<FILENAME>ims1321200210kst.txt
<PAGE>   1

    As filed with the Securities and Exchange Commission on March 31, 2003
===============================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549
                                FORM 10-KSB

Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 2002

                             Commission File No. 0-30853

                        INTERNATIONAL MONETARY SYSTEMS, LTD.

                    (Name of small business issuer in its charter)

              Wisconsin                                        39-1924096
   (State or other jurisdiction of                          (I.R.S. Employer
    incorporation or organization)                        Identification Number)

       16901 West Glendale Drive
        New Berlin, Wisconsin                                      53151
 (Address of principal executive offices)                        (Zip Code)

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

      Securities registered under Section 12(b) of the Exchange Act: None

  Securities registered under Section 12(g) of the Exchange Act: Common Stock,
                          par value $0.0001 per share

Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X]

Issuer's consolidated revenues for its most recent fiscal year: $3,659,408

     Aggregate market value of voting and non-voting common equity held by
                    non-affiliates as of December 31, 2002:

$1,130,333 (calculated at $.30 per share, closing price on December 31, 2002)

Number of shares outstanding of each of the issuer's classes of common equity
                          as of December 31, 2002:

         15,779,614 shares of Common Stock, par value $0.0001 per share

                      DOCUMENTS INCORPORATED BY REFERENCE
                                    None

===============================================================================



<PAGE>   2
                                      PART I

   In this report, "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 1988 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 5,000 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. We currently conduct our business
operations in the United States and Canada.

   Our corporate headquarters mailing address is 16901 West Glendale Drive,
P.O. Box 510305, New Berlin, Wisconsin 53151, and our telephone numbers are
(800) 236-8104 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.ctebarter.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.














                                        2
<PAGE>   3

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 12%). 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 income is 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 principal disadvantage of barter is that, in comparison to the general
cash-based economy, a more limited supply of products and services is available.

                                       3
<PAGE>   4

International Monetary Systems, Ltd.

   International Monetary Systems, Ltd. (IMS) is a holding company that
currently has four operating subsidiaries: Continental Trade Exchange, Ltd.,
the CTE barter system which operates in the United States; Continental Trade
Exchange of Canada, Ltd., which services the CTE Canadian barter clients; JM
Graphics, a printing pre-press company located in New Berlin, