Table ofContents

 

 

 

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

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

 

**For the Quarterly period ended September 30,2009**

 

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

 

**For the transition period from             to             **

 

**Commission File No. 333-133634**

 

**INTEGRATEDMANAGEMENT INFORMATION, INC.**

(Name of SmallBusiness Issuer in its charter)

 

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

 

**221Wilcox, Suite A**

**CastleRock, CO 80104**

(Address of principalexecutive offices, including zip code)

 

Issuer’s telephonenumber, including area code:

**(303)895-3002**

 

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

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T during the  preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files).  Yes o Noo

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.  See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act.

 

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

 

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

 

The number of shares ofthe registrant’s common stock, $.001 par value per share, outstanding as of November 5,2009 was 20,868,481.

 

Transitional smallbusiness disclosure format (check one):  Yes o No x

 

 

 

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Tableof Contents

 

**Integrated Management Information, Inc.**

**Table of Contents**

**September 30, 2009**

 

**Part 1 - Financial Information**

 
| ** **                            | ** ** | ** **                                                                                                                                                 | **Page:** |
|---------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
|                                  |       |                                                                                                                                                       |      |
| Item  1.                              |       | Financial Statements:                                                                                                                                      |      |
|                                  |       |                                                                                                                                                       |      |
|                                  |       | Balance Sheets  (unaudited), September 30, 2009 and December 31, 2008                                                                            | 3         |
|                                  |       |                                                                                                                                                       |      |
|                                  |       | Statements of Operations (unaudited), for the third  quarter ended  September 30, 2009 and 2008                                                       | 4         |
|                                  |       |                                                                                                                                                       |      |
|                                  |       | Statements of Operations (unaudited), for the year to  date periods ended  September 30, 2009 and 2008                                                | 5         |
|                                  |       |                                                                                                                                                       |      |
|                                  |       | Statements of Cash Flows  (unaudited), for the year to date periods ended  September 30, 2009 and 2008                                                | 6         |
|                                  |       |                                                                                                                                                       |      |
|                                  |       | Statements of Stockholders’ Equity(unaudited), for the  year ended  December 31, 2008 and the year to date period ended September 30,  2009 | 7         |
|                                  |       |                                                                                                                                                       |      |
|                                  |       | Notes to Financial  Statements                                                                                                                             | 8         |
|                                  |       |                                                                                                                                                       |      |
| Item 2.                               |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                | 15        |
|                                  |       |                                                                                                                                                       |      |
| Item 3.                               |       | Controls and  Procedures                                                                                                                                   | 20        |
|                                  |       |                                                                                                                                                       |      |
| **Part II - Other  Information** |       |
|                                  |       |                                                                                                                                                       |      |
| Item 1.                               |       | Legal Proceedings                                                                                                                                          | 21        |
|                                  |       |                                                                                                                                                       |      |
| Item 2.                               |       | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                                               | 21        |
|                                  |       |                                                                                                                                                       |      |
| Item 3.                               |       | Defaults upon  Senior Securities                                                                                                                           | 21        |
|                                  |       |                                                                                                                                                       |      |
| Item 4.                               |       | Submission of  Matters to a Vote of Security Holders                                                                                                       | 21        |
|                                  |       |                                                                                                                                                       |      |
| Item 5.                               |       | Other Information                                                                                                                                          | 21        |
|                                  |       |                                                                                                                                                       |      |
| Item  6.                              |       | Exhibits                                                                                                                                                   | 21        |

 

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**Integrated Management Information, Inc.**

**BalanceSheets**

**(Unaudited)**

 
| ** **                                                                                                                                                                            | ** ** | **Sept  30,** | ** ** | **Dec  31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------|------------|--------------|------------|
| ** **                                                                                                                                                                            | ** ** | **2009**      | ** ** | **2008**     | ** ** |
| **Assets**                                                                                                                                                                            | ** ** |
| Current assets:                                                                                                                                                                       |       |          |       |         |       |
| Cash and cash equivalents                                                                                                                                                             |       | $             | 245,352    |         | $          | 154,044 |   |
| Accounts receivable, net of allowance                                                                                                                                                 |       | 374,907       |       | 458,715      |       |
| Inventories                                                                                                                                                                           |       | —        |       | 14,350       |       |
| Prepaid expenses and other current assets                                                                                                                                             |       | 8,864         |       | 33,073       |       |
| Total current assets                                                                                                                                                                  |       | 629,123       |       | 660,182      |       |
| Property and equipment, net                                                                                                                                                           |       | 134,550       |       | 78,275       |       |
| Intangible assets, net                                                                                                                                                                |       | 764           |       | 1,093        |       |
| Total assets                                                                                                                                                                          |       | $             | 764,437    |         | $          | 739,550 |   |
|                                                                                                                                                                                  |       |          |       |         |       |
| **Liabilities  and Stockholders’ Equity**                                                                                                                                        |
| Current liabilities:                                                                                                                                                                  |       |          |       |         |       |
| Accounts payable                                                                                                                                                                      |       | $             | 203,283    |         | $          | 218,843 |   |
| Accrued expenses and other current liabilities                                                                                                                                        |       | 38,030        |       | 53,438       |       |
| Current portion of notes payable                                                                                                                                                      |       | 8,309         |       | —       |       |
| Total current liabilities                                                                                                                                                             |       | 249,622       |       | 272,281      |       |
| Notes payable and other long-term debt                                                                                                                                                |       | 363,060       |       | 300,000      |       |
| Commitments and contingencies                                                                                                                                                         |       |          |       |         |       |
| Stockholders equity:                                                                                                                                                                  |       |          |       |         |       |
| Preferred stock, $0.001 par value; 5,000,000  shares authorized; none issued or outstanding                                                                                           |       | —        |       | —       |       |
| Common stock, $0.001 par value; 95,000,000 shares  authorized; 20,929,006 and 20,929,006 shares issued, respectively; and 20,868,481  and 20,871,806 shares outstanding, respectively |       | 20,929        |       | 20,929       |       |
| Additional paid-in-capital                                                                                                                                                            |       | 3,386,948     |       | 3,359,380    |       |
| Treasury stock of 60,525 and 57,200 shares,  respectively                                                                                                                             |       | (16,889       | )          | (16,124      | )          |
| Accumulated deficit                                                                                                                                                                   |       | (3,239,233    | )          | (3,196,916   | )          |
| Total stockholders’ equity                                                                                                                                                       |       | 151,755       |       | 167,269      |       |
| Total liabilities and stockholders’ equity                                                                                                                                       |       | $             | 764,437    |         | $          | 739,550 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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**IntegratedManagement Information, Inc.**

