INTERNATIONAL MONETARY SYSTEMS LTD /WI/ - FORM 10-K/A

Attached files

file	filename
EX-32.1 - CEO EX 32 - INTERNATIONAL MONETARY SYSTEMS LTD /WI/	ex32_1.htm
EX-31.1 - CEO EX 31 - INTERNATIONAL MONETARY SYSTEMS LTD /WI/	ex31_1.htm
EX-23.1 - AUDITOR CONSENT - INTERNATIONAL MONETARY SYSTEMS LTD /WI/	ex23_1.htm
EX-32.2 - CFO EX 32 - INTERNATIONAL MONETARY SYSTEMS LTD /WI/	ex32_2.htm
EX-31.2 - CFO EX 31 - INTERNATIONAL MONETARY SYSTEMS LTD /WI/	ex31_2.htm

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No.1

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2008

OR

o	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ___________

Commission File No. 0-30853

INTERNATIONAL MONETARY SYSTEMS, LTD.

(Exact name of registrant as specified in its charter)

Wisconsin	39-1924096
(State of incorporation)	(I.R.S. Employer Identification No.)

16901 West Glendale Drive New Berlin, Wisconsin 53151

(Address of principal executive offices & Zip Code)

(Registrant's telephone number, including area code) (262) 780-3640

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Class A Common par value $.0001 per share

Indicate by checkmark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by checkmark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer o	Accelerated filer o

	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

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

As of April 6, 2009, the Registrant had issued and outstanding 61,025,436 shares of common stock. The aggregate market value of the voting Common Stock (par value $.0001 per share) held by non-affiliates on June 30, 2008 (the last business day of our most recently completed second quarter) was $25,630,683 using the ask price on June 30, 2008.

EXPLANATORY NOTE

This Amendment on Form 10-K/A amends our annual report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on April 8, 2009. It is in response to comment letters received from the Securities and Exchange Commission dated September 25, 2009, November 25, 2009 and January 8, 2010 requesting clarifications and expansion of certain portions of the original Form 10-K as listed below:

·	Reconciling subsidiaries listed under Part, 1 Item 1 to Note 1A in the Notes to the Consolidated Financial Statements;

·	Update the MD & A section regarding key variables and other quantitative and qualitative factors;

·	Update Disclosure Controls and Procedures in Item 9A(T);

·	Update business experience for the directors and executive officers in Item 10;

·	Clarify options or other stock rights available to officer or directors in Item 12;

·	Added financial statements schedules to exhibits in Item 15;

·	Added auditors consent for reference to Form S-8 in Item 15;

·	Updated signature page with additional required signatures.

This filing has been updated for the items listed above and does not include subsequent events or the results of operations subsequent to December 31, 2008 except as noted above. Readers are encouraged to read subsequent filings on forms 10-Q and 8-K for periods subsequent to December 31, 2008 for current information.

INTERNATIONAL MONETARY SYSTEMS, LTD.

Form 10-K Annual Report

TABLE OF CONTENTS

PART I		Page

Item 1.	Description of Business		4
Item 2.	Description of Property		6
Item 3.	Legal Proceedings		6
Item 4.	Submission of Matters to a Vote of Security Holders		6

PART II

Item 5.	Market for IMSL Common Equity and Related Stockholder Matters		7
Item 6.	Selected Financial Data		7
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations		7
Item 8.	Financial Statements		11
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		11
Item 9 A(T).	Controls and Procedures		11

PART III

Item 10.	Directors and Executive Officers		13
Item 11.	Executive Compensation		15
Item 12.	Security Ownership of Certain Beneficial Owners and Management		20
Item 13.	Certain Relationships and Related Transactions		21
Item 14.	Principal Accountant Fees and Services		21
Item 15.	Exhibits List and Reports On Form 8-K		22

CERTAIN CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this annual report on Form 10-K contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking Statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this quarterly report in its entirety, including but not limited to our financial statements and the notes thereto. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

PART I

In this report, "IMSL", "IMS", "The Company", "we", "us" and "our" refer to the Registrant, International Monetary Systems, Ltd., a Wisconsin corporation, and its subsidiaries.

ITEM 1 - DESCRIPTION OF BUSINESS

Introduction

International Monetary Systems, Ltd. was incorporated in 1989 under the laws of the State of Wisconsin. The Company acquires, owns, manages and operates trade exchanges and other related businesses.

Trade exchanges, or barter networks, are financial service firms which permit companies and individuals to exchange goods and services utilizing an electronic currency known as "trade dollars", the use of which is described below. Currently, IMS services more than 18,000 barter customers. We have continually expanded our customer base, principally through enrolling new members in our existing markets, acquiring other barter exchanges, and by encouraging our members to increase their trade volume.

Our corporate headquarters mailing address is 16901 West Glendale Drive, New Berlin, Wisconsin 53151, and our telephone numbers are (800) 559-8515 and (262) 780-3640; the telephone number for our primary facsimile line is (262) 780-3655. Our Internet addresses are www.internationalmonetary.com and www.imsbarter.com.

The Modern Barter Industry

The modern barter industry took shape in its current form in 1969 with the creation of the first retail barter exchange. Currently there are an estimated 250 barter system firms - including several with multiple licensees – operating in the United States and Canada. These exchanges provide services that involve an estimated 200,000 member companies.

Retail trade exchanges range in size from those operated by a single person from a small office to large firms operating out of multiple offices located over a wide area. The 35 largest commercial exchange firms handle approximately 50% of the estimated $700 million in transactions that flow through the barter system annually. Most trade exchanges are private companies that make extensive use of computers to track their members, match transactions, and provide necessary accounting.

The National Association of Trade Exchanges and the International Reciprocal Trade Association are the two professional associations most active in the industry.

How Barter Works

In a typical barter transaction, a member offers to sell products or services in return for the exchange's trade dollars, typically referenced as "T$", which are paid to the member by the purchaser in the transaction. For example, T$100 refers to $100 worth of trade dollars that are used to acquire a product or service priced at $100 in U.S. currency. If the purchase price is greater than the amount of earned trade dollars in the buyer's account, the exchange may grant a trade dollar line of credit to the buyer. Periodically, each member has to account for any deficit in its trade account just as it would with a conventional loan or other credit facility.

As compensation for providing its services, the trade exchange generally charges a one-time membership fee, monthly maintenance fees and/or a percentage of the price of each transaction (usually 10% to 15%). These fees are typically paid by the member to the trade exchange in cash.

Barter transactions which represent sales revenue are taxable as ordinary income to the recipient of the trade dollars in the conventional dollar amount of the trade dollars received, and conversely are deductible as ordinary expense by a purchaser in the conventional dollar amount of the trade dollars paid. Members' barter sales are reportable by the trade exchange to the Internal Revenue Service on Form 1099B.

Advantages and Disadvantages

Barter offers a number of advantages to those who utilize it. A principle advantage to trade exchange members is referred to as "barter leverage". This refers to the fact that the typical barter exchange member is purchasing a product or service in exchange for its own

product or service. Consequently, each purchase results in a probable sale. And since the actual cash cost of producing the product or service is typically less than its retail sale price, a person utilizing barter is actually purchasing for a real cash cost that is only a fraction of the price of the product or service purchased. In effect, the barter exchange member buys at wholesale, but sells its own goods or services at retail. Frequently, the member will charge a higher price for barter than for cash to cover the charges due to the trade exchange. However, the benefit to the person bartering for the product or service is still significant as a result of the purchase being accomplished through barter.

For example, a trade exchange member may incur a $1,000 cash cost to produce a product or to purchase it at wholesale. If the member then barters this product for a good or service priced at $1,500, representing the retail price at which it is normally sold, the member has effectively bought the good or service for a cost of only $1,000 in cash. Barter leverage is particularly effective in the case of products that have become hard to sell. Rather than write down their value, the producer may be able to secure full value by bartering them through the trade exchange. Barter leverage works most effectively when trading for something that is perishable, such as hotel rooms or airline tickets. Once the hotel room lies vacant or the airline seat is unfilled for a flight, its value is lost forever. In those cases, exchange of the room or seat in barter offers an effective way to gain value from something that would otherwise have been rendered worthless. Due to barter leverage, the value of barter to exchange members will more than likely offset the fees charged by the barter exchange.

Barter also provides an effective means by which a member may enter new markets, gain trial usage by potential customers, or increase market share. The member may well find that he can reach a customer who would not otherwise have tried his product or service if the full price had to be paid in cash, but who will try his goods or services, sometimes in large amounts or on extended terms, when the price is being paid in goods or services of the purchaser in the form of trade dollars. Because of the need to clear trade dollars over time, barter exchanges become affinity marketing networks, in which members seek out opportunities to do business with one another.

The principle disadvantage of barter is that, in comparison to the general cash-based economy, a more limited supply of products and services is available.

International Monetary Systems, Ltd. (IMS - the Company) is a Wisconsin holding company located in New Berlin, Wisconsin, with three wholly-owned operating subsidiaries: Continental Trade Exchange, Ltd (CTE) and National Trade Association, both of which operate a barter (trade) exchange in the United States, and INLM CN Inc., which operates a barter (trade) exchange in Canada.

The IMS Barter Network

As a leader in the barter industry, IMS has created a network of more than 18,000 barter clients who regularly trade their goods and services with each other. Through their participation in our barter program, these companies and individuals are provided with an effective revenue management tool which enables them to identify and capture incremental income, move surplus inventories and profitably capitalize on their excess capacity. IMS functions as a third-party record keeper - a status granted by the Internal Revenue Service - and also manages the barter system.

To provide clients with a flexible and effective means of trading, IMS has created an alternative monetary system with its own unique currency. Upon enrolling in the program, each member is assigned a barter account (much like a traditional bank account) through which it receives IMS trade dollars - the medium of exchange for the barter system. Under the T.E.F.R.A. act of 1982, we are required to report all barter sales to the IRS. For accounting and tax purposes, the IRS has ruled that trade dollars are treated the same as cash. Accordingly, the Company may in any period report significant revenue, profits and increases in net assets from transactions denominated in IMS trade dollars or other non-cash consideration.

The IMS barter system began operations in July of 1985 and has had a record of consistent and steady growth, both organic and through acquisitions of other barter networks. As we have added new members to the system we have witnessed a compounded annual growth rate of approximately 15% per year for the past decade. During that same period we have acquired twenty two independent trade exchange operations. We believe that the barter industry, much like the banking industry, is ready for a period of substantial consolidation and, therefore, we intend to continue acquiring strategically located trade exchanges that will enable us to achieve and maintain a dominant market position. A dominant position within a market gives us better visibility within that market, allows us to offer a wider range of customer products and services for the benefit of our clients, and ensures that we will achieve greater economies of scale.

Three of those acquisitions were consummated during 2008. In April 2008, IMSL exercised its option to acquire the membership and assets of New York Commerce Group of New York, NY. In May 2008, IMSL acquired the membership list and assets of Business Network of Hauppauge, New York.. In July 2008, IMSL acquired the membership list and assets of Bartermax of Norwood, MA.

Other Related Businesses

In addition to expanding our IMS barter operations, we intend to acquire other related businesses that synergize with and enhance the barter network.

ITEM 1A – RISK FACTORS - No applicable risk factors

ITEM 2 - DESCRIPTION OF PROPERTY

Our company's executive offices and principal operating facilities occupy 11,000 square feet of leased space located at 16901 West Glendale Drive, New Berlin, Wisconsin, under a lease from Glendale Investments, LLC, a Wisconsin limited liability company owned by Donald F. Mardak, Dale L. Mardak and John E. Strabley, officers and directors of IMSL. Rent and other terms of our lease, which expires September 30, 2010 are believed by us to be comparable to those available for similar space from unaffiliated, third-party lessors in the same area. We also lease (1) 400 square feet of office space at 1545 University Avenue, Green Bay, Wisconsin, (2) 2,800 square feet of office space at 5350 Commerce Blvd., Rohnert Park, CA, (3) 6,840 square feet at 8938 Cotter Street, Lewis Center, Ohio, (4) 1,000 square feet of office space at 1317 Oakdale Road, Modesto, California, (5) 2,900 square feet of office at 4295 Cromwell Rd, Chattanooga, TN, (6) 630 square feet of office space at 4600 Kietzke Lane,, Reno, NV, (7) 7,600 square feet of office and warehouse space at 103 East Main Street, Plainview, CT, (8) 833 square feet of office space at 6402 McLeod Drive, Las Vegas, NV. (9) 200 square feet of office space at 50 Airport Parkway, San Jose, CA, (10) 1,896 square feet of office space at 7670 Wolff Court, Westminster, CO (11) 21,630 square feet of office and warehouse space at 7449 North Natchez Ave., Niles, IL, (12) 4,900 square feet of office space at 1595 Elmwood Ave., Rochester, NY, (13) 1,455 square feet of office space at 3100 Steeles Avenue West, Concord, Ontario, Canada, (14) 1,200 square feet of office space at 438 S. Greenwood, Wichita, Kansas, (15) 250 square feet of office space at 3418 Frankfort Ave, Louisville, KY.,(16) 1,400 square feet of office space at 1751 2nd Avenue, New York, NY, (18) 1.500 square feet of office space at 800 Veterans Blvd, Hauppauge, NY, (19) 1,910 square feet of office space at One Edgewood Drive, Norwood, MA. The leases on all other properties aside from the New Berlin, Wisconsin facility are from unaffiliated parties and are each on a month-to-month basis or a short term lease of less than 5 years. Upon the expiration of our current leases, we expect that, in each case, we will be able to obtain either a renewal lease, if desired, or a new lease at an equivalent or better location.

ITEM 3 - LEGAL PROCEEDINGS

On January 20, 2008, Celia Greengrass filed a sexual harassment complaint with the Equal Employment Opportunity Commission. The claim is still under investigation by the EEOC but IMS believes the claims to be meritless and will vigorously defend itself.

On March 20, 2008, Joan Mansfield filed a complaint alleging age discrimination with the Connecticut Commission on Human Rights and Opportunities and the Equal Employment Opportunity Commission. IMS has reached a settlement with Ms. Mansfield and the complaints will be dismissed.

On May 29, 2008, John Lounsbury filed a claim of sexual harassment with the Connecticut Commission on Human Rights and Opportunities and the Equal Employment Opportunity Commission. The claim is still under investigation by the CHRO but IMS feels the claim is without merit and will vigorously defend itself.

On September 25, 2008, IMS was notified of a wage claim filed with the Canadian Ministry of Labour by Gerard Domet in the amount of $10,400.00. The claim is still under review by the Ministry of Labour. There may be wages due to Mr. Domet; however, the amount is substantially less than the amount claimed.

On September 30, 2008, WRS, Inc D/B/A WRS Motion Picture and Video Laboratory filed suit in Allegheny County, PA for breach of contract. The complaint seeks $38,649.58 in damages. The complaint against IMS is meritless; the litigation seeks payment for services provided to a former member of the Exchange, none of the services at the heart of the litigation were provided to IMS and therefore, no payment is due from IMS. A motion to dismiss this matter is pending with the court.

There are no other material pending legal proceedings involving IMSL or any of its properties.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of our security holders during the fourth quarter of the fiscal year ended December 31, 2008.

PART II

ITEM 5 - MARKET FOR IMSL COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Stock. Our initial public offering was concluded on December 31, 2001, and our Common Stock began being quoted on the NASD's OTC Bulletin Board on June 25, 2002. For the past 50 days ending on March 27, 2009, the trading volume has averaged 24,308 shares per day.

	High		Low
Fiscal 2007

First quarter ended March 31, 2007	$	0.98	$	0.98
Second quarter ended June 30, 2007	$	0.81	$	0.81
Third quarter ended September 30, 2007	$	0.62	$	0.62
Fourth quarter ended December 31, 2007	$	0.54	$	0.53

Fiscal 2008

First quarter ended March 31, 2008	$	0.55	$	0.51
Second quarter ended June 30, 2008	$	0.49	$	0.42
Third quarter ended September 30, 2008	$	0.33	$	0.28
Fourth quarter ended December 31, 2008	$	0.20	$	0.20

As of December 31, 2008, the approximate number of holders of record of our Common Stock was 675.

ITEM 6 – SELECTED FINANCIAL DATA - Not applicable.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following commentary should be read in conjunction with the financial statements and related notes contained elsewhere in this report.

2008 was a year filled with achievements and challenges for International Monetary Systems. After record-setting growth in 2007 triggered by IMS’ acquisitions of two of America’s largest trade exchanges, the Company spent much of 2008 integrating those operations and continuing to build infrastructure.

Following are some of the highlights of 2008:

·	The Company completed its investment in new computers, monitors, printers, servers, and other equipment, which has enhanced the efficiency of our broker and sales staffs.

Substantial progress was made in upgrading our web site, with new written content and graphics, new testimonials, an educational video, a client/broker blog, and audio clips which tell our story to prospective members. We have seen new traffic to our web site increase 76% from 2007. The member portal has been expanded with a new online barter marketplace, travel-on-trade booking area, and account maintenance tools. As a result we are seeing more and more members use the IMS web site to sell, buy, or simply input a transaction or check their account. We are transforming member behavior to positively impact our efficiency.

Last year IMS acquired the source code for TradeWorks, our proprietary clearing system, then migrated the entire program from its original RPG format into a more current dot-net technology. This process is ongoing as we are nearing the official rollout of the most updated version of our new Trade Network Tracking System (TNT). The cost of this project is approaching $500,000.

·	Our IT department now has five full-time employees, including a talented graphics designer, who are servicing the network, converting the software and enhancing the IMS web site.

We have worked diligently to increase the productivity and cost-effectiveness of our outside sales force. Some of our losses in the first two quarters of 2008 were a direct result of non-productive efforts. We now have a leaner, more efficient group who enrolled more than 3,000 new members during 2008. Yet as impressive as that number seems, it barely matched the attrition of existing members who had stopped functioning in the barter system, or had ceased business operations.

·	Our annual barter expo series in November and December surpassed the attendance and trading volume experienced in 2007. Overall volume at these events increased by 16%, with aggregate sales of over $3 million.

·	During 2008 IMS acquired two small exchanges in Boston, MA and Long Island, NY, and completed the acquisition of New York Commerce Group.

·	During 2008 IMS repurchased more than one million of its shares under contractual obligations with former owners of companies acquired in previous years. This increased our treasury stock to more than two million shares.

To evaluate operations, management monitors, among other measures, EBIDTA, cash flow, trade volume, revenue generated from said trade volume, number of customers and levels of significant operating expense categories. Key metrics to evaluate the health of the company include cash position, ratio of current assets to current liabilities, debt levels, and equity trading activity.

As stated above, 2008 was a year of investment in the business. 2009 will be a year of evaluation and integration, right sizing the operations across the footprint to take advantage of larger scale, standardizing processes in acquired markets, and reducing overlapping expenses. Management feels that these changes will help to drive increased profitability in the future.

The national and international economic outlook requires us to be cautious in our enthusiasm for the future. While a slow economy can emphasize barter as an increased part of a successful business’s model, management must be extra diligent in monitoring the health of the exchange members so as to ensure the continued health of the exchange and collectability of fees earned. That said, fees earned are relatively small amounts from a large number of clients in 50 markets across the country. This diversification provides substantial revenue risk mitigation.

RESULTS OF OPERATIONS

GROSS REVENUE & EXPENSES

In 2008 IMS experienced positive cash flows from operations of more than $610,000, and operating profits (EBITDA) totaling nearly $594,000. However after deducting amortization and impairment of our membership lists, as well as bad debt expense and depreciation, the Company posted a net loss of $940,521, compared to a net loss of $414,290, in 2007. The impairment loss was recorded when estimated future cash flows were calculated as less than anticipated at the time of the original acquisitions. Management believes that these expenses represent investment in infrastructure that will provide substantial future organic growth.

During the year ended December 31, 2008 IMS processed more than $114 million in trade sales transactions, generating gross revenue of $14,203,550, compared to $14,772,045 in 2007. A substantial portion of the decline in revenue was experienced in the corporate barter division, resulting in a decline in trade revenue. While revenue from the corporate division has decreased year over year, as operated it is an incrementally less profitable segment of our business. Gross revenue from this division decreased from $2,678,605 in 2007 to $1,030,246 in 2008.

Total operating expenses increased from $14,945,745 in 2007 to $15,448,086 for the year ended December 31, 2008, an increase of 3.3%. This increase is primarily due to inclusion of the operating expenses from market acquisitions made in 2007 and 2008. A full year’s expenses are included in 2008 for 2007 acquisitions, compared to a partial year’s expenses in 2007. Similarly, 2008 includes a partial year’s expenses for markets acquired in 2008 which would not have been included in 2007’s results. Adjusting for these fluctuations, operating expenses are relatively comparable on a year over year basis.

Payroll expenses increased 2.7% from $9,228,485 in 2007 to $9,483,364 in 2008, while occupancy expenses increased from $969,243 to $1,078,288, or 11.4%. Selling expenses increased 22.4%, from $687,079 in 2007 to $840,926 in 2008. The increase in selling expenses was a direct result of our expanded sales force early in the year. However, the sales department has been reduced and expenses in 2009 should decrease proportionately. General and administrative expenses were reduced 13.1%, from $2,319,680 to $2,014,856. Depreciation and amortization expenses were increased 12.2%, from $1,465,367 to $1,643,534. This was a mainly a result of the new exchanges acquired in 2008.

Net cash flows from operations totaled $610,238 in 2008, compared to $945,111 in 2007. EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $593,728 compared to EBITDA of $1,375,839 in 2007.

EBITDA Calculation
	2008			2007
Net loss	$	(940,521	)	$	(414,290	)
Interest expense		275,332			342,855
Taxes		(594,222	)		(54,769	)
Depreciation & amortization		1,643,534			1,465,367
Impairment		209,605			36,676
Total EBITDA	$	593,728		$	1,375,839

FINANCIAL CONDITION

LIQUIDITY, COMMITMENTS FOR CAPITAL RESOURCES, AND SOURCES OF FUNDS

In 2008 IMS experienced positive cash flows from operations of $610,238. Our principal source of liquidity from operations has been cash earnings from membership charges, monthly service fees and transaction processing charges. We believe that cash from operations will be adequate to provide for our continuing liquidity needs.

At December 31, 2008 the Company had a working capital deficit of $1,173,807 and a net loss of $940,521. The loss resulted in part from $1,643,534 in depreciation and amortization expenses and an impairment charge of $209,605. As a result of recent cuts in personnel and salaries, management believes that cash flows from operations will increase by approximately $1,300,000. We also anticipate $100,000 in new financing, and an extension of a $100,000 note payable currently due in 2009. Accordingly, management has mitigated the working capital deficiency and does not believe that substantial doubt exists about the Company’s ability to continue as a going concern.

In May of 2008, IMS acquired BNI of Long Island, NY for $400,000, and in July acquired Barter Max of Boston, MA for $400,000. The Company also concluded its purchase of New York Commerce Group in 2008. We are not currently obligated to purchase any trade exchange or other business. However, we will continue to seek opportunities to acquire additional quality exchanges in the future.

Over 46% of the current portion of long-term debt consists of notes convertible to equity. We anticipate that some of this debt will be converted to equity. However, existing cash flow is sufficient to meet current obligations, should anticipated conversions not materialize.

CHANGES IN ASSETS AND LIABILITIES

During 2008 cash balances decreased to $279,227 from $812,365 in 2007. The decrease is due to the investments in additional markets and infrastructure for future growth described above. Restricted cash deposited in escrow accounts totaled $495,803, compared to $483,443 in 2007, primarily to guarantee the buyback of shares related to the purchase of Alliance Barter. If IMS’ stock price exceeds $.75 per share, these funds will revert back to the Company in accordance with the purchase agreement. At the end of 2008, accounts receivable, net of allowance for doubtful accounts, totaled $1,401,383, compared to $1,516,938 at the end of 2007. Earned trade decreased from $314,928 to $6,991 primarily due to outlays for advertising during the fourth quarter. As a result of these changes, total current assets decreased from $3,392,126 on December 31, 2007 to $2,460,261 at the end of 2008. Other assets decreased by $433,906, or 3.2%. Total assets decreased from $18,351,454 in 2007 to $16,772,946 on December 31, 2008.

