International Monetary Systems Files 2007 Annual Report
Revenue increases 68%, operating profit totals $1.37 million
New Berlin, Wis., April 03, 2008 -- International Monetary Systems, Ltd. (OTCBB:INLM), a worldwide leader in business-to-business barter services, recently filed its 2007 annual report on Form 10-KSB.
2007 was a year of record achievements and growth for International Monetary Systems. In October of 2006 IMS acquired National Trade Association and its subsidiary Illinois Trade Association, America’s largest independent barter network. In February of 2007 the company acquired Alliance Barter, with offices in Rochester, NY and Toronto, Canada. The two exchanges have had a significant, positive impact on 2007 operations, resulting in increased trade volume, gross revenue, new-client enrollments and operating profit, or EBITDA.
The increased revenue enabled IMS to invest in an infrastructure that supported and implemented critical Best Practices to create future organic growth:
- In 2006 and 2007 IMS invested more than $700,000 in new computers, monitors, printers, servers, and other equipment to enhance the efficiency of its trade brokering and sales staffs.
- In 2007 the company invested more than $250,000 to acquire the source code for TradeWorks, its proprietary trade dollar clearing system, and to migrate the entire database from the original RPG format into a more current .net technology.
- The IMSbarter.com website is undergoing a facelift, toward the goal of creating a fully interactive, web-based online marketplace. Expected completion is spring of 2008. More than $200,000 has been spent on this project.
- The company hired additional technicians and programmers to integrate the new hardware, to convert the clearing system software and to develop the website. The IT department has been expanded to four full-time employees.
- IMS hired a full-time national sales trainer and a full-time national broker trainer to implement Best Practices for the Sales and Trade Brokering departments.
- The company doubled the size of its Columbus, OH office to expand its telemarketing and tele-sales staff. There are now 12 people working to support the outside sales force of more than two dozen sales professionals. As a result IMS enrolled more than 3,500 new members during 2007.
- In 2007 a full-time marketing and public relations director was hired. She is working with the IT staff to develop critical IT/Marketing efforts and streamline the online experience for members and prospective members. She is also developing a campaign to strengthen the IMS brand in the marketplace through a comprehensive program scheduled for the second quarter of 2008.
- In October the company hosted the IMS Academy, the organization’s first national convention/seminar, which was attended by 118 Employees. The cost was more than $125,000, but proved to be highly educational and motivational to the entire staff.
- Throughout the year, IMS hired additional sales staff to expand the base of National Trade Association (NTA Trade), its corporate barter division, resulting in the enrollment of a number of high-profile businesses.
RESULTS OF OPERATIONS
GROSS REVENUE & EXPENSES
In spite of these expenditures, many of which will not recur in 2008, International Monetary Systems produced positive cash flow of nearly $1 million, and operating profit (EBITDA) of over $1.3 million in 2007. However, after deducting amortization and impairment losses for its substantial membership lists and taking other non-cash write-offs for depreciation and bad debts, the company experienced a net loss of $414,290, comparable to the loss in 2006. IMS management believes that all of these expenditures have created a strong infrastructure of both human resources and equipment that will provide substantial organic growth in the future.
During the year ended December 31, 2007, International Monetary Systems processed more than $114 million in trade transactions, compared to $72 million in 2006, an increase of 58%. (In stating this number, IMS is reporting sales only — just one side of each transaction — even though most other barter companies double this amount.) This generated gross revenue of $14,772,045 for the year, compared to $8,782,666 in 2006, an increase of 68%.
Total expenses increased from $8,857,798 in 2006 to $14,945,745 for the year ended December 31, 2007. This 68% increase (comparable to the increase in sales) occurred primarily because of additional overhead costs from the acquisitions of National Trade Association and Alliance Barter, as well as the expansion of the company’s outside sales force, and the infrastructure expenses described above. IMS also expensed $36,676 for membership list impairment, since estimated future cash flows in the Virginia marketplace are less than anticipated at the time of the original acquisition.
Payroll expenses increased nearly 92% from $4,812,595 in 2006 to $9,228,485 in 2007, while occupancy expenses increased from $591,304 to $969,243. Both increases resulted from acquisitions, and from hiring additional sales, marketing and IT staff. Selling expenses increased from $614,034 to $687,079, a direct result of the company’s expanded sales force, which management believes will ultimately lead to sustained organic growth. General and administrative expenses increased 49%, from $1,557,795 to $2,319,680.