**Statementsof Operations**

**(Unaudited)**

 
| ** **                                   | ** ** | **Third Quarter ended** | ** ** |
|----------------------------------------------|------------|-------------------------|------------|
| ** **                                   | ** ** | **Sept 30,**            | ** ** | **Sept 30,** | ** ** |
| ** **                                   | ** ** | **2009**                | ** ** | **2008** | ** ** |
|                                         |       |                    |       |   |   |
| Revenues                                     |       | $                       | 778,736    |   | $ | 597,262 |   |
| Costs of revenues                            |       | 391,446                 |       | 352,152 |   |
| Gross profit                                 |       | 387,290                 |       | 245,110 |   |
| Selling, general and administrative expenses |       | 308,030                 |       | 391,312 |   |
| Gain on sale of equipment                    |       | —                  |       | (366,991 | ) |
| Income from operations                       |       | 79,260                  |       | 220,789 |   |
| Other expense (income):                      |       |                    |       |   |   |
| Interest expense                             |       | 9,114                   |       | 7,603 |   |
| Other income, net                            |       | (250                    | )          | (875 | ) |
| Income before income taxes                   |       | 70,396                  |       | 214,061 |   |
| Income taxes                                 |       | —                  |       | — |   |
| Income from continuing operations            |       | 70,396                  |       | 214,061 |   |
| Loss from discontinued operations            |       | —                  |       | (53,071 | ) |
| Net income                                   |       | $                       | 70,396     |   | $ | 160,990 |   |
|                                         |       |                    |       |   |   |
| Income per share from continuing operations: |       |                    |       |   |   |
| Basic                                        |       | $                       | —     |   | $ | 0.01 |   |
| Diluted                                      |       | $                       | —     |   | $ | 0.01 |   |
|                                         |       |                    |       |   |   |
| Loss per share from discontinued operations: |       |                    |       |   |   |
| Basic                                        |       | $                       | —     |   | $ | — |   |
| Diluted                                      |       | $                       | —     |   | $ | — |   |
|                                         |       |                    |       |   |   |
| Weighted average shares outstanding:         |       |                    |       |   |   |
| Basic                                        |       | 20,868,481              |       | 20,856,009 |   |
| Diluted                                      |       | 20,996,910              |       | 21,372,672 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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**Integrated Management Information, Inc.**

**Statementsof Operations**

**(Unaudited)**

 
| ** **                                           | ** ** | **Year to Date Period ended** | ** ** |
|------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                           | ** ** | **Sept 30,**                  | ** ** | **Sept 30,** | ** ** |
| ** **                                           | ** ** | **2009**                      | ** ** | **2008** | ** ** |
|                                                 |       |                          |       |   |   |
| Revenues                                             |       | $                             | 1,901,941  |   | $ | 1,768,308 |   |
| Costs of revenues                                    |       | 964,935                       |       | 779,754 |   |
| Gross profit                                         |       | 937,006                       |       | 988,554 |   |
| Selling, general and administrative expenses         |       | 957,505                       |       | 1,121,697 |   |
| Gain on sale of equipment                            |       | (4,000                        | )          | (366,991 | ) |
| Income from operations                               |       | (16,499                       | )          | 233,848 |   |
| Other expense (income):                              |       |                          |       |   |   |
| Interest expense                                     |       | 26,462                        |       | 25,075 |   |
| Other income, net                                    |       | (644                          | )          | (2,135 | ) |
| Income (loss) before income taxes                    |       | (42,317                       | )          | 210,908 |   |
| Income taxes                                         |       | —                        |       | — |   |
| Income (loss) from continuing operations             |       | (42,317                       | )          | 210,908 |   |
| Loss from discontinued operations                    |       | —                        |       | (67,733 | ) |
| Net income (loss)                                    |       | $                             | (42,317    | ) | $ | 143,175 |   |
|                                                 |       |                          |       |   |   |
| Income (loss) per share from continuing  operations: |       |                          |       |   |   |
| Basic                                                |       | $                             | —     |   | $ | 0.01 |   |
| Diluted                                              |       | $                             | —     |   | $ | 0.01 |   |
|                                                 |       |                          |       |   |   |
| Loss per share from discontinued operations:         |       |                          |       |   |   |
| Basic                                                |       | $                             | —     |   | $ | — |   |
| Diluted                                              |       | $                             | —     |   | $ | — |   |
|                                                 |       |                          |       |   |   |
| Weighted average shares outstanding:                 |       |                          |       |   |   |
| Basic                                                |       | 20,868,859                    |       | 20,583,331 |   |
| Diluted                                              |       | 20,868,859                    |       | 20,646,214 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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**Integrated Management Information, Inc.**

