Table ofContents

 

 

 

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

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

 

**For the Quarterly period ended June 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**

 

**INTEGRATED MANAGEMENT INFORMATION, INC.**

(Name of SmallBusiness Issuer in its charter)

 

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

 

**221Wilcox, Suite A**

**CastleRock, CO 80104**

(Address ofprincipal executive offices, including zip code)

 

Issuer’s telephonenumber, including area code:

**(303)895-3002**

 

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

 

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 duringthe  preceding 12 months (or for suchshorter period that the registrant was required to submit and post such files). Yes o No o

 

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

 

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

 

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 July 27,2009 was 20,868,481.

 

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

 

 

 

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Table of Contents

 

**Integrated Management Information, Inc.**

**Table of Contents**

**June 30, 2009**

 
| ** **                                                                                                                                           | **Page:** |
|------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
|                                                                                                                                                 |      |
| **Part 1 - Financial Information**                                                                                                              |
|                                                                                                                                                 |      |
| Item 1. Financial  Statements:                                                                                                                       |      |
|                                                                                                                                                 |      |
| Balance Sheets  (unaudited), June 30, 2009 and December 31, 2008                                                                           | 3         |
|                                                                                                                                                 |      |
| Statements of Operations (unaudited),  for the second quarter ended June 30, 2009 and 2008                                                      | 4         |
|                                                                                                                                                 |      |
| Statements of  Operations (unaudited), for the year to date periods ended June 30, 2009  and 2008                                               | 5         |
|                                                                                                                                                 |      |
| Statements of  Cash Flows (unaudited), for the year to date periods ended June 30, 2009  and 2008                                               | 6         |
|                                                                                                                                                 |      |
| Statements of Stockholders’ Equity(unaudited), for the  year ended December 31, 2008 and the year to date period ended  June 30, 2009 | 7         |
|                                                                                                                                                 |      |
| Notes to Financial Statements                                                                                                                        | 8         |
|                                                                                                                                                 |      |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations                                                  | 16        |
|                                                                                                                                                 |      |
| Item 3. Controls and Procedures                                                                                                                      | 21        |
|                                                                                                                                                 |      |
| **Part II - Other Information**                                                                                                                 |
|                                                                                                                                                 |      |
| Item  1. Legal Proceedings                                                                                                                           | 22        |
|                                                                                                                                                 |      |
| Item 2. Unregistered Sales of Equity Securities and  Use of Proceeds                                                                                 | 22        |
|                                                                                                                                                 |      |
| Item 3. Defaults upon Senior Securities                                                                                                              | 22        |
|                                                                                                                                                 |      |
| Item 4. Submission of Matters to a Vote of Security  Holders                                                                                         | 22        |
|                                                                                                                                                 |      |
| Item  5. Other Information                                                                                                                           | 22        |
|                                                                                                                                                 |      |
| Item 6.  Exhibits                                                                                                                                    | 22        |

 

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**Integrated Management Information, Inc.**