Current liabilities decreased by $344,401, or 8.6%, from $3,978,469 in 2007 to $3,634,068 at the end of 2008. This decrease is primarily due to retiming and renewal of notes payable, setting due dates further into the future, helping to increase cash flow in 2009. Current and long-term notes payable consist of various notes to former owners of acquired trade exchanges, or to investors who funded the acquisitions. At the end of 2008, long-term debt was $5,119,647 compared to $5,292,037 in 2007, a decrease of $172,390. Total liabilities decreased 5.5%, from $9,270,506 in 2007 to $8,753,715 at the end of 2008.

Common stock and paid-in capital increased from $10,908,001 in 2007 to $11,703,201 in 2008. Treasury stock increased from $547,241 (1,276,542 shares) in 2007 to $1,403,216 (2,322,542 shares) in 2008. Total shareholder equity decreased 11.7%, from $9,080,948 in 2007 to $8,019,231 on December 31, 2008.

BOARD OF DIRECTORS

In 2007 the board of directors formed a Compensation Committee. The members of that committee, as of December 31, 2008, are Wayne Dalin, Thomas Delacy, Wayne Emmer and Gerald Van Dyn Hoven.

The Audit Committee members are Wayne Dalin, Thomas Delacy, Wayne Emmer, Gerald Van Dyn Hoven and Donald Mardak.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management's applications of accounting policies. The significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating our reported financial results include revenue recognition, intangible asset testing and income taxes.

NEW ACCOUNTING STANDARDS

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51”. This statement improves the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require: the ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income; changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently; when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value; entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 affects those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133), as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement.

In May 2008, the FASB issued FASB Staff Position APB 14-1 (FSP APB 14-1), “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)”, which applies to all convertible debt instruments that have a “net settlement feature”, which means that such convertible debt instruments, by their terms, may be settled either wholly or partially in cash upon conversion. FSP APB 14-1 requires issuers of convertible debt instruments that may be settled wholly or partially in cash upon conversion to separately account for the liability and equity components in a manner reflective of the issuers’ nonconvertible debt borrowing rate. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. Early adoption is not permitted and retroactive application to all periods presented is required. We continue to evaluate the application of FSP APB 14-1 on our financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles and provides entities with a framework for selecting the principles used in preparation of financial statements that are presented in conformity with GAAP. The current GAAP hierarchy has been criticized because it is directed to the auditor rather than the entity, it is complex, and it ranks FASB Statements of Financial Accounting Concepts, which are subject to the same level of due process as FASB Statements of Financial Accounting Standards, below industry practices that are widely recognized as generally accepted but that are not subject to due process. The Board believes the GAAP hierarchy should be directed to entities because it is the entity (not its auditors) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC’s approval of PCAOB Auditing Standard No. 6, Evaluating Consistency of Financial Statements (AS/6). The adoption of FASB 162 is not expected to have a material impact on the Company’s financial position.

In May, 2008, FASB issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60" ("SFAS 163"). SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. SFAS 163 also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company does not expect the proposed guidance will have an impact on its consolidated financial statements.

OFF BALANCE SHEET ARRANGEMENT

We do not have any off balance sheet arrangements or other relationships with unconsolidated entities.

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOUSRES ABOUT MARKET RISK

Not applicable because we are a small reporting company.

ITEM 8 - FINANCIAL STATEMENTS

Our consolidated financial statements and related notes, and the report of Webb and Company, P.A., independent auditors, with respect thereto, as described in the Index to Financial Statements, appear elsewhere in this report at pages F-1 through F-31.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

During IMSL's two most recent fiscal years of IMSL's engagement of Webb and Company P.A. ("Webb"), neither IMSL nor anyone on behalf of IMSL consulted with Webb regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on IMSL's consolidated financial statements; or (ii) any other matter that was either the subject of a disagreement (as defined in Regulation S-K Item 304(a)(1)(iv)) or a reportable event (as described in Regulation S-K Item 304(a)(1)(v)).

ITEM 9A(T) - CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Donald F. Mardak, our Principal Executive Officer and Danny W. Weibling, our Principal Financial Officer, are responsible for establishing and maintaining disclosure controls and procedures for us. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this report, is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and to reasonably assure that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

Our management does not expect that our disclosure controls or our internal controls will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of December 31, 2008, the end of the period covered by this report, our management concluded its evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. As of the evaluation date, our Principal Executive Officer and our Principal Financial Officer concluded that we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management, including our Principal Executive Officer and Principal Financial Officer, are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making its assessment of internal control over financial reporting, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on this evaluation, our management concluded that, as of December 31, 2008, our internal control over financial reporting was effective based on those criteria.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal control over financial reporting during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS

Executive Officers and Directors

The following table sets forth information concerning our executive officers and directors, including their names, ages and the positions they held with IMSL, as of December 31, 2008.

Name	Age	Position
Donald F. Mardak	72	Principal Executive Officer, President and Director
Danny W. Weibling	60	Treasurer and Principal Financial Officer
John E. Strabley	45	Executive Vice President and Director
Dale L. Mardak	48	Senior Vice President and Director
Patricia A. Katisch	63	Corporate Secretary
Wayne Emmer	54	Director
Gerald Van Dyn Hoven	52	Director
Thomas Delacy	44	Director
Wayne Dalin	64	Director
Stephen Webster	64	Director

Donald F. Mardak has been the Principal Executive Officer, President and a director of IMSL since our inception in 1988. From 1970 to 1974, Mr. Mardak was a partner in Learning Unlimited, a division of Hal Leonard Publishing Corp. In 1974, he founded Don Mardak Piano & Organ Centers, Ltd., a chain of retail piano and organ stores in the Greater Milwaukee area. In 1985, Mr. Mardak founded the Continental Trade Exchange barter network under the name "Continental Trading Company", a sole proprietorship. Continental Trading Company was incorporated in 1988 as Continental Trade Exchange, Ltd. and is now our primary operating subsidiary. Mr. Mardak is a two-term president of NATE, the National Association of Trade Exchanges (1995-96 and 1999-2000) and served on the board of directors of the organization for seven years. NATE is the principal barter industry trade association.

John E. Strabley has been the Executive Vice President of IMSL since 1992 and a director since 1997. Mr. Strabley joined Continental Trade Exchange, Ltd. as a trade broker in 1991. In 1992, he was promoted to General Manager and, in August of that year, was appointed as Vice President of Continental Trade Exchange and IMSL. In 1995, Mr. Strabley passed the barter industry certification examination and was awarded with the industry's highest designation of CTB - Certified Trade Broker. In 1997, Mr. Strabley became a director of both Continental Trade Exchange, Ltd. and IMSL.

Dale L. Mardak has been Senior Vice President of IMSL since 1995, and a director since 1997. He joined Continental Trade Exchange, Ltd. in 1993 as a trade broker and was appointed trade director in 1995. In 1997, he was appointed Treasurer and a director of both Continental Trade Exchange, Ltd. and IMSL. In 1999, Mr. Mardak received the designation of CTB - Certified Trade Broker.

Danny W. Weibling is a Certified Public Accountant and, along with his wife Lisa, was the former owner of Trade Systems Interchange, the Rohnert Park, CA barter network that IMSL acquired in April of 2001. Mr. Weibling is also the developer and programmer of TradeWorks, a leading barter industry software program, and he served six years as treasurer of the National Association of Trade Exchanges. He has been Treasurer and Principal Financial Officer of IMSL since April of 2001.

Patricia A. Katisch is the owner of Katisch & Associates, a marketing consulting and public relations firm she has operated since 2002. From 1998 - 2001, Ms. Katisch was an Associate Dean in the College of Professional Studies at Marquette University. Previous to that, she founded and published the Women's Yellow Pages of Greater Milwaukee and was the producer of the Wisconsin World of Women Show.

Wayne Emmer is the President of Illinois Cement Co., a position he has held since August of 1998. Wayne is also a former member of the Parkview Christian Academy School Board.

Gerald Van Dyn Hoven has been the president of the Van Dyn Hoven Automotive Group for more than 20 years. Jerry is a director of American National Bank - Fox Cities, and is a member of the Board of Trustees of Equitable Reserve Association.

Thomas Delacy is the president and CEO of Independent Inspections, Ltd., a company that provides municipal inspection services for several cities. Tom has held this position for more than 15 years.

Wayne Dalin has been a Certified Public Accountant for more than 30 years and is a retired principal in Dalin, Lindseth & Company.

Stephen Webster was the former owner of Alliance Barter, of Rochester New York for more than 25 years. He is a past president of the National Association of Trade Exchanges (NATE) and the International Reciprocal Trade Association (IRTA). Steve is also a member of the Barter Hall of Fame. He is currently a real estate developer and private investor.

Donald F. and Judy E. Mardak are husband and wife. John E. Strabley is their son-in-law, and Dale L. Mardak is their son. Kimberly A. Strabley, the daughter of Donald F. and Judy E. Mardak and the wife of John E. Strabley, is also employed as IMS travel director and reciprocal accounts manager.

All of our directors are serving three-year terms. Messrs. Van Dyn Hoven, Strabley and Webster serve a three-year term expiring at the 2010 annual meeting of shareholders. Mr. Donald F. Mardak, Messrs. Emmer and Dalin are serving three-year terms expiring at the 2008 annual meeting of shareholders. And Messrs. Delacy and Dale L. Mardak serve a three-year term expiring at the 2009 annual meeting of shareholders.

Director's Compensation

While we do not have an established compensation policy for our directors, from time to time we may issue members of our outside Board of Directors shares of stock as compensation for their services to us in those positions. During 2008 we issued an aggregate of 60,000 shares of our common stock valued at $21,000 to Messrs. Gerald Van Dyn Hoven, Wayne Emmer, Thomas Delacy, Wayne Dalin, Stephen Webster and Patricia Katisch as compensation for their services.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and persons who own more than ten percent of a registered class of our equity securities to file with the Securities and Exchange Commission ("SEC") initial reports of ownership and reports of changes in ownership of our Common Stock and other IMSL equity securities. Officers, directors and beneficial owners of more than ten percent of such equity securities are required by SEC regulations to furnish us with copies of all Section 16(a) reports filed by them.

Based solely upon review of the copies of such reports furnished to us and written representations that no other reports were required, IMSL believes that there was compliance for the fiscal year ended December 31, 2008 with all Section 16(a) reports filed by them.

ITEM 11 - EXECUTIVE COMPENSATION.

The following table summarizes the compensation paid to or accrued by our principal executive officer and the two most highly compensated executive officers other than the principal executive officer, who were serving as executive officers at the end of December 31, 2008, for the fiscal years ended December 31, 2008 and 2007:

SUMMARY COMPENSATION TABLE

										Pension Value
										and
										Nonqualified
										Deferred		Non-Equity
						Stock		Option		Compensation		Incentive Plan		All Other
Name and		Salary		Bonus		Awards		Awards		Earnings		Compensation		Compensation		Total
Principle Position	Year	($)		($)		($)		($)		($)		($)		($) (1)		($)


Donald F. Mardak,	2008		230,000		--		--		--		--		--		10,367		240,367
Principal Executive	2007		200,000		--		--		--		--		--		6,960		206,960
Officer & President


Danny W. Weibling,	2008		190,000		2,500		--		--		--		--		4,367		196,867
Principal Financial	2007		165,000		--		--		--		--		--		3,975		168,975
Officer & Treasurer


John E. Strabley,	2008		175,000		2,500		--		--		--		--		6,092		183,592
Executive Vice	2007		150,000		--		--		--		--		--		4,706		154,706
President & Director

(1) Represents auto allowances.

