WFCF 10-K Fiscal year ended Dec. 31, 2011

The accompanying notes are an integral part of these financial statements.

Integrated Management Information, Inc.

Statements of Cash Flows

		Year ended December 31,
		2011				2010
Operating activities:
Net income		$	864,452			$	327,757
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			74,880				81,766
Stock-based compensation expense			13,170				63
Issuance of common shares for services			-				14,300
Deferred tax benefit			(224,350	)			-
Bad debt expense			10,605				2,264
Loss on sale of marketable securities			13,597				-
Changes in operating assets and liabilities:
Accounts receivable			(14,885	)			(20,148	)
Prepaid expenses and other current assets			(2,196	)			31,115
Accounts payable			(23,940	)			11,275
Accrued expenses and other current liabilities			9,352				(17,507	)
Net cash provided by operating activities			720,685				430,885
Investing activities:
Purchases of marketable securities			(429,399	)			-
Proceeds from sale of marketable securities			125,598				-
Purchases of property and equipment			(12,171	)			(58,337	)
Acquisition of intangible assets			-				(18,007	)
Net cash used in investing activities			(315,972	)			(76,344	)
Financing activities:
Proceeds from notes payable			200,000				-
Repayments of notes payable			(88,972	)			(28,521	)
Proceeds from stock option exercise			1,800				-
Stock repurchase under Buyback Program			(61,597	)			(27,273	)
Net cash provided by (used in) financing activities			51,231				(55,794	)
Net increase in cash and cash equivalents			455,944				298,747
Cash and cash equivalents at beginning of year			513,076				214,329
Cash and cash equivalents at end of year		$	969,020			$	513,076

The accompanying notes are an integral part of these financial statements.

Integrated Management Information, Inc.

Statements of Stockholders’ Equity

										Additional								Other
		Common Stock								Paid-in				Treasury				Comprehensive				Accumulated
		Shares				Amount				Capital				Stock				Loss				Deficit				Total
Balance at December 31, 2009			20,849,481			$	20,929			$	3,387,130			$	(20,144	)		$	-			$	(3,350,107	)		$	37,808
Stock repurchase of 171,031 shares on the open market			(171,031	)			-				-				(27,273	)			-				-				(27,273	)
Issuance of common shares for services			110,000				110				14,190				-				-				-				14,300
Stock-based compensation expense			-				-				63				-				-				-				63
Net income			-				-				-				-				-				327,757				327,757
Balance at December 31, 2010			20,788,450				21,039				3,401,383				(47,417	)			-				(3,022,350	)			352,655
Stock repurchase of 247,691 shares on the open market			(247,691	)			-				-				(61,597	)			-				-				(61,597	)
Issuance of common shares upon exercise of options			10,000				10				1,790				-				-				-				1,800
Stock-based compensation expense			-				-				13,170				-				-				-				13,170
Unrealized loss on marketable securities																			(6,693	)							(6,693	)
Net income			-				-				-				-				-				864,452				864,452
Balance at December 31, 2011			20,550,759			$	21,049			$	3,416,343			$	(109,014	)		$	(6,693	)		$	(2,157,898	)		$	1,163,787

The accompanying notes are an integral part of these financial statements.

Integrated Management Information, Inc.

Notes to the Financial Statements

Note 1 - The Company and Basis of Presentation

Business Overview

Integrated Management Information, Inc., is a Colorado corporation based in Castle Rock, Colorado, (“IMI Global,” “IMI,” the “Company,” “our,” “we,” or “us,”). We are a leading provider of verification and communication solutions for the agriculture, livestock and food industry. Our customers are located throughout the United States.

We provide our owned and operated online products and services which specialize in identification and traceability; process, production practice and supply verification; document control for USDA verification programs, and; third-party auditing services. We apply information technology to the agriculture, livestock and food industry by addressing the growing importance of marketing claims such as: source of origin information, genetic background, animal treatment, animal health history, animal age, animal movements, nutrition, carbon credits and other credence attributes. Our solutions provide assurance regarding those claims made that cannot be confirmed by visual inspection once the product reaches the food retail case and is marketed to the consumer. We have developed a range of proprietary web-based applications, consulting methodologies, auditing processes, and other services to allow the livestock and food industry to record, manage, report, and audit this information. Our solutions help our customers establish their own systems, meet government regulations, create their own premium brand identity, gain cost efficiencies and command a higher price for their product.