**Statementsof Cash Flows**

**(Unaudited)**

 
| ** **                                                                   | ** ** | **Year to Date Period ended Sept 30,** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                   | ** ** | **2009**                               | ** ** | **2008** | ** ** |
| Operating activities:                                                        |       |                                   |       |   |   |
| Net income (loss)                                                            |       | $                                      | (42,317    | ) | $ | 143,175 |   |
| Adjustments to reconcile net loss to net cash used  in operating activities: |       |                                   |       |   |   |
| Depreciation and amorization                                                 |       | 39,525                                 |       | 38,080 |   |
| Stock based compensation expense                                             |       | 27,568                                 |       | 5,716 |   |
| Provision for doubtful accounts                                              |       | 12,722                                 |       | 4,146 |   |
| Amortization under advertising rights                                        |       | —                                 |       | 5,000 |   |
| Loss (gain) on sale/disposal of equipment                                    |       | (4,000                                 | )          | 4,709 |   |
| Gain on sale of online businesses                                            |       | —                                 |       | (366,991 | ) |
| Changes in assets and liabilities:                                           |       |                                   |       |   |   |
| Accounts receivable                                                          |       | 71,086                                 |       | (349,831 | ) |
| Inventories                                                                  |       | 14,350                                 |       | 6,166 |   |
| Prepaid expenses and other current assets                                    |       | 24,209                                 |       | (13,787 | ) |
| Accounts payable                                                             |       | (15,560                                | )          | 11,604 |   |
| Accrued expenses and other current liabilities                               |       | (15,408                                | )          | 2,520 |   |
| Deferred revenue                                                             |       | —                                 |       | (5,750 | ) |
| Net cash provided by (used in) operating activites                           |       | 112,175                                |       | (515,243 | ) |
|                                                                         |       |                                   |       |   |   |
| Investing activities:                                                        |       |                                   |       |   |   |
| Acquisition of property and equipment                                        |       | (95,471                                | )          | (45,521 | ) |
| Proceeds from sale of online businesses                                      |       | —                                 |       | 800,000 |   |
| Proceeds from sale of equipment                                              |       | 4,000                                  |       | 800 |   |
| Net cash provided by (used in) investing  activities                         |       | (91,471                                | )          | 755,279 |   |
|                                                                         |       |                                   |       |   |   |
| Financing activities:                                                        |       |                                   |       |   |   |
| Proceeds from line of credit                                                 |       | —                                 |       | 38,000 |   |
| Repayments on line of credit                                                 |       | —                                 |       | (108,000 | ) |
| Proceeds from Notes Payable                                                  |       | 89,964                                 |       | — |   |
| Repayment under Notes Payable                                                |       | (18,595                                | )          | (350,000 | ) |
| Proceeds from issuance of common stock                                       |       | —                                 |       | 125,000 |   |
| Stock repurchase under Buyback Program                                       |       | (765                                   | )          | (13,690 | ) |
| Net cash provided by (used in) financing  activities                         |       | 70,604                                 |       | (308,690 | ) |
| Net change in cash and cash equivalents                                      |       | 91,308                                 |       | (68,654 | ) |
| Cash and cash equivalents at beginning of year                               |       | 154,044                                |       | 170,882 |   |
| Cash and cash equivalents at end of year                                     |       | $                                      | 245,352    |   | $ | 102,228 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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**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, 2007                                                  |       | 28,245,506       |       | $           | 28,246     |           | $          | 4,705,679    |       | $          | (3,346,574 | )          | $          | (1,485,000 | ) | $ | (97,649 | ) |
|                                                                               |       |             |       |        |       |           |       |         |       |       |       |       |       |
| Stock repurchase of 57,200 shares on the open  market                              |       | —           |       | —      |       | —         |       | —       |       | (16,124    | )          | (16,124    | )          |
| Stock-based compensation expense                                                   |       | —           |       | —      |       | 3,410          |       | —       |       | —     |       | 3,410      |       |
| Issuance of common stock in connection with a  private placement in July 2008 |       | 916,000          |       | 916         |       | 124,084        |       | —       |       | —     |       | 125,000    |       |
| Exercise of stock options                                                          |       | 17,500           |       | 17          |       | 2,957          |       | —       |       | —     |       | 2,974      |       |
| Retirement of treasury stock                                                       |       | (8,250,000       | )          | (8,250      | )          | (1,476,750     | )          | —       |       | 1,485,000  |       | —     |       |
| Net income                                                                         |       | —           |       | —      |       | —         |       | 149,658      |       | —     |       | 149,658    |       |
| Balance at December 31, 2008                                                  |       | 20,929,006       |       | $           | 20,929     |           | $          | 3,359,380    |       | $          | (3,196,916 | )          | $          | (16,124 | ) | $ | 167,269 |   |
| Stock repurchase of 3,325 shares on the open  market                               |       | —           |       | —      |       | —         |       | —       |       | (765       | )          | (765       | )          |
| Stock-based compensation expense                                                   |       | —           |       | —      |       | 27,568         |       | —       |       | —     |       | 27,568     |       |
| Net loss                                                                           |       | —           |       | —      |       | —         |       | (42,317      | )          | —     |       | (42,317    | )          |
| Balance at September 30, 2009                                                 |       | 20,929,006       |       | $           | 20,929     |           | $          | 3,386,948    |       | $          | (3,239,233 | )          | $          | (16,889 | ) | $ | 151,755 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

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

 

****BusinessOverview****

 

IntegratedManagement Information, Inc. (“IMI Global,” “IMI,” the “Company,” “our,” “we,”or “us,”) is a leading provider of verification and communication solutions forthe agriculture, livestock and food industry.