Employment Agreements

On March 10, 2007, we renewed the employment agreements with Donald F. Mardak, our president, Danny W. Weibling, our Principal Financial Officer and John E. Strabley, and Dale L. Mardak our senior vice presidents, pursuant to which these employees will receive base salaries in 2008 of $230,000, $190,000, $175,000 and $165,000, respectively, plus commissions and bonuses, if any, to be determined by our principal executive officer at his discretion. On November 20, 2008 we amended the contracts to freeze the compensation schedule at the above 2008 salaries. Each contract was modified to add one additional year to the original three year terms. Each of these contracts will be automatically extended for additional one-year periods thereafter, unless terminated by either IMSL or the employee. Each agreement further provides that, for eighteen months after the termination thereof, the employee will not, either directly or indirectly, compete with the businesses of International Monetary Systems, Ltd. Each employee also agrees to maintain the confidentiality of trade secrets and other information concerning IMSL. Each receives an annual auto allowance of from $4,000-$12,000. On March 31, 2009, each of the above officers agreed to a 10% reduction in salary.

Each of the agreements provides for stock options at the discretion of Management. All agreements contain a change of control provision. In the event of a merger, acquisition of IMSL or sale of substantially all of its assets, Donald Mardak's contract provides for compensation equal to two years' salary plus a lump sum payment of $400,000, Danny Weibling's, John Strabley's and Dale Mardak's contracts provide for compensation equal to one year's salary plus a lump sum payment of $200,000.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table provides information concerning unexercised options and stock that has not vested for each of our Named Executive Officers for the fiscal year ended December 31, 2008.

Option Awards

Stock Awards

Equity

incentive

Number

Market

plan

plan awards:

Equity

value

awards:

Market or

incentive

number of

payout

plan

unearned

value of

awards:

units

or units

shares or

unearned

Number of

units or

shares,

securities

stock

other

units or

underlying

that

rights

other

unexercised

Option

have

that have

rights

options

unearned

exercise

Option

not

that have

exercisable

unexercisable

options

price

expiration

vested

not vested

Name

(#)

($)

date

(#)

($)

(#)

($)

Donald F.

Mardak

Danny W.

Weibling

400,000

0.15

Jan .2009

John E.

Strabley

Compensation of Directors

We pay our outside directors cash of $200 to $300 per board meeting and an annual fee of 10,000 shares of IMS stock. Our Named Executive Officers or other employees are not compensated additionally as board members. No stock options have been issued to our outside directors.

The table below summarizes the total compensation paid by us to our outside directors for the fiscal year ended December 31, 2008.

									Nonqualified
							Non-Equity		Deferred
	Fees Earned or		Stock		Option		Incentive Plan		Compensation		All Other
	Paid in Cash		Awards (1)		Awards		Compensation		Earnings		Compensation		Total
Name	($)		($)		($)		($)		($)		($)		($)

Wayne Dalin		1,200		3,500		--		--		--		--		4,700
Thomas Delacy		900		3,500		--		--		--		--		4,400
Wayne Emmer		700		3,500		--		--		--		--		4,200
Gerald Van Dyn Hoven		900		3,500		--		--		--		--		4,400
Stephen Webster		900		3,500		--		--		--		--		4,400

(1) For all directors, this is the fair value of the 10,000 shares of stock issued, at the date of issue.

Limitation of Liability and Indemnification

Our bylaws provide for the elimination, to the fullest extent permissible under Wisconsin law, of the liability of our directors to us for monetary damages. This limitation of liability does not affect the availability of equitable remedies such as injunctive relief. Our bylaws also provide that we shall indemnify our directors and officers against certain liabilities that may arise by reason of their status for service as directors or officers, other than liabilities arising from certain specified misconduct. We are required to advance their expenses incurred as a result of any proceeding against them for which they could be indemnified, including in circumstances in which indemnification is otherwise discretionary under Wisconsin law. At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of our company in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding which may result in a claim for such indemnification.

CODE OF ETHICS

The Board of Directors has adopted a Code of Business Conduct and Ethics that applies to, among other persons, our President (being our principal executive officer) as well as all employees. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

	honest and ethical conduct, including the ethical handling of actual
	or apparent conflicts of interest between personal and professional
	relationships;

	full, fair, accurate, timely, and understandable disclosure in
	reports and documents that we file with, or submit to, the SEC and
	in other public communications made by us;

	compliance with applicable governmental laws, rules and regulations;

	the prompt internal reporting of violations of the Code of Business
	Conduct and Ethics to an appropriate person or persons identified in
	the Code of Business Conduct and Ethics; and

	accountability for adherence to the Code of Business Conduct and Ethics

Our Code of Business Conduct and Ethics requires, among other things, that all of our company's personnel are accorded full access to our President with respect to any matter that may arise relating to the Code of Business Conduct and Ethics. Further, all of our company's personnel are to be accorded full access to our Board of Directors if any such matter involves an alleged breach of the Code of Business Conduct and Ethics by our President.

In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal, provincial and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our company's President. If the incident involves an alleged breach of the Code of Business Conduct and Ethics by the President, the incident must be reported to any member of our Board Of Directors. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company's Code of Business Conduct and Ethics by another.

We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to 16901 West Glendale Drive, New Berlin, WI 53151.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides certain information with respect to the beneficial ownership of our common stock, as of December 31, 2008, by:

· each person known by us to beneficially own more than 5% of our common stock;

· each of our directors and our named executive officers; and

· all of our directors and executive officers as a group.

We believe that, subject to applicable community and marital property laws, the beneficial owners of our common stock listed below have sole voting and dispositive power with respect to such shares.

	Shares beneficially owned
	as of December 31, 2008

Name of Beneficial Owner	Number		Percent

Donald F. Mardak (1)		17,707,800		28.73	%
Dale L. Mardak (2)		1,392,000		2.26	%
John E. Strabley (3)		676,000		1.10	%
Danny W Weibling (4)		393,500		0.64	%
Stephen Webster		2,714,000		4.40	%
Thomas Delacy		560,000		0.91	%
Gerald Van Dyn Hoven		442,000		0.72	%
Wayne Emmer		260,000		0.42	%
Wayne Dalin		243,460		0.40	%
Patricia Katisch		68,000		0.11	%

All directors and executive officers
as a group (10 persons)		24,456,760		39.69	%


Other Beneficial Owner

Praetorian Capital Management LLC (5)		8,957,793		14.54	%

Other than the options listed below, issued to Mr. Weibling, there are no other stock options or awards available to any officer or director. All shares listed on the above table are owned by the individual. No shares listed on the above table are shares that the individual has the right to acquire within the next 60 days.

(1)	Does not include 676,000 shares held by his wife, Judy E. Mardak, as to which Mr. Mardak disclaims beneficial ownership. All shares owned by Donald F. and Judy E. Mardak are now held in a revocable living trust.

(2)	Does not include 8,400 shares held by his wife, Lisa L. Mardak, as to which Mr. Mardak disclaims beneficial ownership.

(3)	Does not include 1,280,000 shares held by his wife, Kimberly A. Strabley, as to which Mr. Strabley disclaims beneficial ownership.

(4)	Does not include 246,000 shares held by his wife, Alesia Peters, as to which Mr. Weibling disclaims beneficial ownership. Does not include 400,000 shares of exercisable options.

(5)	Does not include 2,200,000 shares of exercisable warrants.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Transactions

We currently lease our executive offices and principal operating facilities, consisting of 11,000 square feet of space located at 16901 West Glendale Drive, New Berlin, Wisconsin, from Glendale Investments, LLC., a Wisconsin limited liability company owned by Donald F. Mardak, Dale L. Mardak and John E. Strabley, officers and directors of our company, under a triple net lease which commenced in October, 2008 and expires September 30, 2010. For the fiscal year ended December 31, 2007, we made rental payments of $90,000 and in the fiscal year ended December 31, 2008, we made rental payments of $90,000 to Glendale Investments, LLC. We believe that the rental payments required and other terms of our lease are comparable to those available for similar space from unaffiliated, third-party lessors in the area.

On August 3, 2007, the company issued 75,000 shares to Danny W. Weibling, Principal Financial Officer of IMS, in exchange for a copy of the source code of the software package called TradeWorks which he developed. The cost of the source code was $50,000. Shares were issued from the company’s treasury stock.

In 2008 and 2007, Patricia Katisch, our Corporate Secretary, was paid $500 and $480 respectively to produce and distribute the corporate minutes.

Conflicts of Interest

Certain potential conflicts of interest are inherent in the relationships between our affiliates and us. From time to time, one or more of our affiliates may form or hold an ownership interest in and/or manage other businesses both related and unrelated to the type of business that we own and operate. These persons expect to continue to form, hold an ownership interest in and/or manage additional other businesses which may compete with ours with respect to operations, including financing and marketing, management time and services and potential customers. These activities may give rise to conflicts between or among the interests of IMSL and other businesses with which our affiliates are associated. Our affiliates are in no way prohibited from undertaking such activities, and neither we nor our shareholders will have any right to require participation in such other activities.

Further, because we intend to transact business with some of our officers, directors and affiliates, as well as with firms in which some of our officers, directors or affiliates have a material interest, including for example the lease agreement described above under "Certain Relationships and Related Transactions - Certain Transactions", potential conflicts may arise between the respective interests of IMSL and these related persons or entities. We believe that such transactions will be effected on terms at least as favorable to us as those available from unrelated third parties.

With respect to transactions involving real or apparent conflicts of interest, we have adopted policies and procedures which require that (1) the fact of the relationship or interest giving rise to the potential conflict be disclosed or known to the directors who authorize or approve the transaction prior to such authorization or approval, (2) the transaction be approved by a majority of our disinterested outside directors and (3) the transaction be fair and reasonable to IMSL at the time it is authorized or approved by our directors.

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

Webb & Company, P.A. served as our independent registered public accounting firm for fiscal years 2008 and 2007. The following table shows the fees that were billed for the audit and other services provided by each of these firms for the 2008 and 2007 fiscal years.

	2008		2007

Audit Fees	$	47,167	$	55,741
Audit-Related Fees		0		955
Tax Fees		0		0
All Other Fees		0		0

Total	$	47,167	$	56,696

Audit Fees -- This category includes the audit of our annual financial statements, review of financial statements included in our Form 10-Q Quarterly Reports and services that are normally provided by the independent auditors in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

Audit-Related Fees -- This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under "Audit Fees." The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting.

Tax Fees -- This category consists of professional services rendered by our independent auditors for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

All Other Fees -- This category consists of fees for other miscellaneous items.

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent auditors. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting. The audit fees paid to the auditors with respect to fiscal year 2008 were pre-approved by the entire Board of Directors.

ITEM 15 - EXHIBITS LIST AND REPORTS ON FROM 8-K

(a) Exhibits:

Exhibit
Number	Description
3.1	Articles of Incorporation of the Registrant *
3.2	Articles of Amendment of the Registrant *
3.3	Bylaws of the Registrant *
10.1	Lease Agreement, between Glendale Investments, LLC. and the Registrant *
23.1	Consent of Independent Registered Public Accounting Firm **
31.1	Certificate of the Principal Executive Officer pursuant to Section 302 of
	the Sarbanes-Oxley Act of 2002 **
31.2	Certificate of the Principal Financial Officer pursuant to Section 302 of
	the Sarbanes-Oxley Act of 2002 **
32.1	Certificate of the Principal Executive Officer to Section 906 of
	the Sarbanes-Oxley Act of 2002 **
32.2	Certificate of the Principal Financial Officer to Section 906 of
	the Sarbanes-Oxley Act of 2002 **

	* Incorporated by reference to the registration statement of the
	company on Form SB-2 File No. 333-94597

	** Filed herein

(b) Reports on Form 8-K -- None

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTERNATIONAL MONETARY SYSTEMS, LTD.

