WFCF

SEC Filing Summary: Integrated Management Information, Inc. (10-Q)

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended September 30, 2009, and the year-to-date period for Integrated Management Information, Inc. (IMI Global). The company provides verification and communication solutions for the agriculture, livestock, and food industries, specializing in identification, traceability, and USDA verification programs. Key offerings include the USVerified Source and Age Verification system and the VerifiedGreen program. The company is a smaller reporting company based in Castle Rock, Colorado.

Key Financial Metrics

Note: Q3 2008 results included a one-time gain of $366,991 from the sale of online businesses, which significantly impacted operating income for that period.

Material Changes vs. Prior Period

• Revenue Growth: Third-party verification revenue increased 31.6% in Q3 2009 compared to Q3 2008, driven by demand for age verification for Japanese exports and non-hormone-treated cattle (NHTC) verification for the EU market. Hardware sales (ear tags) increased 29.1% in Q3.
• Profitability: While Q3 2009 reported a net income of $70,396, this is a decrease from Q3 2008's $160,990, largely due to the absence of the $366,991 gain on asset sales recorded in 2008. Year-to-date 2009 resulted in a net loss of $42,317 compared to a net income of $143,175 in 2008.
• Expense Reduction: Selling, general, and administrative (SG&A) expenses decreased 21.3% in Q3 2009 compared to the prior year, primarily due to a reduction in office support personnel.
• Cash Flow: Operating cash flow improved significantly, providing $112,175 in cash for the year-to-date period in 2009, compared to a use of $515,243 in the same period in 2008. This improvement was driven by the timing of receipts and disbursements.
• Debt: Total notes payable increased to $371,369 from $300,000 at year-end 2008, due to a new equipment note and an additional $50,000 draw on an existing shareholder note.

Outlook, Risks, and Management Commentary

• Market Drivers: Management cites political changes in Japan (protectionist stance on beef imports) and new duty-free quotas in the EU as drivers for continued growth in verification services. Consumer awareness campaigns (e.g., "Food, Inc.") are also expected to boost demand.
• Liquidity: The company believes it has sufficient cash on hand ($245,352) to execute its business plan, though it notes it can give no assurance. Future funding may require additional debt or equity offerings.
• Seasonality: The business is seasonal, with significant revenues typically realized in the second and fourth quarters during peak calf marketing periods.
• Risks and Contingencies:
  • Legal: Tyson Foods, Inc. filed a petition to cancel the "Beef Born & Raised in the USA" trademark. IMI Global is defending the trademark, which is central to its marketing partner role.
  • Concentration: Livestock identification tags are purchased primarily from a single supplier, Allflex.
  • Receivables: Approximately $150,000 in receivables related to a discontinued USDA grant project are over 90 days past due, though management expects full collection.
  • Internal Controls: Management acknowledges a lack of segregation of duties due to the small number of employees, though they deem the risk low.

Investor Verification Checklist

• Verify the status of the trademark dispute with Tyson Foods regarding "Beef Born & Raised in the USA."
• Confirm the collectability of the $150,000 in receivables from the discontinued USDA grant project.
• Review the terms of the related-party debt (Lapaseotes Note Payable) held by a major shareholder.
• Assess the sustainability of the 31.6% growth in third-party verification revenue given the seasonal nature of the business.
• Monitor the company's ability to maintain liquidity without further dilution of equity or increased debt.