 

Weprovide our owned and operated online properties and services which specializein identification and traceability, process, production practice and supplyverification, document control for USDA verification programs and third partyauditing services. We apply information technology to the agriculture,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 andverify sources of beef and other livestock products. In the aftermath of thediscovery of the first case of mad cow disease in the United States inDecember, 2003, many of the largest U.S. beef and other livestock 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 and other livestock products to other countries must participate in apre-approved Quality System Assessment Program so as to have an approved meansof verifying specific product requirements. In response, we were the first todevelop a USDA Quality System Assessment document management system forauditing the tracking systems used by beef and other livestock producers toverify source and age. We introduced our USVerified Source and Age Verificationsystem in 2005, and over the years we have continued to enhance and furtherdevelop programs to address other verification needs including, but not limitedto, non-hormone treated cattle (NHTC) and humane handling marketing claims.More recently, we worked with compliance programs, and marketing approaches inadvance of completion of the country of origin labeling (COOL) legislation’sfinal rule, requiring meat retailers to display the country of origin on theirmeat and produce labels. In March 2009, we introduced our VerifiedGreenTMVerification program. This program caters to producers and consumers who arecommitted to reducing their carbon footprint. Such a program is expected toappeal to forward-thinking producers and retailers who are both environmentallyconscious and looking for a marketing edge as well as to consumers who want tosupport producers practicing good environmental stewardship.

 

****InterimFinancial Statements****

 

****Theaccompanying unaudited condensed financial statements have been preparedpursuant to the rules and regulations of the Securities and ExchangeCommission (SEC) and should be read in conjunction with our audited financialstatements and footnotes thereto for the year ended December 31, 2008included in our Form 10-K filed on March 31, 2009. 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 and regulations.However, we believe that the disclosures are adequate to make the informationpresented not misleading.****

 

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**** ****

**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

**** ****

****Thefinancial statements reflect all adjustments (consisting primarily of normalrecurring adjustments) that are, in the opinion of management necessary for afair presentation of our financial position and results of operations. Theoperating results for the three and nine months ended September 30, 2009are not necessarily indicative of the results to be expected for any otherinterim period of any future year.****

 

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

 

**Note 2- Asset Sale and Discontinued Operations**

 

OnJuly 15, 2008, we completed the sale (the “asset sale”) of threewholly-owned online businesses — CattleNetwork, CattleStore and AgNetwork — toVance Publishing Corp. (“Vance”), a privately held provider of print andelectronic media with a strong presence in the agricultural industry.  The transaction included $800,000 in cash andlong term advertising rights for placements in Vance’s industry leadingpublications, including Drover’s, Pork, Bovine Veterinarian and Dairy HerdManagement, over a three year period. The assets sold in the transactionprimarily represented all of the goodwill and intangible assets recorded on thebalance sheet. We sold the assets at a substantial premium to the originalpurchase in 2005 and recorded a gain on sale of approximately $358,000 in 2008.

 

****Note3 - Basic and Diluted Income (Loss) per Share****

 

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

 

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

 
| ** **                                      | ** ** | **Third Quarter ended** | ** ** | **Year to Date Period ended** | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|-------------------------------|------------|
| ** **                                      | ** ** | **Sept 30,**            | ** ** | **Sept 30,**                  | ** ** | **Sept 30,** | ** ** | **Sept 30,** | ** ** |
| ** **                                      | ** ** | **2009**                | ** ** | **2008**                      | ** ** | **2009** | ** ** | **2008** | ** ** |
| Basic:                                          |       |                    |       |                          |       |   |   |   |   |
| Weighted average shares outstanding             |       | 20,868,481              |       | 20,856,009                    |       | 20,868,859 |   | 20,583,331 |   |
|                                            |       |                    |       |                          |       |   |   |   |   |
| Diluted:                                        |       |                    |       |                          |       |   |   |   |   |
| Weighted average shares outstanding             |       | 20,868,481              |       | 20,856,009                    |       | 20,868,859 |   | 20,583,331 |   |
| Weighted average effects of dilutive securities |       | 128,429                 |       | 516,663                       |       | — |   | 62,883 |   |
| Total                                           |       | 20,996,910              |       | 21,372,672                    |       | 20,868,859 |   | 20,646,214 |   |
|                                            |       |                    |       |                          |       |   |   |   |   |
| Antidilutive securities:                        |       | 7,062,810               |       | 10,460,310                    |       | 8,831,310 |   | 10,460,310 |   |

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

****Note4 - Stock-Based Compensation****

 

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

 
| ** **                           | ** ** | ** **           | ** ** | ** **         | ** ** | ** **        | ** ** | **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, 2008  |       | 10,548,810           |       | $                  | 1.51       |              | $          | 0.03                 |       | 1.78                |       |   |   |
| Granted                              |       | —               |       | $                  | —     |              | $          | —               |       | —              |       |   |   |
| Exercised                            |       | —               |       | $                  | —     |              | $          | —               |       | —              |       |   |   |
| Canceled                             |       | (1,717,500           | )          | $                  | 0.97       |              | $          | 0.14                 |       | 0.01                |       |   |   |
| Outstanding, September 30, 2009 |       | 8,831,310            |       | $                  | 1.62       |              | $          | 0.01                 |       | 1.35                |       | $ | 31,285 |   |
| Exercisable, September 30, 2009 |       | 7,303,810            |       | $                  | 1.41       |              | $          | 0.01                 |       | 1.36                |       | $ | 27,160 |   |

 

Theaggregate intrinsic value represents the total pre-tax intrinsic value (theaggregate difference between the closing price of our common stock on September 30,2009 and the exercise price for the in-the-money options) that would have beenreceived by the option holders if all the in-the-money options had beenexercised on September 30, 2009.

 

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

 
| ** **                                  | ** ** | **For the Quarter ended** | ** ** | **For the Year to Date Period ended** | ** ** |
|---------------------------------------------|------------|---------------------------|------------|---------------------------------------|------------|
| ** **                                  | ** ** | **Sept 30,**              | ** ** | **Sept 30,**                          | ** ** | **Sept 30,** | ** ** | **Sept 30,** | ** ** |
| ** **                                  | ** ** | **2009**                  | ** ** | **2008**                              | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                        |       |                      |       |                                  |       |   |   |   |   |
| Expected life of options from date of grant |       | N/A                       |       | 3.0 years                             |       | N/A |   | 3.0 years |   |
| Risk free interest rate                     |       | N/A                       |       | 2.8 - 2.9%                            |       | N/A |   | 2.5 - 2.9% |   |
| Expected volatility                         |       | N/A                       |       | 35.9%                                 |       | N/A |   | 35.9% |   |
| Assumed dividend yield                      |       | N/A                       |       | 0.0%                                  |       | N/A |   | 0.0% |   |

 

Nostock options have been granted during the year to date period ended September 30,2009.

 

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

 

Ourstock-based compensation cost for the third quarters ended September 30,2009 and 2008 was $640 and $2,000, respectively, and has been included ingeneral and administrative expenses. Stock-based compensation cost for the yearto date periods ended September 30, 2009 and 2008 was $27,568 and $5,716,respectively. No tax benefits were recognized for these costs due to ourcumulative losses as well as a full valuation reserve on our deferred taxassets.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

**Note 5- Stock Buyback Plan**

 

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

 

Asof June 30, 2009, we have repurchased 60,525 shares at an average price of$0.26 per share. Total cash consideration for the repurchased shares was$16,889. The repurchased shares are recorded as part of treasury stock and areaccounted for under the cost method.

 

****Note6 — Income Taxes****

 

Deferredtax assets and liabilities have been determined based upon the differencesbetween the financial statement amounts and the tax bases of assets andliabilities as measured by enacted tax rates expected to be in effect whenthese differences are expected to reverse. In assessing the reliability ofdeferred tax assets, management considers whether it is more likely than notthat some portion or all of the deferred tax assets will not be realized. Ournet operating loss carry forwards are the most significant component of ourdeferred income tax assets; however, the ultimate realization of our deferredincome tax assets is dependent upon generation of future taxable income. Weconsider past history, the scheduled reversal of taxable temporary differences,projected future taxable income, and tax planning strategies in making thisassessment. As of September 30, 2009 and December 31, 2008, webelieve it is more likely than not that our net deferred tax asset will not berealized 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. As we move closer towards achieving net income for a full year, we willreview qualitative and quantitative data, including events within our industry,the nature of our business, our future forecasts and historical trending. If weconclude that our prospects for the realization of our deferred tax assets aremore likely than not, we will then reduce our valuation allowance asappropriate and credit income tax expense after considering the followingfactors:

 

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

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

 

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

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

****Note7 - Notes Payable****

 

Notespayable consist of the following:

 
| ** **                                                      | ** ** | **September 30,** | ** **    | **December 31,** | ** ** |
|-----------------------------------------------------------------|------------|------------------------|---------------|-----------------------|------------|
| ** **                                                      | ** ** | **2009**               | ** **    | **2008**              | ** ** |
|                                                            |       |                   |          |                  |       |
| Equipment Note Payable                                          |       | $                      | 31,369        |                  | $          | — |   |
| Lapaesotes Note Payable                                         |       | 340,000                |          | 300,000               |       |
|                                                            |       | $                      |  371,369 |                  | $          | 300,000 |   |
| Less current portion of notes payable and other  long-term debt |       | 8,309                  |          | —                |       |
| Notes payable and other long-term debt                          |       | $                      | 363,060       |                  | $          | 300,000 |   |

 

**EquipmentNote Payable**

 

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

 

**LapaseotesNote Payable**

 

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

 

****Note8 - Related Party Transactions****

 

Aspreviously discussed in Note 7, we have unsecured debt payable to a majorshareholder who is related to Pete Lapaseotes, a director.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

****Note9 - 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, 2009, the annual primary lease payments are as follows:

 

| **Years Ending December 31,** | ** ** | **Amount** | ** ** |
|------------------------------------|------------|------------|------------|
| 2009                               |       | 11,970     |       |
| 2010                               |       | 47,326     |       |
| 2011                               |       | 48,509     |       |
| 2012                               |       | 24,554     |       |
| Thereafter                         |       | —     |       |
| Total lease commitments            |       | $          | 132,359    |   |
|                                    |            |            |            |  |

 

Welease a copier machine which requires a base rent of $375.00 per month or$4,500 annually. The lease expires in 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**

 

**Other**

 

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

 

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

 

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

 

****Note10 - Liquidity****

 

Historically,our growth has been funded through a combination of convertible debt from privateinvestors and private placement offerings. We continually evaluate all fundingoptions including additional offerings of our securities to private, public andinstitutional investors and other credit facilities as they become available.