Dated: April 6, 2009	By:	/s/ DONALD F. MARDAK

		Donald F. Mardak, President
		(Principal Executive Officer)


Dated: April 6, 2009	By:	/s/ DANNY W. WEIBLING, CPA

		Danny W. Weibling, Treasurer
		(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE


/s/ DONALD F. MARDAK	Principal Executive Officer,	April 6, 2009
	President and Director
Donald F. Mardak

/s/DANNY W. WEIBLING	Principal Financial Officer,	April 6. 2009
	Principal Accounting Officer
Danny W. Weibling	and Treasurer

/s/ DALE L. MARDAK	Senior Vice President	April 6, 2009
	and Director
Dale L. Mardak

/s/ JOHN E. STRABLEY	Executive Vice President	April 6, 2009
	and Director
John E. Strabley

/s/ THOMAS E. DELACY	Director	October 23, 2009

Thomas E. Delacy

/s/ WAYNE R. DALIN	Director	October 23, 2009

Wayne R. Dalin

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

and

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

For the Years Ended December 31, 2008 and 2007

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

TABLE OF CONTENTS



	Page


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	1


FINANCIAL STATEMENTS

Consolidated Balance Sheets	2 - 3

Consolidated Statements of Operations and Comprehensive Income (Loss)	4

Consolidated Statements of Changes in Stockholder Equity	5

Consolidated Statements of Cash Flows	6 - 7

Notes to Consolidated Financial Statements	8 - 30

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

International Monetary Systems, Ltd. and Subsidiaries

We have audited the accompanying consolidated balance sheets of International Monetary Systems, Ltd. and Subsidiaries as of December 31, 2008 and December 31, 2007, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholder equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Monetary Systems, Ltd. and Subsidiaries at December 31, 2008 and December 31, 2007, and the results of its operations and comprehensive income (loss), and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

WEBB & COMPANY, P. A.

Boynton Beach, Florida

March 21, 2009, except for Note 14,

To which the date is April 4, 2009

The accompanying notes are an integral part of the audited consolidated financial statements.

F -1

INTERNATIONAL MONETARY SYSTEMS, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
December 31

	2008		2007
ASSETS			(restated)
Current assets
Cash	$	279,227	$	812,365
Restricted cash		495,803		483,443
Marketable securities		84,808		118,380
Accounts receivable, net of allowance for doubtful
accounts of $796,261 in 2008 and $739,540 in 2007		1,401,383		1,516,938
Refundable income taxes		48,500		-
Earned trade account		6,991		314,928
Prepaid expenses		109,710		112,233
Inventory		33,839		33,839
Total current assets		2,460,261		3,392,126

Property and equipment, net		1,056,526		1,269,263

Other assets
Membership lists, net		9,577,257		9,962,154
Goodwill		3,435,479		3,435,479
Deferred tax asset		75,000		-
Covenant not to compete, net		-		14,883
Purchase option		-		112,500
Assets held for investment		99,298		99,298
Investment in real estate		26,000		28,695
Cash surrender value		43,125		37,056
Total other assets		13,256,159		13,690,065

Total assets	$	16,772,946	$	18,351,454

The accompanying notes are an integral part of the audited consolidated financial statements.

F -2

INTERNATIONAL MONETARY SYSTEMS, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
December 31
	2008			2007
LIABILITIES AND STOCKHOLDER EQUITY				(restated)
Current liabilities
Accounts payable	$	245,579		$	324,808
Accrued compensation		298,317			377,515
Accrued payroll taxes		103,150			99,602
Accrued sales taxes		33,702			51,807
Accrued income taxes		8,150			149,000
Trade payable		321,476			-
Credit lines		340,736			-
Current portion of notes payable		838,992			785,460
Current portion of convertible notes payable		175,466			1,195,277
Current portion of common stock subject to guarantees		1,268,500			995,000
Total current liabilities		3,634,068			3,978,469

Long-term liabilities
Notes payable, less current portion		154,334			716,037
Convertible notes payable, less current portion		1,306,813			-
Common stock subject to guarantees, less current portion		1,359,500			1,890,000
Deferred compensation		260,000			136,000
Deferred income taxes		2,039,000			2,550,000
Total long-term liabilities		5,119,647			5,292,037
Total liabilities		8,753,715			9,270,506

COMMITMENTS AND CONTINGENCIES		-			-

STOCKHOLDER EQUITY
Preferred stock, $.0001 par value; 20,000,000 shares
authorized, none outstanding		-			-
Common stock, $.0001 par value; 280,000,000 shares
authorized, 61,625,436 and 60,565,436 shares
issued and outstanding, respectively		6,163			6,057
Paid in capital		11,697,038			10,901,944
Treasury stock, 2,322,542 and 1,276,542 shares
outstanding, respectively		(1,403,216	)		(547,241	)
Subscription receivable		-			(31,196	)
Deferred compensation		(25,467	)		-
Accumulated other comprehensive income		(50,840	)		15,310
Accumulated deficit		(2,204,447	)		(1,263,926	)
Total stockholder equity		8,019,231			9,080,948

Total liabilities and stockholder equity	$	16,772,946		$	18,351,454

The accompanying notes are an integral part of the audited consolidated financial statements.

F -3

INTERNATIONAL MONETARY SYSTEMS, LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the Years Ended December 31

	2008			2007

Revenue	$	14,203,550		$	14,772,045

Operating expenses
Payroll, related taxes and employee benefits		9,483,364			9,228,485
General and administrative		2,014,856			2,319,680
Occupancy		1,078,288			969,243
Selling		840,926			687,079
Depreciation and amortization		1,643,534			1,465,367
Impairment of membership list		209,605			36,676
Provision for bad debts		177,513			239,215
Total operating expenses		15,448,086			14,945,745
Net loss from operations		(1,244,536	)		(173,700	)
Other income (expense)
Interest income		8,910			47,496
Loss on disposal of fixed assets		(23,786	)		-
Interest expense		(275,332	)		(342,855	)
Total other income (expense)		(290,208	)		(295,359	)

Loss before income taxes		(1,534,744	)		(469,059	)

Income tax expense (benefit)		(594,222	)		(54,769	)

Net loss	$	(940,521	)	$	(414,290	)

Basic earnings per common share	$	(0.02	)	$	(0.01	)
Diluted earnings per common share	$	(0.02	)	$	(0.01	)
Weighted average shares outstanding, basic		59,560,197			57,061,451
Weighted average shares outstanding, diluted		59,560,197			57,061,451

Comprehensive (loss)	2008			2007
Net loss	$	(940,521	)	$	(414,290	)
Comprehensive income:
Foreign currency translation loss		(24,046	)		12,863
Unrealized loss on available for sale investments		(42,104	)		2,447
Comprehensive loss	$	(1,006,671	)	$	(398,980	)

The accompanying notes are an integral part of the audited consolidated financial statements.

F -4

INTERNATIONAL MONETARY SYSTEMS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER EQUITY
For the Years Ended December 31

															Accumulated									Treasury						Total
	Preferred Stock				Common Stock				Paid in			Subscription			Comprehensive			Deferred			Accumulated			Stock						Stockholder
	Shares		Amount		Shares		Amount		Capital			Receivable			Income			Compensation			Deficit			Shares			Amount			Equity
Balance, December 31, 2006		-	$	-		52,623,769	$	5,263	$	9,291,988		$	(42,017	)	$	-		$	-		$	(849,363	)		(1,566,542	)	$	(626,241	)	$	7,779,537
Foreign currency translation adjustment		-		-		-		-		-			-			12,863			-			-			-			-			12,863
Unrealized gain on available for sale
securities		-		-		-		-		-			-			2,447			-			-			-			-			2,447
Net loss for 2007		-		-		-		-		-			-			-			-			(414,290	)		-			-			(414,290	)
Total comprehensive loss		-		-		-		-		-			-			-			-			-			-			-			(398,980	)
Stock issued for services		-		-		75,000		8		48,242			-			-			-			-			-			-			48,250
Stock issued for software		-		-		-		-		-			-			-			-			-			75,000			50,000			50,000
Shares issued in conjunction with
the acquisition of businesses		-		-		3,683,333		368		2,849,632			-			-			-			-			-			-			2,850,000
Warrants redeemed		-		-		750,000		75		412,425			-			-			-			-			-			-			412,500
Options exercised		-		-		-		-		-			-			-			-			-			190,000			29,000			29,000
Options exercised for 2004, unissued		-		-		-		-		-			-			-			-			-			25,000			-			-
Shares issued on conversion of
notes payable		-		-		3,433,334		343		1,029,657			-			-			-			-			-			-			1,030,000
Subscription receivable		-		-		-		-		-			10,821			-			-			-			-			-			10,821
Reclassification of shares released at
guaranteed prices to liabilities		-		-		-		-		(2,730,000	)		-			-			-			-			-			-			(2,730,000	)
Balance December 31, 2007		-		-		60,565,436		6,057		10,901,944			(31,196	)		15,310			-			(1,263,926	)		(1,276,542	)		(547,241	)		9,080,948
Foreign currency translation adjustment		-		-		-		-		-			-			(24,046	)		-			-			-			-			(24,046	)
Unrealized loss on available for sale
securities		-		-		-		-		-			-			(42,104	)		-			-			-			-			(42,104	)
Net loss for 2008		-		-		-		-		-			-			-			-			(940,521	)		-			-			(940,521	)
Total comprehensive loss		-		-		-		-		-			-			-			-			-			-			-			(1,006,671	)
Stock issued for services		-		-		310,000		31		85,669			-			-			(25,467	)		-			-			-			60,233
Shares issued in conjunction with
the acquisition of businesses		-		-		200,000		20		149,980			-			-			-			-			-			-			150,000
Warrants redeemed		-		-		550,000		55		302,445			-			-			-			-			-			-			302,500
Treasury stock purchases		-		-		-		-		-			-			-			-			-			(1,046,000	)		(855,975	)		(855,975	)
Subscription receivable written off		-		-		-		-		-			31,196			-			-			-			-			-			31,196
Reclassification of shares released at
guaranteed prices to liabilities		-		-		-		-		257,000			-			-			-			-			-			-			257,000
Balance December 31, 2008		-	$	-		61,625,436	$	6,163	$	11,697,038		$	-		$	(50,840	)	$	(25,467	)	$	(2,204,447	)		(2,322,542	)	$	(1,403,216	)	$	8,019,231

The accompanying notes are an integral part of the audited consolidated financial statements.

F -5

INTERNATIONAL MONETARY SYSTEMS, LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(940,521	)	$	(414,290	)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization		1,643,534			1,465,263
Impairment loss		209,605			36,676
Provision for bad debts		177,513			239,215
Stock issued for services		60,233			98,250
Loss on disposal of fixed assets		23,786			4,216
Accretion of discount on notes payable		4,723			37,097
Deferred compensation		124,000			15,000
Amortization of deferred compensation		26,196			-
Changes in operating assets and liabilities:
Accounts receivable		(30,957	)		48,418
Refundable income taxes		(48,500	)		-
Earned trade account		257,937			(761,228	)
Prepaid expense		2,523			115,602
Deferred tax asset		(75,000	)		-
Accounts payable		(79,229	)		16,637
Accrued compensation		(79,198	)		58,550
Accrued payroll taxes		3,548			47,464
Accrued sales taxes		(18,105	)		4,241
Accrued income taxes		(140,850	)		99,000
Deferred income taxes		(511,000	)		(165,000	)
Net cash provided by operating activities		610,238			945,111

CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in restricted cash		(12,360	)		(483,443	)
(Increase) decrease in marketable securities		(8,531	)		(9,000	)
Capital expenditures		(89,985	)		(768,588	)
Cash received in business acquisitions		-			498,453
Cash payments for business acquisitions		(495,000	)		-
Proceeds from sale of real estate		2,695			5,000
Increase in cash surrender value		(6,069	)		(5,600	)
Net cash used in investing activities		(609,250	)		(763,178	)

The accompanying notes are an integral part of the audited consolidated financial statements.