**Balance Sheets**

**(Unaudited)**

 
| ** **                                                                                                                                                                             | ** ** | **Jun 30,** | ** ** | **Dec 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|
| ** **                                                                                                                                                                             | ** ** | **2009**    | ** ** | **2008**    | ** ** |
| **Assets**                                                                                                                                                                             |
| Current  assets:                                                                                                                                                                       |       |        |       |        |       |
| Cash  and cash equivalents                                                                                                                                                             |       | $           | 128,548    |        | $          | 154,044 |   |
| Accounts  receivable, net of allowance                                                                                                                                                 |       | 378,014     |       | 458,715     |       |
| Inventories                                                                                                                                                                            |       | —      |       | 14,350      |       |
| Prepaid  expenses and other current assets                                                                                                                                             |       | 24,412      |       | 33,073      |       |
| Total  current assets                                                                                                                                                                  |       | 530,974     |       | 660,182     |       |
| Property  and equipment, net                                                                                                                                                           |       | 111,266     |       | 78,275      |       |
| Intangible  assets, net                                                                                                                                                                |       | 874         |       | 1,093       |       |
| Total  assets                                                                                                                                                                          |       | $           | 643,114    |        | $          | 739,550 |   |
|                                                                                                                                                                                   |       |        |       |        |       |
| **Liabilities and Stockholders’  Equity**                                                                                                                                         |
| Current  liabilities:                                                                                                                                                                  |       |        |       |        |       |
| Accounts  payable                                                                                                                                                                      |       | $           | 125,536    |        | $          | 218,843 |   |
| Accrued  expenses and other current liabilities                                                                                                                                        |       | 53,496      |       | 53,438      |       |
| Current  portion of notes payable                                                                                                                                                      |       | 8,154       |       | —      |       |
| Total  current liabilities                                                                                                                                                             |       | 187,186     |       | 272,281     |       |
| Notes  payable and other long-term debt                                                                                                                                                |       | 375,209     |       | 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                                                                                                                                                            |       | 3,386,308   |       | 3,359,380   |       |
| Treasury  stock of 60,525 and 57,200 shares, respectively                                                                                                                              |       | (16,889     | )          | (16,124     | )          |
| Accumulated  deficit                                                                                                                                                                   |       | (3,309,629  | )          | (3,196,916  | )          |
| Total  stockholders’ equity                                                                                                                                                       |       | 80,719      |       | 167,269     |       |
| Total  liabilities and stockholders’ equity                                                                                                                                       |       | $           | 643,114    |        | $          | 739,550 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Integrated Management Information, Inc.**

**Statements of Operations**

**(Unaudited)**

 
| ** **                                           | ** ** | **Second Quarter ended** | ** ** |
|------------------------------------------------------|------------|--------------------------|------------|
| ** **                                           | ** ** | **June 30,**        | ** ** | **June 30,** | ** ** |
| ** **                                           | ** ** | **2009**                 | ** ** | **2008** | ** ** |
|                                                 |       |                     |       |   |   |
| Revenues                                             |       | $                        | 645,880    |   | $ | 633,716 |   |
| Costs  of revenues                                   |       | 294,393                  |       | 221,277 |   |
| Gross  profit                                        |       | 351,487                  |       | 412,439 |   |
| Selling,  general and administrative expenses        |       | 293,168                  |       | 340,724 |   |
| Gain  on sale of equipment                           |       | —                   |       | — |   |
| Income  from operations                              |       | 58,319                   |       | 71,715 |   |
| Other  expense (income):                             |       |                     |       |   |   |
| Interest  expense                                    |       | 9,187                    |       | 8,959 |   |
| Other  income, net                                   |       | (133                     | )          | (115 | ) |
| Income  (loss) before income taxes                   |       | 49,265                   |       | 62,871 |   |
| Income  taxes                                        |       | —                   |       | — |   |
| Income  (loss) from continuing operations            |       | 49,265                   |       | 62,871 |   |
| Loss  from discontinued operations                   |       | —                   |       | (20,137 | ) |
| Net  income (loss)                                   |       | $                        | 49,265     |   | $ | 42,734 |   |
|                                                 |       |                     |       |   |   |
| Income  (loss) per share from continuing operations: |       |                     |       |   |   |
| Basic                                                |       | $                        | —     |   | $ | — |   |
| Diluted                                              |       | $                        | —     |   | $ | — |   |
|                                                 |       |                     |       |   |   |
| Loss  per share from discontinued operations:        |       |                     |       |   |   |
| Basic                                                |       | $                        | —     |   | $ | — |   |
| Diluted                                              |       | $                        | —     |   | $ | — |   |
|                                                 |       |                     |       |   |   |
| Weighted  average shares outstanding:                |       |                     |       |   |   |
| Basic                                                |       | 20,868,481               |       | 19,984,506 |   |
| Diluted                                              |       | 20,956,251               |       | 20,047,389 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Integrated Management Information, Inc.**