 

Theprimary driver of our operating cash flow is our third-party verificationsolutions, specifically the gross margin generated from services provided.Therefore we focus on the elements of those operations including revenue growthand long term projects that ensure a steady stream of operating profits toenable us to meet our cash obligations. On a weekly basis we review theperformance of each of our revenue streams focusing on third party verificationsolutions compared with prior periods and our operating plan. Based on thecontinued sales growth, ****overall improvement in our performance and our ability to secureadditional financing, we believe that we have sufficient cash on hand toexecute our current Business Plan a****lthough we cangive no assurance****. The culmination of all our efforts has brought opportunities to usincluding: increased investor confidence and renewed interest in our company,third-party interest in our expertise to develop and enhance websites, as wellas the potential to develop business relationships with long term strategicpartners. In keeping with our core business, we will continue to review ourbusiness model with a focus on profitability, long term capital solutions andthe potential impact of acquisitions or divestitures, if such an opportunityarises.****

 

**Note 11- Recent Accounting Pronouncements**

 

InMay 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165) codifiedas FASB Accounting Standards Codification Topic 855 (ASC 855).  SFAS 165 establishes general standards foraccounting for and disclosure of events that occur after the balance sheet datebut before financial statements are available to be issued (subsequent events).More specifically, SFAS 165 sets forth the period after the balance sheet dateduring which management of a reporting entity should evaluate events ortransactions that may occur for potential recognition in the financialstatements, identifies the circumstances under which an entity should recognizeevents or transactions occurring after the balance sheet date in its financialstatements and the disclosures that should be made about events or transactionsthat occur after the balance sheet date. SFAS 165 provides largely the same guidance on subsequent events whichpreviously existed only in auditing literature. We have adopted SFAS 165 and it did not have an impact on our financialstatements.

 

InJune 2009, the Financial Accounting Standards Board (the “FASB”) issuedStatement of Financial Accounting Standards (“SFAS”) No. 168, “The FASBAccounting Standards Codification and the Hierarchy of Generally AcceptedAccounting Principles (“GAAP”), a replacement of FASB Statement No. 162”codified as FASB ASC Topic 105. All existing accounting standard documents aresuperseded by the Codification, which does not change or alter existing GAAP.Since we have adopted SFAS No. 168, any references to GAAP included in ourhistorical public filings with the SEC are no longer included in the Company’sfilings. The adoption of SFAS No. 168 had no impact on our financialstatements.

 

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

 

**Note 12 – Subsequent Events**

 

We have evaluated all subsequent eventsthrough November 12, 2009, the date this Quarterly Report on Form 10-Q wasfiled with the SEC. No material subsequentevents have occurred since September 30, 2009 that required recognition or disclosurein these financial statements.

 

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**** ****

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

 

****BusinessOverview****

 

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

 

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

 

Westand at the forefront of a rapidly evolving movement to track livestock andverify sources of beef and other livestock products. In the aftermath of thediscovery of the first case of mad cow disease in the United States inDecember, 2003, many of the largest U.S. beef and other livestock 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 and other livestock products to other countries were required toparticipate in a pre-approved Quality System Assessment Program so as to havean approved means of verifying specific product requirements. In response, wewere the first to develop a USDA Quality System Assessment document managementsystem for auditing the tracking systems used by beef and other livestockproducers to verify source and age. We introduced our USVerified Source and AgeVerification system in 2005, and over the years we have continued to enhanceand further develop programs to address other verification needs including, butnot limited to, non-hormone treated cattle (NHTC) and humane handling marketingclaims. More recently, we worked with compliance programs, and marketingapproaches in advance of completion of the country of origin labeling (COOL)legislation’s final rule, requiring meat retailers to display the country oforigin on their meat and produce labels. In March 2009, we introduced ourVerifiedGreenTM Verification program. This program caters to producers andconsumers who are committed to reducing their carbon footprint. Such a programis expected to appeal to forward-thinking producers and retailers who are bothenvironmentally conscious and looking for a marketing edge as well as toconsumers who want to support producers practicing good environmentalstewardship.

 

**CurrentMarketplace Conditions**

 

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

 

·              In September 2009, theDemocratic 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 protectionists innature, the current agreement for supplying Japan—cattle must be age verifiedas 20 months of age or 

 

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less—willstay intact. This sets the stage for continued growth in IMI’s third partysource and age verification services. This was evidenced by a 30% growth inthird quarter for cow/calf verification services.

 

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

 

·              With increased consumerconsciousness generated by movies such as “Food, Inc.” and Time Magazine’sAugust 2009 cover article “The Real Cost of Cheap Food”, consumers arelooking for answers to questions including food production practices andoverall food safety and regulation. Additionally, there has been a shift inattitude within the new administration that is uniquely positioning theagricultural 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.

 

**Seasonality**

 

Ourbusiness is subject to seasonal fluctuations. Significant portions of ourrevenues are typically realized during the second and fourth 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.