F -6

INTERNATIONAL MONETARY SYSTEMS, LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31
	2008			2007
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable to related parties		25,000			(110,024	)
Proceeds from credit lines		480,000			-
Proceeds from convertible notes payable		300,000			-
Payments on notes payable to related parties		(25,000	)		-
Payments on credit lines		(139,264	)		-
Payments on notes payable		(956,095	)		(655,689	)
Payments on convertible notes payable		(17,721	)		-
Purchase of treasury stock		(484,499	)		-
Proceeds from subscription receivable		5,000			10,820
Proceeds from issuance of stock		302,500			441,500
Net cash used in financing activities		(510,079	)		(313,393	)

Effect of exchange rate changes		(24,047	)		12,863

Net decrease in cash		(533,138	)		(118,597	)

Cash at beginning of year		812,365			930,962

Cash at end of year	$	279,227		$	812,365

SUPPLEMENTAL DISCLOSURES
Cash paid for interest	$	280,107		$	332,891
Cash paid for income taxes	$	181,128		$	11,231

NON CASH FINANCING AND INVESTING ACTIVITIES
Acquisitions:
Fair value of assets acquired	$	1,155,424		$	4,095,000
Less: liabilities assumed		-			(130,000	)
Stock issued		(150,000	)		(2,850,000	)
Purchase option		(112,500	)		-
Issuance of long-term debt		(397,924	)		-
Deferred tax liability		-			(650,000	)
Net cash paid for acquisitions	$	495,000		$	465,000

Stock issued for services	$	60,233		$	98,250
Treasury stock redeemed for fixed assets	$	-		$	50,000
Unrealized net gain (loss) on equity investments	$	(42,103	)	$	2,447
Stock guarantees on acquisitions	$	300,000		$	2,500,000
Stock guarantees released	$	557,000		$	-
Payment of long-term debt with stock	$	-		$	1,030,000
Treasury stock acquired with trade payable	$	321,476		$	-

The accompanying notes are an integral part of the audited consolidated financial statements.

F -7

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -

INFORMATION ABOUT THE COMPANY AND

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. ORGANIZATION

B. LIQUIDITY AND OTHER MATTERS

C. OPERATIONS OF BARTER EXCHANGES

A barter (trade) exchange is a business network, a membership organization comprised of businesses that buy and sell among the network without using cash. It is a small, private economy with a unique currency called a barter dollar or trade dollar. It is a third-party record keeper which provides an alternative payment system.

Member businesses do not actually engage in direct barter. Rather, they sell products or services to other members, accepting payment in trade dollars which they then use to buy the products or services of other members of the network. Transactions are recorded through manual and electronic data transmission using a 24-hour telephone and Internet authorization system. Some members consign their products to the barter exchange to hold as saleable inventory. Others sell gift certificates or tickets that are redeemable for their goods or services.

The barter exchange maintains the accounting records for all sales and purchases, provides monthly statements, files annual tax forms 1099B, enrolls businesses to the network, proactively markets member products and services, maintains a member web site, facilitates transactions, and provides personal customer support services to members and clients.

D. CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not held for investment purposes.

F -8

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

E. RESTRICTED CASH

As a condition to issuing the guarantee on the purchase of certain exchanges, IMS agreed to deposit a monthly amount into an escrow account for the repurchase of common stock under guaranteed transactions. As of December 31, 2008 the Company has made all required deposits into the escrow account.

F. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, restricted cash, prepaid expense and other assets, accounts payable, accrued liabilities, notes payable and deferred compensation approximate their fair value due as of December 31, 2008 because of their short-term natures.

Fair Value Measurements

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements.

SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.

In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. FAS 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of FAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. The impact of adoption had no effect on the Company.

In October 2008, the FASB issued FASB Staff Position No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active. This FASB Staff Position clarifies the application of SFAS 157, in determining the fair value of a financial asset when the market for that financial asset is not active. This FASB Staff Position was effective upon issuance.

F -9

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Securities Available for Sale

Where quoted prices are available in an active market, securities are classified within level 1 of the valuation hierarchy. Level 1 securities include highly liquid government bonds, certain mortgage products and exchange-traded equities.

G. REVENUE SOURCES AND REVENUE RECOGNITION

The Company and its subsidiaries earn revenues in both traditional dollars (cash income) and in trade dollars. Cash income is earned through fees assessed when a member joins, through transaction fees generated when clients earn or spend trade dollars, through monthly maintenance fees, finance charges on delinquent accounts receivable, event fees, and inventory sales.

Trade revenue is similarly generated through initial membership fees, monthly maintenance fees, transaction fees, event fees, and inventory sales. Occasionally the Company will accept a favorable trade ratio in lieu of a cash fee. The Company uses earned trade dollars to purchase various goods and services required in its operations. All barter transactions are reported at the estimated fair value of the products or services received.

Revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured.

Transaction fees are recognized upon receipt of transactional information accumulated by our systems or reported by our clients. Membership fees, monthly maintenance fees, finance charges, and other fees are billed monthly to members’ accounts, and are recognized in the month the revenue is earned.

H. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements for 2008 and 2007 include the accounts of the Company and its wholly owned subsidiaries Continental Trade Exchange, Ltd., National Trade Association, Inc., and INLM CN, Inc. (from the acquisition date of February 1, 2007 through December 31, 2008). Significant inter-company accounts and transactions have been eliminated in consolidation.

I. USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

J. MARKETABLE SECURITIES

Marketable equity securities are classified into three categories: (1) held-to-maturity securities reported at amortized cost, (2) trading securities reported at fair value with unrealized gains and losses included in earnings, and (3) available-for-sale securities reported at fair value with unrealized gains and losses reported in other comprehensive income (loss). Costs are determined by the specific identification method.

F -10

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

K. RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable are stated at face value, net of the allowance for bad debts. Finance charges on receivables are calculated using the simple interest method on the amount outstanding.

The allowance for bad debts is maintained at a level that is management’s best estimate of probable bad debts incurred as of the balance sheet date. Management’s determination of the adequacy of the allowance is based on an evaluation of the accounts receivable, past collection experience, current economic conditions, volume, growth and composition of the accounts receivable, and other relevant factors. Actual results may differ from these estimates. The allowance is increased by provisions for bad debts charged against income.

L. INVENTORY

Inventory consists primarily of jewelry and other merchandise held for sale by the Company. Inventory is carried at the lower of actual cost or fair market value.

M. EARNED TRADE ACCOUNT

As part of the operations of the subsidiaries, the Company earns trade dollars which are used to purchase goods and services required in operations. This account is increased principally for service, membership and transaction fees, and is decreased by the Company’s purchase of goods and services. An impairment loss is recognized if it becomes apparent that the fair value of the trade dollars in the account is less than the carrying amount, or if it is probable that the Company will not use all of the balance.

N. PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using straight line methods over the estimated useful lives of five to thirty-nine years.

O. GOODWILL AND MEMBERSHIP LISTS

Goodwill and membership lists are stated at cost and arise when additional exchanges are purchased. Membership lists are amortized over the estimated life of ten years.

In 2002 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangibles,” which requires that goodwill and intangible assets with indefinite lives be tested annually for impairment. In 2008 the Company recorded an impairment loss of $209,605 on membership lists related to its Modesto, CA, Chattanooga, TN, Las Vegas, NV, and Louisville, KY operations. In 2007 the Company recorded an impairment loss of $36,676 on membership lists related to its Virginia, Memphis, TN and Indiana operations.

P. ASSETS HELD FOR INVESTMENT

Assets held for investment consist of various works of art which are valued at the lower of cost or fair market value.

F -11

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Q. INVESTMENT IN REAL ESTATE

Investment in real estate includes two parcels of undeveloped land valued at $26,000. Both are valued at the lower of cost or fair market value.

R. INCOME TAXES

The Company accounts for income taxes under the Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). Under SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

S. CONCENTRATIONS OF CREDIT RISK

Cash

Cash includes deposits at financial institutions with maturities of three months or less. The Company at times has cash in banks in excess of FDIC insurance limits and places its temporary cash investments with high credit quality financial institutions. At December 31, 2008 and 2007, respectively, the Company had approximately $198,000 and $835,000 in cash balances at financial institutions which were in excess of the FDIC insured limits. The FDIC insured limits at December 31, 2008 and 2007, respectively, were $250,000 and $100,000.

Accounts Receivable

The Company grants credit to its customers, all of whom are members of Continental Trade Exchange, National Trade Association and INLM CN. Customers are principally located throughout California, Colorado, Connecticut, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Nevada, New York, Ohio, Tennessee, Virginia, Washington DC, Wisconsin, and Toronto, Canada. The Company routinely assesses the financial strength of its customers and, therefore, believes that its accounts receivable credit risk exposure is limited.

T. SEGMENT REPORTING

The Company operates in one segment and, therefore, segment information is not presented.

U. ADVERTISING

Advertising costs, which are principally included in selling expenses, are expensed as incurred. Advertising expense was $503,997 and $334,028 for the years ended December 31, 2008 and 2007, respectively.

F -12

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

V. COMPREHENSIVE INCOME

FAS No. 130, Reporting Comprehensive Income (SFAS 130) establishes rules for reporting and displaying comprehensive income and its components. Comprehensive income is the sum of net loss as reported in the consolidated statements of operations and other comprehensive income transactions as reported in the consolidated statement of changes in stockholders' equity. Other comprehensive income transactions that currently apply to the Company result from unrealized gains or losses on equity investments and from changes in exchange rates used in translating the financial statements of its wholly owned subsidiary INLM CN, Inc. of Canada.

W. FOREIGN CURRENCY TRANSLATION

The financial statements of the Company's foreign subsidiary have been translated into U.S. dollars in accordance with SFAS No. 52, Foreign Currency Translation (SFAS 52). All balance sheet accounts have been translated using the exchange rate in effect at the balance sheet date. Income statement amounts have been translated using an appropriately weighted average exchange rate for the year. The translation gains and losses of $(24,046) and $12,863 resulting from the changes in exchange rates during 2008 and 2007, respectively, have been reported in accumulated other comprehensive income, except for gains and losses resulting from the translation of intercompany receivables and payables, which are included in earnings for the period.

X. LOSS PER SHARE

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by Financial Accounting Standards No. 128, “Earnings Per Share.” As of December 31, 2008 and 2007 there were 7,301,161 and 6,477,528 common share equivalents outstanding which consisted of:

	2008		2007
Shares issuable upon the
conversion of notes payable		4,441,161		2,907,528
Shares issuable upon the
exercise of warrants		2,200,000		2,750,000
Shares issuable upon the
conversion of stock options		660,000		820,000
		7,301,161		6,477,528

These shares were not included in the computations of loss per share because their effect was anti dilutive.

F -13

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Y. RECENT ACCOUNTING PRONOUNCEMENTS

F -14

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - MARKETABLE SECURITIES

SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities," requires that all applicable investments be classified as trading securities, available-for-sale securities or held-to-maturity securities. The Company has classified certain of its investments as trading securities which are reported at fair value, which is defined as the last closing price for the listed securities. The unrealized gains and losses which the Company recognizes from its trading securities are included in earnings. The Company also has investments classified as available-for-sale, which are also required to be reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity (net of the effect of income taxes). Fair value is also defined as the last closing price for the listed security. Due to the size of certain of the Company's investments and their limited trading volume, there can be no assurance that the Company will realize the value which is required to be used by SFAS No. 115.

F -15

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost of equity securities as shown in the accompanying balance sheet and their estimated market value at December 31, 2008 and 2007 are as follows:

	2008			2007
Available for sale securities:
Cost	$	98,966		$	90,434
Unrealized gain or (loss)		(14,158	)		27,946
Marketable equity securities
classified as current	$	84,808		$	118,380

The changes in unrealized gains (losses) from available-for-sale securities included as a component of equity for the years ended December 31, 2008 and 2007 were as follows:

		2008				2007
Unrealized gain (loss)		$	(42,104	)		$	2,447

The investment in marketable equity securities has been pledged to secure the liability for deferred compensation (Note 8).

NOTE 3 - ACQUISITIONS

On February 1, 2007 the Company entered into a Share-Exchange agreement for the acquisition of all outstanding shares of Alliance Barter, Inc., a New York corporation with offices in Rochester, NY and Toronto, Canada, for $2,500,000. IMS issued 3,333,333 shares of common stock guaranteed at $2,500,000 ($.75 per share).

Purchase price	$	2,500,000
Cash	$	498,452
Accounts receivable		116,972
Furniture and equipment		87,235
Member lists		1,927,341
Goodwill		650,000
Liabilities assumed		(130,000	)
Deferred tax liability		(650,000	)
Net assets acquired	$	2,500,000

F -16

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

B.	On September 1, 2007, the Company purchased selected assets of Barter Partners of St. Joseph, Michigan for $50,000. IMS issued 50,000 shares of common stock guaranteed at $50,000 ($1.00 per share).