**Statements of Operations**

**(Unaudited)**

 
| ** **                                           | ** ** | **Year to Date Period ended** | ** ** |
|------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                           | ** ** | **June 30,**             | ** ** | **June 30,** | ** ** |
| ** **                                           | ** ** | **2009**                      | ** ** | **2008** | ** ** |
|                                                 |       |                          |       |   |   |
| Revenues                                             |       | $                             | 1,123,205  |   | $ | 1,171,046 |   |
| Costs  of revenues                                   |       | 573,489                       |       | 427,603 |   |
| Gross  profit                                        |       | 549,716                       |       | 743,443 |   |
| Selling,  general and administrative expenses        |       | 649,475                       |       | 730,385 |   |
| Gain  on sale of equipment                           |       | (4,000                        | )          | — |   |
| Income  from operations                              |       | (95,759                       | )          | 13,058 |   |
| Other  expense (income):                             |       |                          |       |   |   |
| Interest  expense                                    |       | 17,348                        |       | 17,472 |   |
| Other  income, net                                   |       | (394                          | )          | (1,260 | ) |
| Income  (loss) before income taxes                   |       | (112,713                      | )          | (3,154 | ) |
| Income  taxes                                        |       | —                        |       | — |   |
| Income  (loss) from continuing operations            |       | (112,713                      | )          | (3,154 | ) |
| Loss  from discontinued operations                   |       | —                        |       | (14,662 | ) |
| Net  income (loss)                                   |       | $                             | (112,713   | ) | $ | (17,816 | ) |
|                                                 |       |                          |       |   |   |
| 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                                                |       | 20,869,050                    |       | 19,988,797 |   |
| Diluted                                              |       | 20,869,050                    |       | 19,988,797 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Integrated Management Information, Inc.**

**Statements of Cash Flows**

**(Unaudited)**

 
| ** **                                                                   | ** ** | **Year to Date Period ended June 30,** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                   | ** ** | **2009**                                    | ** ** | **2008** | ** ** |
| Operating  activities:                                                       |       |                                        |       |   |   |
| Net  loss                                                                    |       | $                                           | (112,713   | ) | $ | (17,816 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |       |                                        |       |   |   |
| Depreciation  and amorization                                                |       | 25,923                                      |       | 24,270 |   |
| Stock  based compensation expense                                            |       | 26,928                                      |       | 3,717 |   |
| Provision  for doubtful accounts                                             |       | 12,722                                      |       | 1,000 |   |
| Gain  on sale of equipment                                                   |       | (4,000                                      | )          | — |   |
| Changes  in assets and liabilities:                                          |       |                                        |       |   |   |
| Accounts  receivable                                                         |       | 67,978                                      |       | (212,002 | ) |
| Inventories                                                                  |       | 14,350                                      |       | 3,697 |   |
| Prepaid  expenses and other current assets                                   |       | 8,661                                       |       | 23,534 |   |
| Accounts  payable                                                            |       | (93,307                                     | )          | 60,037 |   |
| Accrued  expenses and other current liabilities                              |       | 58                                          |       | 24,249 |   |
| Deferred  revenue                                                            |       | —                                      |       | (5,750 | ) |
| Net  cash used in operating activites                                        |       | (53,400                                     | )          | (95,064 | ) |
|                                                                         |       |                                        |       |   |   |
| Investing  activities:                                                       |       |                                        |       |   |   |
| Acquisition  of property and equipment                                       |       | (58,695                                     | )          | (34,731 | ) |
| Proceeds  from sale of equpment                                              |       | 4,000                                       |       | 500 |   |
| Net  cash used in investing activities                                       |       | (54,695                                     | )          | (34,231 | ) |
|                                                                         |       |                                        |       |   |   |
| Financing  activities:                                                       |       |                                        |       |   |   |
| Proceeds  from line of credit                                                |       | —                                      |       | 24,000 |   |
| Proceeds  from Notes Payable                                                 |       | 89,964                                      |       | — |   |
| Repayment  under Notes Payable                                               |       | (6,600                                      | )          | — |   |
| Stock  repurchase under Buyback Program                                      |       | (765                                        | )          | (1,728 | ) |
| Net  cash provided by financing activities                                   |       | 82,599                                      |       | 22,272 |   |
| Net  change in cash and cash equivalents                                     |       | (25,496                                     | )          | (107,023 | ) |
| Cash  and cash equivalents at beginning of year                              |       | 154,044                                     |       | 170,882 |   |
| Cash  and cash equivalents at end of year                                    |       | $                                           | 128,548    |   | $ | 63,859 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Integrated Management Information, Inc.**