On February 29, 2012, we closed on an acquisition of a 60% ownership investment in a North Dakota company, International Certification Services, Inc. (“ICS”) (Note 14).

Basis of Presentation

Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, costs and expenses during the reporting period. Actual results could differ from the estimates.

Certain reclassifications to the 2010 statement of operations have been made to conform to the 2011 presentation, none of which had any effect on total revenue, gross profit, income from operations, or net income.

Note 2 - Summary of Significant Accounting Policies

Cash and Cash Equivalents

All cash and short-term investments with original maturities of three months or less are considered cash and cash equivalents, since they are readily convertible to cash. Amounts in-transit from credit card processors are also considered cash equivalents because they are both short-term and highly liquid in nature and are typically converted to cash within three days of the sales transaction. We place our cash with high quality financial institutions. At times, cash balances may exceed the FDIC insurance limit, however; we have not experienced any losses related to balances that exceed such FDIC insurance limits and we believe our credit risk is minimal.

Revenue Recognition

We offer a range of products and services to deploy and maintain identification, traceability, and verification systems and to facilitate customers’ participation in and compliance with USDA’s Quality System Assessment, Process Verification and Export Verification Programs. We generate revenue primarily from the sale of our US Verified identification and verification solutions, consulting services, web-based development, and hardware sales. We sell our products and services directly to customers at various levels in the livestock supply chain.

Revenue is recognized when persuasive evidence of an agreement with the customer exists, delivery has occurred or services have been provided, the sales price is fixed or determinable, collectability is reasonably assured, and risk of loss and title have transferred to the customer.

In 2011, one customer generated approximately 14% of our total revenue. No single customer generated more than 10% of net revenue in 2010.

Service revenues primarily consist of fees charged for verification audits and other verification services that the Company performs for customers under our US Verified Program. Revenues derived from our US Verified program services are recognized as those services are rendered. Contracts for these services are cancelable only for non-performance.

Revenues under contracts for consulting and website development are recognized when completed (for short-term projects). On occasion, we may enter into long-term projects, for which we use the percentage of completion method. No such long-term projects occurred during 2011 and 2010.

Product sales are primarily generated from the sale of cattle identification ear tags. Revenue is recognized when goods are shipped and after title has transferred to the customer.

Other revenue primarily represents the fees earned from our “Where Food Comes From®” (WFCF) labeling program. Revenue is recognized when our customer, who has been granted a right to use our WFCF label, places a WFCF label on their product and ships their product. Revenue is billed based on pounds of product shipped.

Generally, we do not provide right of return or warranty on product sales or services performed.

Accounts Receivable and Allowance for Doubtful Accounts

The majority of our receivables are due from trade customers. Credit is extended based on our evaluation of the customer’s financial condition and generally, collateral is not required. Accounts receivable are due approximately 30 days from the invoice date and are stated at amounts due from customers, net an allowance for doubtful accounts. Accounts receivable that are outstanding longer than the contractual payment terms are considered past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss and payment history, the customer’s current ability to pay its obligations to us and the condition of the general economy and the industry as a whole. We write off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. The allowance for doubtful accounts was approximately $7,000 at December 31, 2011 and 2010.

Two customers accounted for greater than 10% of our outstanding accounts receivable balance at December 31, 2011.

Cost of Revenues

Cost of revenues includes the cost of products sold, which consists of livestock ear tags used in connection with the US Verified Source and Age Verification programs. Salaries and related fringe benefits directly associated with development of the US Verified programs are allocated to cost of revenues.

Livestock identification ear tags sold in connection with our verification offerings are purchased primarily from one supplier. However, there are numerous other companies which manufacture and market such ear tags.

Investment in Marketable Securities

We classify our investments in marketable securities as available-for-sale securities and account for the investments at fair value. Changes in the fair value of these securities are recognized as a component of accumulated other comprehensive income (loss) within stockholders’ equity on the Balance Sheet. Realized gains or losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are determined by specific identification of the cost basis of each security and are reported on the Statement of Operations. We follow a conservative investment strategy of optimizing liquidity and protecting principal. We invest primarily in high credit quality equity securities, both in mutual funds and individual corporate stocks, and all investments are traded in active markets (Note 3). We do not utilize derivative financial instruments to manage interest rate risk.