Net cash flow from operations totaled $945,111 in 2007, compared to $871,631 in 2006. Operating profit or EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $1,375,839 an increase of nearly 23 % over the EBITDA of $1,120,993 recorded in 2006.
EBITDA Calculation
| Net loss | $ (414,290) |
| Interest expense | 342,855 |
| Taxes | (54,769) |
| Depreciation & amortization | 1,465,367 |
| Impairment | 36,676 |
| ----------- | |
| TOTAL EBITDA | $1,375,839 |
| ========== | |
FINANCIAL CONDITION
LIQUIDITY, COMMITMENTS FOR CAPITAL RESOURCES, AND SOURCES OF FUNDS
The company’s principal source of liquidity from operations has been cash earnings from membership charges, monthly service fees, and transaction processing charges. Furthermore, in 2007 over 19% of operating expenses were satisfied using earned trade dollars, preserving cash for growth and infrastructure improvements. Management anticipates that IMS’ principal source of liquidity during the next year will continue to be cash from operations, and that this will be adequate to provide for its continuing needs. In 2007 the company experienced positive cash flow, as net cash provided by operating activities was $945,111, compared to a cash flow of $871,631 in 2006.
In January 2007 IMS acquired Alliance Barter, Inc. for $2,500,000, for 3,333,333 shares of common stock, guaranteed at $.75 per share. The company also has an option to purchase New York Commerce Group in 2008, and with that exception, there are no other purchase obligations. However, the firm will continue to seek opportunities to acquire quality exchanges.
Over 28% of the current portion of long-term debt consists of notes convertible to equity. However, existing cash flow is sufficient to meet current obligations, should anticipated conversions not materialize.
CHANGES IN ASSETS AND LIABILITIES
During 2007 cash balances decreased to $812,365 from $930,962 in 2006, resulting primarily from the infrastructure investments described above. Restricted cash deposited in escrow accounts totaled $483,443, 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 to the Company in accordance with the purchase agreement.
Accounts receivable, net of allowance for doubtful accounts, totaled $1,516,938, a slight reduction from 2006, primarily due to an increase in the allowance. IMS’ earned trade account increased by $631,227 from ($316,299) to $314,928. Much of the increase can be attributed to the success of the corporate barter division. Total current assets increased 15% from $2,942,265 in 2006 to $3,392,126 in 2007. Other assets increased by $2,076,327, or 18%. Total assets increased nearly 21% from $15,203,887 in 2006 to $18,351,454 on December 31, 2007.
Current liabilities increased by $974,694, or 32%, from $3,003,775 in 2006 to $3,978,469 at the end of 2007. Current and long-term notes payable consist of various notes to former owners of acquired trade exchanges, or to investors who funded acquisitions. Long-term debt increased during 2007 because we issued stock subject to guarantee for the purchase of Alliance Barter. At the end of 2007, long-term debt was $5,292,037, compared to $4,420,755 in 2006, an increase of 20%. Total liabilities increased 25%, from $7,424,530 in 2006 to $9,270,507 in 2007.
Common stock and paid-in capital increased from $9,297,251 in 2006 to $10,908,000 in 2007. Treasury stock decreased from $626,241 (1,556,542 shares) in 2006 to $547,241 (1,276,542 shares) in 2007. Total shareholder equity increased nearly 17%, from $7,779,357 in 2006 to $9,080,947 on December 31, 2007.
About International Monetary Systems
Founded in 1985, International Monetary Systems (IMS) serves 17,600 customers representing 25,000 cardholders in 49 U.S. markets. Based in New Berlin, Wisconsin, and managed by seasoned industry veterans, IMS is one of the largest publicly traded barter companies in the world and is continually expanding its network by adding exchange locations. The company's proprietary transaction software enables businesses and individuals to trade goods and services throughout North America online. Using an electronic currency known as trade dollars, the IMS network allows companies to create cost savings and to improve operations by taking advantage of barter opportunities in their business models. Further information can be obtained at the company's Web site at: IMS Barter(www.imsbarter.com).
Contact:
International Monetary Systems, Ltd., New Berlin, WI
Krista Vardabash, (888) 783-4636, ext. 19
http://www.internationalmonetary.com
Source: International Monetary Systems, Ltd.
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