selling,general and administrative expenses for the third quarter 2010 were $376,740,an increase of $68,710, or 22.3% over the third quarter 2009 amount of$308,030. For the year to date period ended September 30, 2010, expensesincreased $131,627, or 13.7% to $1,089,132 compared to $957,505 in the sameyear to date 2009 period.

 

Theincrease was directly attributed to increased spending in consulting, marketingand advertising. During the second quarter 2010 and continuing through thethird quarter 2010, management, along with the assistance of industry consultingexperts, intentionally made the decision to invest heavily in marketing our “WhereFood Comes From” labeling program to build consumer awareness. We believe thatthe future growth of verification services will be achieved only throughconsumer awareness and demand. We recognize that we have allocated significantfunds to this effort but we are confident that we are heading in the rightdirection. This marketing decision and the decision to invest these funds inour future were made at a time when we recognized that our operationsconsistently generated sufficient cash flow. While we generated a small revenuestream from our WFCF program during the third quarter 2010, we cannot guaranteethat this investment will generate future revenue nor can we determine for howlong, if at all. Therefore, this investment must be expensed in accordance withaccounting principles generally accepted in the United States. For a moredetailed discussion regarding our “Where Food Comes From” labeling program,read “Management’s Strategy” above.

 

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

 

Asa result of the foregoing, net income for the third quarter ended September 30,2010 was $105,517 or $0.01 per basic and diluted common share, compared to netincome of $70,396 or less than a penny per basic and diluted common share forthe third quarter ended September 30, 2009. Net income for the year todate period ended September 30, 2010 was $211,701 or $0.01 per basic anddiluted common share, compared to net loss of $42,317 or less than a penny lossper 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 financialstatements. We believe that the following critical accounting policies reflectthe more significant estimates and assumptions used in the preparation of theconsolidated financial statements.

 

20

----

Table ofContents

 

**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 our stock-basedawards that are granted, exercised and cancelled. If our actual forfeiture rateis materially different from our estimate, the stock-based compensation expensecould be significantly different from what we have recorded in the currentperiod.

 

**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 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.

 

21

----

Table ofContents

 

**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 September 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**

 

Duringthe year ended as of September 30, 2010, we have granted 110,000 shares offully vested stock at $0.13 per share with an aggregate value of $14,300 inconnection with investor relations services 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 its businessprospects, 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 to Section 4(2) containa restrictive legend. Finally, our stock transfer agent has been instructed notto transfer any of such shares, unless such shares are registered for resale orthere is an exemption with respect to their transfer.

 

**ITEM 5.  OTHERINFORMATION**

 

TheCompany held its Annual Meeting of Shareholders on October 27, 2010. 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 ending December 31,2010.

 

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

 

22

----

Table ofContents

 

**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: November 12, 2010 | Integrated  Management Information, Inc. |
|------------------------------|-----------------------------------------------|
|                         |                                          |
|                         | By:                                           | /s/  John K. Saunders |
|                         |                                          | Chief  Executive Officer |
|                         |                                          |   |
|                         | By:                                           | /s/  Dannette D. Henning |
|                         |                                          | Chief  Financial Officer |

 

23

----