 

****Liquidityand Capital Resources****

 

AtSeptember 30, 2009, we had cash and cash equivalents of $245,352 comparedto $154,044 of cash and cash equivalents at December 31, 2008. Our workingcapital at September 30, 2009 was $379,501 compared to $387,901 at December 31,2008.

 

Netcash provided by operating activities for the year to date period ended September 30,2009 was $112,175 compared to $515,243 net cash used by operating activitiesduring the same period in 2008. Cash used by operating activities (continuingand discontinued operations) is driven by our net loss and adjusted by non-cashitems. Non-cash adjustments primarily include depreciation, amortization ofintangible assets and stock based compensation expense. The improvement was primarilydriven by the timing of cash receipts and cash disbursements.

 

Netcash used in investing activities of $91,471 for the year to date period ended September 30,2009 is primarily attributable to capital expenditures. Our capitalexpenditures were $95,471 and $45,521 for the year to date periods ended September 30,2009 and 2008, respectively. Our capital expenditures are primarily related topurchases and internal development of information technology assets to supportour product and service offerings. As we anticipate continued growth, weexpect to continue investing additional capital in our information technologyassets. Net cash provided by investing activities of $755,279 for the year todate period ended September 30, 2008 was primarily due to the sale of theonline businesses during third quarter 2008.

 

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Netcash provided by financing activities of $70,604 during the year to date periodended September 30, 2009 was primarily related to $50,000 additionalfinancing acquired under an existing note payable and approximately $40,000 innew debt acquired in connection with the acquisition of equipment. Net cashused in financing activities of $308,690 during the year to date period ended September 30,2008 was primarily related to the repayment of the CattleNetwork Note Payable.

 

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

 

Theprimary driver of our operating cash flow is our third-party verificationsolutions, specifically the gross margin generated from services provided.Therefore we focus on the elements of those operations including revenue growthand long term projects that ensure a steady stream of operating profits toenable us to meet our cash obligations. On a weekly basis we review theperformance of each of our revenue streams focusing on third party verificationsolutions compared with prior periods and our operating plan. Based on thecontinued sales growth, ****overall improvement in our performance and our ability to secureadditional financing, we believe that we have sufficient cash on hand toexecute our current Business Plan a****lthough we cangive no assurance****.****The culmination of all our efforts hasbrought opportunities to us ****including: increased investor confidence and renewed interest in ourcompany,**** third-party interest in our expertise todevelop and enhance websites, as well as the potential to develop business relationshipswith long term strategic partners. In keeping with our core business, we willcontinue to review our business model with a focus on profitability, long termcapital solutions and the potential impact of acquisitions or divestitures, ifsuch an opportunity arises.

 

Ourplan for continued growth is primarily based upon intensifying our focus oninternational markets. We believe that there are significant growthopportunities available to us because often the only way to access variousrestrictions as imposed on international market imports/exports is via aquality verification program, like our USVerifiedTM.com product line.

 

**OffBalance Sheet Arrangements**

 

Asof September 30, 2009, we had no off-balance sheet arrangements of anytype.

 

****RESULTSOF OPERATIONS****

 

****ThirdQuarter and Year to Date Periods ended September 30, 2009 compared to theSame Periods in Fiscal Year 2008****

 

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

 

****Revenues****

 

Revenuesare derived from sales of our USVerified identification and verificationsolutions, consulting services, web-based development and hardware sales.Revenues for the third quarter and year to date period ended September 30,2009 were $778,736 and $1,901,941 compared to $597,262 and $1,768,308, 

 

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respectively.****While the improvement yearto date represents modest growth, we believe it is significant in light of thecurrent economic conditions severely impacting the food industry.****

 

Duringthe third quarter ended September 30, 2009, our third party verificationrevenue, which includes sales of our USVerified solutions and relatedconsulting, program development and web-based development services, increased31.6% to $581,032 compared to $441,564 in the same quarter 2008. For the yearto date period ended September 30, 2009, third party verification revenueincreased 23.1% to $1,536,062 compared to $1,248,150 in the same 2008 period.

 

Forpurposes of analysis of our verification revenue stream as discussed above, wehave not included approximately $214,000 in 2008 year to date revenue relatedto a special grant funded project for premise registrations throughout theUSDA. This project was specific to the years ended 2007 and 2008. Midwaythrough the USDA grant funded project, the USDA re-evaluated the project anddecided to discontinue the project. ****As of September 30, 2009 we have approximately$150,000 in receivables outstanding related to this project that is greaterthan 90 days past due. We believe we will collect the full amount due and accordinglyhave not reserved any portion of the amount outstanding.****

 

Revenuesderived from sales of hardware, primarily sales of cattle identification eartags, increased 29.1% to $191,254 in the third quarter 2009 compared to$148,198 in the third quarter 2008. For the year to date period ended September 30,2009, hardware sales increased 37.1% to $347,339 compared to $253,324 in thesame 2008 period.

 

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

 

Costof sales for the third quarter 2009 was $391,446 compared to $352,152 duringthe third quarter 2008. Gross margin for the third quarter 2009 improved byapproximately 9 basis points to 49.7% of revenues compared to 41% for the thirdquarter 2008. For the year to date period ended September 30, 2009, costof sales was $964,935 compared to $779,754 for the same 2008 period. Grossmargins declined approximately 7 basis points to 49.3% in 2009 compared to55.9% in the same 2008 period.