**Statements of Stockholders’ Equity**

**(Unaudited)**

 
| ** **                                                                         | ** ** | ** **       | ** ** | ** **  | ** ** | **Additional** | ** ** | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------|------------|-------------|------------|----------------|------------|--------------|------------|------------|------------|------------|------------|
| ** **                                                                         | ** ** | **Common Stock** | ** ** | **Paid-in** | ** ** | **Retained**   | ** ** | **Treasury** | ** ** | ** ** | ** ** |
| ** **                                                                         | ** ** | **Shares**       | ** ** | **Amount**  | ** ** | **Capital**    | ** ** | **Deficit**  | ** ** | **Stock**  | ** ** | **Total**  | ** ** |
| Balance at  December 31, 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                                                  |       | —           |       | —      |       | 26,928         |       | —       |       | —     |       | 26,928     |       |
| Net loss                                                                           |       | —           |       | —      |       | —         |       | (112,713     | )          | —     |       | (112,713   | )          |
| Balance at June 30,  2009                                                     |       | 20,929,006       |       | $           | 20,929     |           | $          | 3,386,308    |       | $          | (3,309,629 | )          | $          | (16,889 | ) | $ | 80,719 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

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

 

****BusinessOverview****

 

IntegratedManagement Information, Inc. (“IMI Global,” “IMI,” the “Company,” “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, create theirown premium brand identity, gain cost efficiencies and command a higher pricefor 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.

 

****Basisof Presentation****

 

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

 

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**Integrated Management Information, Inc.**

**Notesto the Financial Statements**

 

**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:

 
| ** **                                       | ** ** | **Second Quarter ended** | ** ** | **Year to Date Period ended** | ** ** |
|--------------------------------------------------|------------|--------------------------|------------|-------------------------------|------------|
| ** **                                       | ** ** | **June 30,**        | ** ** | **June 30,**             | ** ** | **June 30,** | ** ** | **June 30,** | ** ** |
| ** **                                       | ** ** | **2009**                 | ** ** | **2008**                      | ** ** | **2009** | ** ** | **2008** | ** ** |
| Basic:                                           |       |                     |       |                          |       |   |   |   |   |
| Weighted  average shares outstanding             |       | 20,868,481               |       | 19,984,506                    |       | 20,869,050 |   | 19,988,797 |   |
|                                             |       |                     |       |                          |       |   |   |   |   |
| Diluted:                                         |       |                     |       |                          |       |   |   |   |   |
| Weighted  average shares outstanding             |       | 20,868,481               |       | 19,984,506                    |       | 20,869,050 |   | 19,988,797 |   |
| Weighted  average effects of dilutive securities |       | 87,770                   |       | 62,883                        |       | — |   | — |   |
| Total                                            |       | 20,956,251               |       | 20,047,389                    |       | 20,869,050 |   | 19,988,797 |   |
|                                             |       |                     |       |                          |       |   |   |   |   |
| Antidilutive  securities:                        |       | 7,062,810                |       | 10,410,310                    |       | 8,831,310 |   | 10,665,310 |   |

 

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**Integrated Management Information, Inc.**

**Notesto 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,  June 30, 2009     |       | 8,831,310            |       | $                   | 1.62       |               | $          | 0.01                  |       | 1.60                 |       | $ | 31,285 |   |
| Exercisable,  June 30, 2009     |       | 7,135,188            |       | $                   | 1.44       |               | $          | 0.01                  |       | 1.60                 |       | $ | 23,807 |   |

 

Theaggregate intrinsic value represents the total pre-tax intrinsic value (theaggregate difference between the closing price of our common stock on June 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 June 30, 2009.