Fair Value Measurements

The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short maturities. The amounts shown for short-term debt and notes payable also approximate fair value because current interest rates and terms offered to us for similar debt are substantially the same. Our investments in marketable securities consist of equity securities classified as available-for-sale and are recorded at fair value on a recurring basis.

Fair value accounting guidance defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements, for both financial and non-financial assets. It also establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:

	●	Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
	●	Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.
	●	Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Our investments in available-for-sale marketable securities include equity mutual funds, exchange-traded funds and individual corporate equity securities. For these securities, we use quoted prices in active markets for identical assets to determine their fair value, thus they are considered to be Level 1 instruments under the fair value hierarchy. The method described may produce a fair value calculation that may not be indicative of net realizable value of future fair values. Although we believe our valuation method is appropriate, the use of a different methodology or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Property and Equipment

Property and equipment are recorded at cost and are depreciated generally using the straight-line method over the estimated useful lives of the respective assets, which range from one to seven years.

Intangible Assets

Our intangible assets primarily represent our trademark rights and the related costs incurred to obtain the trademark rights. These assets are recorded at cost and are subject to amortization. We amortize these assets using the straight-line method over the estimated useful lives of the respective assets, which range from two to five years.

Impairment of Long-Lived Assets

We review all of our long-lived assets (including intangible assets) for impairment at least annually or whenever impairment indicators are determined to be present. If an impairment exists, the amount of impairment is measured as the excess of the carrying amount of the asset over its fair value as determined utilizing the estimated discounted future cash flows, or some other fair value measure, or the expected proceeds, net of costs to sell, upon sale of the asset.

Research and Development, Software Development Costs, and Internal Use Software Development Costs

Research and development costs are charged to operations as incurred. We did not incur any research and development expense in 2011 or 2010.

Software development costs are capitalized once technological feasibility of a product is established and such costs are determined to be recoverable. For products where proven technology exists, this may occur very early in the development cycle. Factors we consider in determining when technological feasibility has been established include (i) whether a proven technology exists; (ii) the quality and experience levels of the individuals developing the software; (iii) whether the software is similar to previously developed software which has used the same or similar technology; and (iv) whether the software is being developed with a proven underlying engine. Technological feasibility is evaluated on a product-by-product basis. Capitalized costs for those products that are cancelled or abandoned are charged immediately to cost of sales. The recoverability of capitalized software development costs is evaluated on the expected performance of the specific products for which the costs relate.

Internal use software development costs represent the capitalization of certain external and internal computer software costs incurred during the application development stage. The application development stage is characterized by software design and configuration activities, coding, testing and installation. Training costs and maintenance are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality.

Website software development costs related to certain planning and training costs incurred in the development of website software are expensed as incurred, while application development stage costs are capitalized.

During the year ended December 31, 2010, we capitalized certain external and internal use software and website development costs totaling $52,305 (none in 2011). The estimated useful life of costs capitalized is evaluated for each specific project and ranges from one to three years. During 2011 and 2010, the amortization of capitalized costs totaled $53,216 and $58,559, respectively. Capitalized costs are included in property and equipment, net.

Advertising Expenses

Advertising costs are expensed as incurred. The total advertising expenses included in the Statement of Operations for the years ended December 31, 2011 and 2010, were $61,502 and $43,762, respectively.

Income Taxes

We compute income taxes using the asset and liability method. Under this method, deferred income taxes are recognized for differences between the basis of assets and liabilities for financial statement and income statement purposes using the enacted statutory rate in effect for the year these differences are expected to be taxable or deductible. Deferred income tax expense or benefit is based on the changes in the net deferred tax asset or liability from period to period. A deferred tax asset or liability is recognized whenever there are future tax effects from existing temporary differences and operating loss and tax credit carryforwards. If we determine that a deferred tax asset could be realized in a greater or lesser amount than recorded, the asset’s recorded amount is adjusted and the income statement is either credited or charged, respectively, in the period during which the determination is made.

We reduce our deferred tax assets by a valuation allowance if we determine that it is more likely than not that some portion or all of these tax assets will not be realized. In making this determination, we consider various qualitative and quantitative factors, such as:

	●	The level of historical taxable income and projections for future taxable income over periods in which the deferred tax assets would be deductible,
	●	Accumulation of income (loss) before taxes utilizing a look-back period of three years.
	●	Events within the industry,
	●	The cyclical nature of our business,
	●	The health of the economy,
	●	Our future forecasts of taxable income, and
	●	Historical trending.