 

Certainelements of costs of sales are fixed in nature such as salaries and rent.Accordingly, when sales volumes remain relatively constant or decrease during adifficult economic period, cost of sales does not decrease in the sameproportion. Therefore, cost of sales as a percentage of sales may be adverselyaffected by reduced volumes or the impact of inflation.

 

Thedecrease in our gross margins during the year to date period in 2009 comparedto 2008 was partially due to shifts in the sales mix of lower margin hardwareproduct sales coupled with the absorption of certain costs which are generally fixedin nature. More specifically in early 2008, we increased our headcount ofdedicated personnel providing program development and web based developmentservices in connection with our third party verification programs. Due to ourfocus on margins and customer service, we are committed to long term growth andthe scalability of the programs we develop.

 

**Selling,General and Administrative Expenses**

 

Selling,general and administrative expenses for the third quarter 2009 were $308,030, adecrease of $83,282, or 21.3% over the third quarter 2008 amount of $391,312.For the year to date period ended September 30, 2009, expenses decreased$164,192 or 14.6% to $957,505 compared to $1,121,697 for the same year to dateperiod in 2008. The decrease was primarily due to a net reduction in salariesdue to a lesser number of office support personnel offset by adjustments tosalaries for costs of living and annual performance reviews.

 

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**Gain onSale of Online Businesses**

 

OnJuly 15, 2008, we completed the sale (the “asset sale”) of threewholly-owned online businesses — CattleNetwork, CattleStore and AgNetwork — toVance Publishing Corp. (“Vance”), a privately held provider of print andelectronic media with a strong presence in the agricultural industry.  The transaction included $800,000 in cash andlong term advertising rights for placements in Vance’s industry leading publications,including Drover’s, Pork, Bovine Veterinarian and Dairy Herd Management, over athree year period. The assets sold in the transaction primarily represented allof the goodwill and intangible assets recorded on the balance sheet. We soldthe assets at a substantial premium to the original purchase in 2005 andrecorded a gain on sale of approximately $358,000 in 2008.

 

****Income(Loss) from Continuing Operations and per Share information****

 

Asa result of the foregoing, income from continuing operations for the thirdquarter ended September 30, 2009 was $70,396 or less than a penny perbasic and diluted common share, compared to $214,061 or $0.01 per basic anddiluted common share for the third quarter ended September 30, 2008.

 

Lossfrom continuing operations for the year to date period ended September 30,2009 was $42,317 or less than a penny per basic and diluted common share,compared to income from continuing operations of $210,908 or $0.01 per basicand diluted common share for the same period in 2008.

 

****NetIncome (Loss)****

 

Netincome for the third quarter ended September 30, 2009 was $70,396 comparedto $160,990 for the third quarter ended September 30, 2008. For the yearto date period ended September 30, 2009, net loss was $42,317 compared tonet income of $143,175 for the same period ended September 30, 2008.

 

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

 

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

 

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

 

**Stock-BasedCompensation Expense**

 

Calculatingstock-based compensation expense requires the input of highly subjectiveassumptions, including the expected term of the stock-based awards, stock pricevolatility, and the pre-vesting option 

 

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forfeiturerate. We estimate the expected life of options granted based on historicalexercise patterns, which we believe are representative of future behavior. Weestimate the volatility of our common stock on the date of grant based on theimplied volatility of publicly traded options on our common stock, with a termof one year or greater. We believe that implied volatility calculated based onactively traded options on our common stock is a better indicator of expectedvolatility and future stock price trends than historical volatility. Therefore,expected volatility was based on a market-based implied volatility. Theassumptions used in calculating the fair value of stock-based awards representour best estimates, but these estimates involve inherent uncertainties and theapplication of management judgment. As a result, if factors change and we usedifferent assumptions, our stock-based compensation expense could be materiallydifferent in the future. In addition, we are required to estimate the expectedforfeiture rate and only recognize expense for those shares expected to vest.We estimate the forfeiture rate based on historical experience of ourstock-based awards that are granted, exercised and cancelled. If our actualforfeiture rate is materially different from our estimate, the stock-basedcompensation expense could be significantly different from what we haverecorded in the current period.

 

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

 

**Evaluationof Disclosure Controls and Procedures**

 

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

 

**InternalControl Over Financial Reporting**

 

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

 

**Lack ofSegregation of Duties**

 

Managementis aware that there is a lack of segregation of duties at the Company due tothe small number of employees dealing with general administrative and financialmatters. However, at this time management has decided that considering theabilities of the employees now involved and the control procedures in place,the risks associated with such lack of segregation are low and the potentialbenefits of adding employees to clearly segregate duties do not justify thesubstantial expenses associated with such increases. Management 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 2.  UNREGISTERED SALES OFEQUITY SECURITIES AND USE OF PROCEEDS****

 

****None****

 

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

 

****None****

 

****ITEM 4.  SUBMISSION OF MATTERS TOA VOTE OF SECURITY HOLDERS****

 

****None****

 

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

 

****None****

 

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

 

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

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

 

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****SIGNATURES****

 

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

 
| Date:  November 10, 2009 |   | Integrated  Management Information, Inc. |
|-------------------------------|--------|-----------------------------------------------|
|                          |   |                                          | By: | /s/  John K. Saunders |
|                          |   |                                          |   | Chief  Executive Officer |
|                          |   |                                          |   |   |
|                          |   |                                          | By: | /s/  Dannette D. Boyd |
|                          |   |                                          |   | Chief  Financial Officer |

 

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