 

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

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

 

Nostock options were granted during the year to date period ended June 30,2009 or the second quarter ended June 30, 2008.

 

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 second quarters ended June 30, 2009and 2008 was $15,779 and $884, respectively, and has been included in generaland administrative expenses. Stock-based compensation cost for the year to dateperiods ended June 30, 2009 and 2008 was $26,978 and $3,717,

 

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**Integrated Management Information, Inc.**

**Notesto the Financial Statements**

 

respectively.No tax benefits were recognized for these costs due to our cumulative losses aswell as a full valuation reserve on our deferred tax assets.

 

**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 June 30, 2009 and December 31, 2008, we believe itis more likely than not that our net deferred tax asset will not be realizedand accordingly we have recorded a valuation allowance against the deferred taxassets.

 

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

 

·                  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.**

**Notesto the Financial Statements**

 

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

 

Notespayable consist of the following:

 
| ** **                                                      | ** ** | **June 30,** | ** **    | **December 31,** | ** ** |
|-----------------------------------------------------------------|------------|-------------------|---------------|-----------------------|------------|
| ** **                                                      | ** ** | **2009**          | ** **    | **2008**              | ** ** |
|                                                            |       |              |          |                  |       |
| Equipment  Note Payable                                         |       | $                 | 33,363        |                  | $          | — |   |
| Lapaesotes  Note Payable                                        |       | 350,000           |          | 300,000               |       |
|                                                            |       | $                 |  383,363 |                  | $          | 300,000 |   |
| Less  current portion of notes payable and other long-term debt |       | 8,154             |          | —                |       |
| Notes  payable and other long-term debt                         |       | $                 | 375,209       |                  | $          | 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 $350,000 payable of unsecured debtpayable to a major shareholder who is related to Pete Lapaseotes, a director.

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

****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 June 30, 2009, the annual primary lease payments are as follows:

 
| **Years  Ending December 31,** | ** ** | **Amount** | ** ** |
|-------------------------------------|------------|------------|------------|
| 2009                                |       | 23,370     |       |
| 2010                                |       | 47,326     |       |
| 2011                                |       | 48,509     |       |
| 2012                                |       | 24,554     |       |
| Thereafter                          |       | —     |       |
| Total  lease commitments            |       | $          | 143,759    |   |
|                                     |            |            |            |  |

 

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. There was no adjustment to Mrs. Saundersannual salary.

 

**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 United StatesPatent 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 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 abilityto secure additional financing, we believe that we have sufficient cash on handto execute our current Business Plan although we can give no assurance.****The culmination of allour efforts has brought opportunities to us including: increased investorconfidence and renewed interest in our company, third-party interest in ourexpertise to develop and enhance websites, as well as the potential to developbusiness relationships with long term strategic partners. In keeping with ourcore business, we will continue to review our business model with a focus onprofitability, long term capital solutions and the potential impact ofacquisitions or divestitures, if such an opportunity arises.****

 

**Note 11- Recent Accounting Pronouncements**

 

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

 

Weadopted SFAS No. 159, The Fair Value Option for Financial Assets andFinancial Liabilities-Including an Amendment of FASB Statement No. 115(SFAS No. 159) on January 1, 2008, which became effective for fiscalperiods beginning after November 15, 2007. This standard permits entitiesto choose to measure many financial instruments and certain other items at fairvalue. While SFAS No. 159 

 

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**Integrated Management Information, Inc.**

**Notes to the Financial Statements**

 

becameeffective for our 2008 fiscal year, we did not elect the fair value measurementoption for any of our financial assets or liabilities.