Purchase price	$	50,000
Accounts receivable	$	4,400
Member list		45,600
Total assets acquired	$	50,000

On September 30, 2007, the Company purchased selected assets of Kansas Trade Exchange of Wichita, Kansas for $600,000. Terms of the acquisition included a note payable for $300,000 with 36 monthly payments of $9,126, and 300,000 shares of IMS common stock guaranteed at $300,000 ($1.00 per share). The shares will be issued in three annual installments starting in January 2008.

Purchase price	$	600,000
Accounts receivable	$	27,400
Furniture and equipment		8,000
Member list		564,600
Total assets acquired	$	600,000

D. On September 30, 2007, the Company purchased selected assets of Synergy Trade Exchange of Louisville, Kentucky for $165,000. Terms of the acquisition included a down payment of $10,000 and a note payable for $155,000 with 15 monthly payments of $10,751.

Purchase price	$	165,000
Accounts receivable	$	11,500
Furniture and equipment		5,000
Member list		148,500
Total assets acquired	$	165,000

F -17

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 4, 2008, IMS exercised its option to purchase specific assets from New York Commerce Group (NYCG) pursuant to an agreement from September 2006, for $405,424. IMS paid NYCG $100,000 on April 8, 2008. Payments made prior to this date totaled $132,500. The balance due of $172,924 is payable over the next 8 months with interest at 6% per annum.

Purchase price	$	405,424
Accounts receivable (net)	$	4,501
Furniture and equipment		5,000
Membership list		395,923
Total assets acquired	$	405,424

On May 2, 2008, IMS acquired the assets of Business Network, Inc. of Hauppauge, New York for $400,000. Terms include a down payment of $200,000 and a $100,000 note to the seller, payable over 18 months with interest at 6% per annum, starting June 10, 2008. In addition IMS issued 133,333 shares of common stock guaranteed to a value of $100,000 ($.75 per share).

Purchase price	$	400,000
Accounts receivable (net)	$	12,600
Furniture and equipment		6,000
Membership list		381,400
Total assets acquired	$	400,000

On July 31, 2008, IMS completed its acquisition of the assets of Bartermax of Norwood, Massachusetts for $400,000. Terms include a cash down payment of $175,000, $50,000 in IMS trade dollars, and a $125,000 note to the seller, payable over 24 months with interest at 6% per annum, starting September 20, 2008. In addition IMS issued 66,667 shares of IMS common stock guaranteed to a value of $50,000 ($.75 per share).

Purchase price	$	400,000
Accounts receivable (net)	$	13,900
Furniture and equipment		8,500
Member list		377,600
Total assets acquired	$	400,000

F -18

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below summarizes the unaudited pro forma information of the results of operations as though the acquisitions had been completed as of January 1, 2008 and January 2007, respectively:

	2008			2007
Gross revenue	$	14,631,508		$	15,341,572
Total expenses		(16,084,089	)		(15,361,959	)
Net income (loss) before taxes	$	(1,452,581	)	$	(20,387	)
Earnings per share	$	(0.02	)	$	0.00

NOTE 4 - INTANGIBLE ASSETS

Intangible assets consist of membership lists, goodwill and a covenant not to compete, and for the years ended December 31, 2008 and 2007 are as follows:

	2008			2007
Membership lists	$	13,635,423		$	12,517,176
Impairment		(209,605	)		(36,676	)
Accumulated amortization		(3,848,561	)		(2,518,346	)
Net	$	9,577,257		$	9,962,154

Covenant not to compete	$	89,300		$	89,300
Accumulated amortization		(89,300	)		(74,417	)
Net	$	-		$	14,883

Goodwill	$	3,448,602		$	3,448,602
Accumulated amortization		(13,123	)		(13,123	)
Net	$	3,435,479		$	3,435,479

F -19

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Aggregate amortization expense was $1,345,098 and $1,222,041 for the years ended December 31, 2008 and 2007, respectively. In 2008 the Company recorded an impairment loss of $209,605 on membership lists related to its California, Kentucky, Nevada and Tennessee operations. In 2007 the Company recorded an impairment loss of $36,676 on membership lists related to its Virginia, Memphis, Tennessee and Indiana operations. Estimated future amortization expense is as follows:

2009	$	1,343,793
2010		1,343,793
2011		1,329,266
2012		1,285,742
2013		1,195,046
thereafter		3,079,617
	$	9,577,257

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of December 31, 2008 and 2007:

	2008			2007
Office furniture, equipment,
computers and software	$	1,753,839		$	1,724,643
Leasehold improvements		211,202			211,202
		1,965,041			1,935,845
Accumulated depreciation		(908,515	)		(666,582	)
	$	1,056,526		$	1,269,263

Depreciation expense during the years ended December 31, 2008 and 2007 was $298,436 and $243,326, respectively.

NOTE 6 - CREDIT LINES, NOTES AND CONVERTIBLE NOTES PAYABLE

CREDIT LINES:

CTE has a revolving credit line of $500,000 with a financial institution, with no maturity date and an interest rate of Prime plus 1%. The note is secured by the assets of the Company. As of December 31, 2008 the balance of the note is $248,658 and as of December 31, 2007 it was $0.

CTE has an unsecured business credit line of $122,000 with a financial institution, with no maturity date and an interest rate of prime plus 6%. As of December 31, 2008 the balance of the note is $92,078 and as of December 31, 2007 it was $0.

F -20

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES PAYABLE:

In connection with the purchase of Barternet in 2003, the Company assumed an unsecured note payable to an individual with maturity in February 2010 and monthly payments of $2,500. The face value of the original note was $207,500, discounted at 7.5% to $161,510. The balance as of December 31, 2008 is $35,000, discounted to $33,412, and $65,000, discounted to $59,821 as of December 31, 2007. The discount is being amortized over the life of the promissory notes as additional interest expense. During the years ended December 31, 2008 and 2007, the Company recorded interest expense from the discounts of $3,591 and $5,493, respectively.

In connection with the acquisition of Barter Business Unlimited, Inc., CTE issued an unsecured note payable to the former owner, with maturity in June 2008 and monthly payments of $9,722. The face value of the original note was $350,000, discounted at 7.5% to $312,500. The balance as of December 31, 2008 is $0, and as of December 31, 2007 was $58,333, discounted to $57,076. The discount was amortized over the life of the note as additional interest expense. During the years ended December 31, 2008 and 2007 the Company recorded interest expense from the discount of $1,257 and $8,728, respectively.

In connection with the acquisition of Barter Business Unlimited, Inc., CTE issued an unsecured note payable for a covenant not to compete with maturity in June 2008 and monthly payments of $2,778. The face value of the original note was $100,000, discounted at 7.5% to $89,300. The balance as of December 31, 2008 is $0, and as of December 31, 2007 was $16,667, discounted to $16,308. The discount was amortized over the life of the note as additional interest expense. During the years ended December 31, 2008 and 2007 the Company recorded interest expense from the discount of $359 and $2,490, respectively.

In 2006 IMS issued an unsecured note payable to a private investor in the amount of $1,465,000 with a maturity date of December 2009, monthly payments of $45,000, and interest at 10%. The balance outstanding was $475,702 and $943,370 as of December 31, 2008 and 2007, respectively.

In 2007 in connection with the acquisition of Kansas Trade Exchange, CTE issued an unsecured note payable for $300,000 to the former owners. Terms include thirty-six monthly payments of $9,267 including interest at 6% beginning January 10, 2008. The balance outstanding was $205,922 and $300,000 as of December 31, 2008 and 2007, respectively.

In 2007 in connection with the acquisition of Synergy Trade Exchange, CTE issued an unsecured note payable for $155,000 to the former owners. Terms include fifteen monthly payments of $10,751 including interest at 6% beginning October 20, 2007. The balance outstanding was $124,921 as of December 31, 2007. The balance was paid in full as of December 31, 2008.

In 2008 in connection with the acquisition of New York Commerce Group, CTE issued an unsecured note payable for $172,924 to the former owner. Terms included monthly payments ranging from $10,000 to $15,000 per month plus interest of 6% beginning May 5, 2008. The balance outstanding was $72,924 as of December 31, 2008.

F -21

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2008 in connection with the acquisition of BNI of Long Island, CTE issued an unsecured note payable for $100,000 to the former owner. Terms include eighteen monthly payments of $5,823 including interest at 6% beginning June 10, 2008. The balance outstanding was $62,174 as of December 31, 2008.

In 2008 in connection with the acquisition of Bartermax, CTE issued an unsecured note payable for $125,000 to the former owner. Terms include twenty four monthly payments of $5,540 including interest at 6% beginning September 20, 2008. The balance outstanding was $105,192 as of December 31, 2008.

In 2008 in CTE issued two unsecured notes payable for $25,000 each in exchange shares of IMS stock issued and guaranteed for the purchase of Barter Partners of Michigan. Terms include seven monthly payments of $3,000 each and a final payment of $4,000, plus interest at 6% beginning November 10, 2008. The balance outstanding of each note was $19,000 (total of $38,000) as of December 31, 2008.

CONVERTIBLE NOTES PAYABLE:

In 2005, two private investors loaned $1,050,000 to IMS. Due dates of the notes ranged from March to November 2007, with quarterly interest payments of 10%. The notes were convertible to 3,500,000 shares of IMS stock at $.30 per share at the holder’s option. The value of the convertible feature on the notes was calculated to be $84,333 and treated as a discount and amortized over the life of the notes. During 2007 all of the notes were converted to 3,500,000 shares of IMS common stock at $.30 per share. As of December 31, 2008 and 2007 the discounted balance of the notes was $0.

In 2006 a private investor loaned $1,200,000 to IMS. The due dates of the notes range from March to September 2008, with quarterly interest payments of 10%. The notes are convertible to 1,883,334 shares of IMS stock at $.30 per share, and 1,024,194 shares of IMS stock at $.62 per share, at the option of the holder. The value of the convertible feature on the notes was calculated to be $39,833 and treated as a discount which is being amortized over the life of the note. As of December 31, 2007 the discounted balance of the notes is $1,195,277.

In September 2008, the notes in the previous paragraph were converted to an amortized note in the amount of $1,200,000, with 60 monthly payments of $15,858 including interest of 10%, and a balloon payment of $746,367 due September 2013. The investor has the option to convert the principle balance to shares of IMS commons stock at $.31 per share. As of December 31, 2008 the balance of the note is $1,182,279.

In 2008 a private investor loaned $100,000 and $200,000 to IMS. The due dates of the notes are July 2009 to April 2010, with quarterly interest payments of 10%. The notes are convertible to 250,000 shares of IMS stock at $.40 per share, and 377,358 shares of IMS stock at $.53 per share, at the option of the holder. As of December 31, 2008 the outstanding balance of the notes was $300,000.

F -22

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the Company’s credit lines, notes and convertible notes payable is as follows:

	Balance as of		Current		Long-term
	December 31, 2008		Portion		Portion
Financial institutions credit lines	$	340,736	$	340,736	$	-
Individual – note payable		475,702		475,702		-
Individual – note payable		205,922		99,881		106,041
Individual – note payable		105,192		61,852		43,340
Individual – note payable		72,924		72,924		-
Individual – note payable		62,174		62,174		-
Individual – note payable		33,412		28,459		4,953
Individuals – notes payable		38,000		38,000		-
Individuals – convertible notes		1,482,279		175,466		1,306,813
		2,816,341		1,355,194		1,461,147
Discounts		-		-		-
	$	2,816,341	$	1,355,194	$	1,461,147

The aggregate amount of maturities of long-term debt for each of the next five years is as follows:

2009	$	1,355,194
2010		437,702
2011		92,098
2012		101,742
2013		829,605
	$	2,816,341

Interest expense for the years ended December 31, 2008 and 2007 was $275,332 and $342,855, respectively.

NOTE 7 - NOTES PAYABLE, RELATED PARTY

From time to time officers and stockholders of the Company have loaned funds to IMS.

	2008			2007
Balance January 1	$	-		$	110,024
New loans during the year		25,000			-
Repayments during the year		(25,000	)		(110,024	)
Balance December 31	$	-		$	-

These loans were paid in full during the year ended December 31, 2008.

F -23

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - DEFERRED COMPENSATION

As part of the acquisition of Tradecard, Inc., the Company assumed a deferred compensation liability of $2,500 per month for 120 months, payable to a key employee after her retirement.