The recognition of our net deferred income tax assets requires significant management judgment regarding the interpretation of applicable statutes, the status of various income tax audits, and our particular facts and circumstances. After consideration of the aforementioned qualitative and quantitative data, we concluded not to reduce our valuation allowance as of December 31, 2010 because of the current macroeconomic climate and uncertainty around credit markets and consumer behavior. In the fourth quarter of 2011, after again assessing the existing qualitative and quantitative data, including the wide-spread consensus that the economic climate was beginning to improve, we reduced our valuation allowance of $643,370 by $224,350 to $419,020 after consideration the following factors:

On an on-going basis, we will continue to assess the likelihood of realization of the benefits of our deferred tax assets considering the many qualitative and quantitative factors.

We recognize the tax benefit from an uncertain tax position when we determine that it is more-likely-than-not that the position would be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If we derecognize an uncertain tax position, our policy is to record any applicable interest and penalties within the provision for income tax. Management believes there are no current uncertain tax positions that would result in an asset or liability being recognized in the accompanying financial statements. Interest and penalties on unrecognized tax benefits, if any, are recognized as a component of income tax expense.

Stock-Based Compensation

The fair value of stock options is estimated using the Black-Scholes option-pricing model, which incorporates ranges of assumptions for inputs. Our assumptions are as follows:

	●	Dividend yield is based on our historical and anticipated policy of not paying cash dividends.
	●	Expected volatility assumptions were derived from our actual volatilities.
	●	The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant with maturity dates approximately equal to the expected life at the grant date.
	●	The expected term of options represents the period of time that options granted are expected to be outstanding giving consideration to vesting schedules, based on historical exercise patterns, which we believe are representative of future behavior.

Our stock-based compensation cost for the years ended December 31, 2011 and 2010, was $13,170 and $63, respectively, and has been included in income from operations.

The fair value of stock options granted during 2011 of 220,000 shares (none were granted in 2010) was estimated using the following assumptions:

Expected life of options from date of grant		8 years
Risk free interest rate		2.26	%
Expected volatility		229.6	%
Assumed dividend yield		0.0	%

As of December 31, 2011, total unrecognized stock-based compensation cost related to non-vested awards granted under our option plans is as follows:

For the year ending
December 31,
2012		$	17,580
2013			17,595
2014			4,399
		$	39,574

Recently Issued Accounting Standards

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to amend fair value disclosure requirements. The updated guidance requires separate disclosures of transfers into and out of Levels 1 and 2, more detailed reconciliations of Level 3 recurring fair value measurements on a gross basis, fair value information by class of assets and liabilities, and descriptions of valuation techniques and inputs for Level 2 and Level 3 measurements. We have adopted the disclosure requirements of the new guidance. The adoption of this new guidance did not have a material impact on our financial position, results of operations or cash flows. In May 2011, the FASB issued guidance further amending the fair value measurement and disclosure requirements. The guidance requires the disclosure of quantitative information about unobservable inputs, a description of the valuation processes used, and a qualitative discussion around the sensitivity of the measurements. This guidance is effective for our Company at the beginning of the first quarter of 2012. The adoption of this new guidance also did not have a material impact on our financial position, results of operations or cash flows.

In June 2011, the FASB issued guidance that revises the manner in which entities present comprehensive income in their financial statements. The guidance requires entities to report the components of comprehensive income in either a single, continuous statement or two separate but consecutive statements. The Company adopted this guidance on January 1, 2012, with no material impact on our financial position, results of operations or cash flows.

In September 2011, the FASB issued guidance that simplifies how entities test goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. This guidance is effective for our Company at the beginning of the first quarter of 2012. The adoption of this guidance is not anticipated to have a material impact on our financial position, results of operations or cash flows.

We have considered all other recently issued accounting pronouncements and do not believe the adoption of such pronouncements will have a material impact on our consolidated financial statements.

Note 3 – Investments in Marketable Securities

The following table summarizes our investments in marketable securities.

		December 31, 2011
		Gross				Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Equity securities		$	224,012			$	6,189			$	(9,884	)		$	220,317
Mutual funds			61,000				-				(2,998	)			58,002
Uninvested cash			5,192				-				-				5,192
Investment in marketable securities		$	290,204			$	2,771			$	(9,464	)		$	283,511