 

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

 

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

 

InMay 2008, the FASB issued SFAS No. 162, The Hierarchy of GenerallyAccepted Accounting Principles (SFAS 162). SFAS 162 identifies the sources ofaccounting principles to be used in the preparation of financial statements ofnongovernmental entities that are presented in conformity with generallyaccepted accounting principles (GAAP) in the United States (the GAAPhierarchy). This Statement will be effective November 15, 2008. Wecurrently adhere to the hierarchy of GAAP as presented in SFAS 162 and do notexpect its adoption will have a material impact on its results of operationsand financial condition.

 

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

 

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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 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 for auditingthe tracking systems used by beef and other livestock producers to verifysource and age. We introduced our USVerified Source and Age Verification systemin 2005, and over the years we have continued to enhance and further developprograms to address other verification 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. 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.

 

**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 calving season is at its peak. Because of the seasonalityof 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.

 

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****Liquidityand Capital Resources****

 

AtJune 30, 2009, we had cash and cash equivalents of $128,548 compared to$154,044 of cash and cash equivalents at December 31, 2008. Our workingcapital at June 30, 2009 was $343,788 compared to $387,901 at December 31,2008.

 

Netcash used in operating activities during the second quarter 2009 was $53,400compared to $95,064 during the same period in 2008. Cash used by operatingactivities (continuing and discontinued operations) is driven by our net lossand adjusted by non-cash items. Non-cash adjustments primarily include depreciation,amortization of intangible assets and stock based compensation expense. Theimprovement was primarily driven by the timing of cash receipts and cashdisbursements.

 

Netcash used in investing activities of $54,695 is primarily attributable tocapital expenditures. Our capital expenditures were $58,695 and $34,731 for theyear to date periods ended June 30, 2009 and 2008, respectively. Ourcapital expenditures are primarily related to purchases and internaldevelopment of information technology assets to support our product and serviceofferings. As we anticipate continued growth, we expect to continueinvesting additional capital in our information technology assets.

 

Netcash provided by financing activities of $82,599 during the year to date periodended June 30, 2009 was primarily related to $50,000 additional financingacquired under an existing note payable and approximately $40,000 in new debtacquired in connection with the acquisition of equipment.

 

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

 

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 various restrictionsas imposed on international market imports/exports is via a qualityverification program, like our USVerifiedTM.com product line.

 

Theprimary driver of our operating cash flow is our third-party verificationsolutions, specifically the gross margin generated from services provided.Therefore we focus on the elements of those operations including revenue growthand long term projects that ensure a steady stream of operating profits toenable us to meet our cash obligations. On a weekly basis we review theperformance of each of our revenue streams focusing on third party verificationsolutions compared with prior periods and our operating plan. Based on thecontinued sales growth, overall improvement in our performance and our abilityto secure additional financing, we believe that we have sufficient cash on handto execute our current Business Plan although we can give no assurance. Theculmination of all our efforts has brought opportunities to us ****including: increasedinvestor 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.

 

**OffBalance Sheet Arrangements**

 

Asof June 30, 2009, we had no off-balance sheet arrangements of any type.

 

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****RESULTSOF OPERATIONS****

 

****SecondQuarter and Year to Date Periods ended June 30, 2009 compared to the SamePeriods 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 second quarter and year to date period ended June 30,2009 were $645,880 and $1,123,205 compared to $633,716 and $1,171,046,respectively. ****While the improvement during second quarter represents modest growth, webelieve it is significant in light of the current economic conditions severelyimpacting the food industry.****On a comparable year todate basis, the first quarter in the prior year included significant growth innew customers due to a delisting of a competitor by the USDA. Currently,verification services provided to those customers that we acquired in the firstquarter of the prior year are now spread more evenly throughout our fiscalyear.

 

Duringthe second quarter ended June 30, 2009, our third party verificationrevenue, which includes sales of our USVerified solutions and relatedconsulting, program development and web-based development services, slightlydecreased 5% to $542,391 compared to $570,830 in the same quarter 2008. On acomparable quarter to quarter basis, 2008 included approximately $97,000 inrevenue related to a special grant funded project for premise registrationsthroughout the USDA. Excluding this non-recurring revenue stream, verificationrevenue for second quarter 2009 improved 14.5% over the comparable revenuestream in second quarter 2008.