The value of future payments required under the agreement is being charged to operations over the period of active employment until the employee reaches her retirement date in approximately four years.

Assets intended to fund this liability include an investment in marketable securities (Note 2) with a balance of $84,808 and $118,380 as of December 31, 2008 and 2007, respectively, and a life insurance policy with a $300,000 death benefit and a cash surrender value as of December 31, 2008 and 2007, of $43,125 and $37,056, respectively. All incidents of ownership accrue to the Company, which is the designated beneficiary. There are no loans outstanding on the insurance policy, but the cash surrender value has been pledged by the Company to secure the liability for deferred compensation.

NOTE 9 - INCOME TAXES

Income tax expense for the years ended December 31, 2008 and 2007 reflect a higher or lower effective tax rate due to certain expenses that are not deductible for tax purposes, such as the impairment loss of the membership list and 50% of meals and entertainment. The difference between actual and expected tax liability also includes the effects of timing differences in deducting certain expenses such as charitable contributions and depreciation, as well as the permanent effects of different financial accounting and tax bases of certain assets.

Income tax expense consists of the following components:

	Years Ended December 31
	2008			2007
Currently payable - state	$	8,150		$	27,000
Currently payable - Federal		-			122,000
Currently refundable - Federal		(48,500	)		-
Deferred tax asset		(75,000	)		-
Deferred - state		(100,250	)		(36,669	)
Deferred - federal		(378,622	)		(167,100	)
	$	(594,222	)	$	(54,769	)

F -24

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the reported income taxes and the income taxes that would be computed byapplying the Company’s normal tax rate to income before taxes for the periods ended December 31:

	Years Ended December 31
	2008			2007
Federal income tax	$	(522,000	)	$	(170,650	)
State income tax		(92,100	)		(32,850	)
Tax effects of:
Nondeductible impairment loss		83,800			15,050
Disallowed meals		9,700			10,300
Change in allowance for
doubtful accounts		22,700			-
Charitable contributions carryover		900			(1,800	)
Depreciation and amortization
variances due to tax basis
and useful life differences		(14,000	)		142,581
Other		(83,222	)		-
Net operating loss carryover		-			(17,400	)
	$	(594,222	)	$	(54,769	)

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:

	2008		2007
Deferred income tax asset:
Net operating loss
carryover to future periods	$	75,000	$	-

Deferred income tax liabilities:
Difference in tax basis of
membership lists and goodwill	$	2,039,000	$	2,550,000

NOTE 10 – STOCKHOLDER EQUITY

In 2007, 3,683,333 shares of common stock were issued as part of the purchase of three trade exchanges. The fair value of the shares was $2,850,000.

On March 20, 2007, 750,000 warrants were exercised for IMS common stock. IMS received cash in the amount of $412,500 ($.55 per share).

In 2007, $1,030,000 of convertible notes payable was converted to 3,433,334 shares of IMS common stock, at $.30 per share.

F -25

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2007, 25,000 shares of common stock were issued to investor relation firms. 50,000 shares of common stock were issued to the outside members of the Board of Directors. Total fair value was $48,250.

On December 18, 2007, 25,000 shares of treasury stock were issued for options that were exercised in 2004, but remained unissued until 2007.

In 2007, 190,000 options were exercised for shares of IMS treasury stock. IMS received $29,000 in cash.

On August 2, 2007 IMS issued 75,000 shares of IMS treasury stock to acquire the source code for our proprietary software, at a fair value of $50,000.

Cash received on the subscription receivable in 2007 was $10,821.

The stock guarantee liability was reduced by $120,000 during 2007 pursuant to the release from an owner of guaranteed stock. The liability increased by $2,850,000 for three acquisitions in 2007. The liability was increased by $150,000 in 2008.

In 2007 marketable securities had an unrealized gain of $4,049 and the cash surrender value had an unrealized loss of $1,602, resulting in other comprehensive income of $2,447.

The effect of the exchange rate on the currency conversion between our U.S. and Canadian offices resulted in an equity adjustment increase of $12,863 for 2007.

In 2008, 200,000 shares of common stock were issued as part of the purchase of two trade exchanges. The fair value of the shares was $150,000.

On April 14, 2008, 550,000 warrants were exercised for IMS common stock. IMS received cash in the amount of $302,500 ($.55 per share).

In 2008, 250,000 shares of common stock were issued to investor relation firms. 60,000 shares of common stock were issued to the outside members of the Board of Directors. Total fair value was $60,233.

On December 9, 2008 IMS paid $321,476 in trade dollars for 350,000 shares of common stock, which were placed into treasury stock.

In 2008 the balance due of $26,196 on the subscription receivable was written off as a bad debt.

The stock guarantee liability was reduced by $557,000 during 2008 pursuant to the release from owners of guaranteed stock. The liability increased by $150,000 for two acquisitions in 2008, and an additional $150,000 for the settlement of a prior years’ dispute. The net decrease was $257,000.

F -26

INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2008 marketable securities had an unrealized loss of $42,572 and the cash surrender value had an unrealized gain of $468, resulting in other comprehensive loss of $42,104.

The effect of the exchange rate on the currency conversion between our U.S. and Canadian offices resulted in an equity adjustment decrease of $24,046 for 2008.

Effective January 1, 2006 the Company adopted SFAS No. 123R, "Share-Based Payment" ("SFAS 123R"), a revision to SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123"). The Company has adopted the provisions of SFAS 123R and related interpretations as provided by SAB 107. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Common stock, stock options and common stock warrants issued to other than employees or directors are recorded on the basis of their fair value, as required by SFAS No. 123(R), which is measured as of the date required by EITF Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” In accordance with EITF 96-18, the stock options or common stock warrants are valued using the Black-Scholes option pricing model on the basis of the market price of the underlying common stock on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense is computed under the Black-Scholes option pricing model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected in the expense recorded in the subsequent period in which that change occurs.

A summary of the status of Company’s fixed stock option plan as of December 31, 2008 and 2007, and the changes during the years then ended is presented below:

	December 31, 2008					December 31, 2007
				Weighted Average					Weighted Average
Fixed Options	Shares			Exercise Price		Shares			Exercise Price
Outstanding at
beginning of period		820,000		$	0.16		1,050,000		$	0.16
Granted		-		$	-		-		$	-
Purchased		-		$	-		(190,000	)	$	0.15
Forfeited		-		$	-		-		$	-
Expired		(160,000	)	$	0.15		(40,000	)	$	0.13
Outstanding at end of period		660,000		$	0.16		820,000		$	0.16

Options exercisable at
period end		660,000

Weighted average fair value
of options granted to
employees during the year	$	-

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INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2008 there were 660,000 options outstanding and exercisable, with a weighted average remaining contractual life of .07 years, and a weighted average exercise price of $.16.

As of December 31, 2007 there were 820,000 options outstanding and exercisable, with a weighted average remaining contractual life of 1.07 years, and a weighted average exercise price of $.16.

Warrants

In May 2006 the Company issued 3,500,000 fully vested warrants with an option price of $.55, which expire in May, 2011. 550,000 warrants were exercised in March 2008 with proceeds of $302,500. 750,000 warrants were exercised in 2007 with proceeds of $412,500. The remaining balance as of December 31, 2008 is 2,200,000.

NOTE 11 - RELATED PARTY TRANSACTIONS

The Company leases its executive offices and principal operating facilities in New Berlin, Wisconsin from Glendale Investments, LLC, a Wisconsin limited liability company which is owned by officers and stockholders of the Company. The original lease commenced October 1, 2002 and extends through September 30, 2010. Lease payments are $7,500 monthly plus certain operating costs, including sales and use taxes, insurance, utilities, maintenance, and non-structural repairs. Total payments in 2008 and 2007 were $90,000 and $90,000, respectively.

From time to time officers and stockholders of the Company have loaned funds to IMS.

	2008			2007
Balance January 1	$	-		$	110,024
New loans during the year		25,000			-
Repayments during the year		(25,000	)		(110,024	)
Balance December 31	$	-		$	-

These loans were paid in full in the year ended December 31, 2008.

On August 3, 2007, the company issued 75,000 shares to Danny W. Weibling, Chief Financial Officer of IMS, in exchange for a copy of the source code of the software package called TradeWorkswhich he developed. The cost of the source code was $50,000. Shares were issued from the company’s treasury stock.

On July 11, 2008, 60,000 of shares of IMS common stock were issued to the six outside members of the board of directors (10,000 shares each), as annual compensation with a fair value of $21,000 ($3,500 each).

In 2008 and 2007 the Company paid $500 and $480, respectively, to Corporate Secretary Patricia Katisch to produce and distribute the corporate minutes.

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INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - COMMITMENTS AND CONTINGENCIES

Leases

The Company has various leases for office facilities and vehicles which are classified as operating leases, and which expire at various times through 2014. Total rent expense for all operating leases for 2008 and 2007 is summarized as follows:

	2008		2007
Related party lease	$	90,000	$	90,000
Office leases		768,405		668,122
Vehicle leases		18,157		16,548
	$	876,562	$	774,670

Minimum future lease commitments as of December 31, 2008, are summarized as follows:

	Office
Year ending December 31	Facilities		Vehicles
2009		687,672	$	8,921
2010		554,123		5,310
2011		157,422		-
2012		82,835		-
thereafter		147,265		-
	$	1,629,317	$	14,231

Employment Agreements

The Company has employment agreements with key employees, including the chief executive officer, the chief financial officer, and the senior vice presidents, pursuant to which these employees will receive base salaries in 2009 of $230,000, $190,000, $175,000 and $165,000, plus commissions and bonuses at the discretion of the chief executive officer. Each contract is for a term of three years, and will be automatically extended for additional one-year periods thereafter, unless terminated by the Company or by the employee. On March 31, 2009, each of the above officers agreed to a 10% reduction in salary.

The agreements also provide for the issuance of stock options at the chief executive officer’s discretion. All agreements contain a change of control provision. In the event of a merger, acquisition of the Company or sale of substantially all of its assets, the chief executive officer’s contract provides for compensation equal to two years' salary plus a lump sum payment of $400,000. The chief financial officer and senior vice presidents will receive compensation equal to one year's salary plus lump sum payments of $200,000 each.

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INTERNATIONAL MONETARY SYSTEMS, LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – RESTATED FINANCIAL STATEMENTS (restated)

On April 1, 2008, the Company restated the December 31, 2007 financial statements to reclassify the current and long-tem portions of common stock subject to guarantees. This reclassification had no effect on net loss, loss per share, cash flows or stockholder equity. A summary of the changes is as follows:

Balance Sheet	As Reported		As Restated

LIABILITIES

Current liabilities
Current portion of common stock subject to guarantees		652,664		995,000
Total current liabilities		3,636,133		3,978,469

Long-term liabilities
Common stock subject to guarantees, less current portion		2,232,336		1,890.000
Total long term liabilities		5,634,373		5,292,037

NOTE 14 - SUBSEQUENT EVENTS

On January 2, 2009 IMS repurchased 600,000 shares of common stock at $.75 per share using restricted cash of $450,000, thereby releasing $450,000 of the common stock guarantee.

On January 15, 2009 IMS issued notes payable totaling $300,000 in exchange for release of the stock guarantee on, and the return of 300,000 shares of IMS stock. The notes are interest only at 4.5% per annum, and annual principal payments begin January 21, 2009. Principal payments range from $0 to $120,000 at the discretion of the note holders.

On March 16, 2009 IMS issued 300,000 shares of IMS stock to an investor relations firm. The fair value of the stock was $24,000.

On March 31, 2009 IMS issued two interest only notes payable totaling $100,000 in exchange for cash. The notes are $50,000 each, issued to a board member and an officer of the Company. Interest is 8% per annum paid quarterly for two years.

On March 31, 2009, an interest only note payable to a private investor with an original due date of July 2009, was extended for 2 years, to July 2011.

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INTERNATIONAL MONETARY SYSTEMS LTD /WI/ - FORM 10-K/A - March 1, 2010

Attached files

INTERNATIONAL MONETARY SYSTEMS LTD /WI/ Reports