 

Forthe year to date period ended June 30, 2009, third party verification revenueslightly decreased 6.4% to $955,030 compared to $1,020,672 in the same 2008period.  On a comparable year to datebasis, 2008 included approximately $214,000 in revenue related to a specialgrant funded project for premise registrations throughout the USDA. Excludingthis non-recurring revenue stream, verification revenue for the year to dateperiod ended June 30, 2009 improved 18.4% over the comparable revenuestream in 2008. This project was specific to the years ended 2007 and 2008.Midway through the USDA grant funded project, the USDA re-evaluated the projectand decided to discontinue the project. ****As of June 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 andaccordingly have not reserved any portion of the amount outstanding.****

 

Revenuesderived from sales of hardware, primarily sales of cattle identification eartags, increased 54.2% to $96,990 in the second quarter 2009 compared to $62,886in the second quarter 2008. For the year to date period ended June 30,2009, hardware sales increased 48.5% to $156,085 compared to $105,125 in thesame 2008 period.

 

Webelieve that occurrence of the following events will drive our business forwardeffectively increasing customer demand for third party verification servicesand presenting additional opportunities:

 

·                  The reopening of key export markets;

·                  An ever increasing consumer demand forverification of NHTC and humane handling marketing claims;

 

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·                  The many recent product recalls in freshproduce and the advent of legislation concerning country of origin labeling(COOL);

·                  Increased congressional scrutiny of foodsafety which creates an ever growing movement towards a mandatoryidentification program (NAIS);

·                  An increase in forward-thinking producers andretailers who are both environmentally conscious and looking for a marketingedge;

·                  An increase in producers and consumers whoare committed to reducing their carbon footprint;

·                  A shift in attitude within the newadministration that is uniquely positioning the agricultural industry.

 

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

 

Costof sales for the second quarter 2009 was $294,393 compared to $221,277 duringthe second quarter 2008. Gross margin for the second quarter 2009 declined byapproximately 11 basis points to 54.4% of revenues compared to 65.1% for thesecond quarter 2008. For the year to date period ended June 30, 2009, costof sales was 573,489 compared to $427,603 for the same 2008 period. Grossmargins declined 14.5 basis points to 48.9% in 2009 compared to 63.5% in thesame 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 2009 compared to 2008 was partially due toshifts in the sales mix of lower margin hardware product sales coupled with theabsorption of certain costs which are generally fixed in nature. Morespecifically in early 2008, we increased our headcount of dedicated personnelproviding program development and web based development services in connectionwith our third party verification programs. Due to our focus on margins andcustomer service, we are committed to long term growth and the scalability ofthe programs we develop.

 

**Selling,General and Administrative Expenses**

 

Selling,general and administrative expenses for the second quarter 2009 were $293,168,a decrease of $47,556, or 14% over the second quarter 2008 amount of $340,724.For the year to date period ended June 30, 2009, expenses decreased$80,910 or 11.1% to $649,475 compared to $730,385 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.

 

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

 

Asa result of the foregoing, income from continuing operations for the secondquarter ended June 30, 2009 was $49,265 or less than a penny per basic anddiluted common share, compared to $62,871 or less than a penny per basic anddiluted common share for the second quarter ended June 30, 2008.

 

Lossfrom continuing operations for the year to date period ended June 30, 2009was $112,713 or $0.01 per basic and diluted common share, compared to $3,154 orless than a penny per basic and diluted common share for the same period in2008.

 

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

 

Netincome for the second quarter ended June 30, 2009 was $49,265 compared to$42,734 for the second quarter ended June 30, 2008. For the year to dateperiod ended June 30, 2009, net loss was $112,713 compared to $17,816 forthe same period ended June 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 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.

 

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****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 willperiodically reevaluate this situation.

 

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****PART II – OTHER INFORMATION****

 

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

 

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

 

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

 

****None****

 

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

 

****None****

 

****ITEM 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:  August 4, 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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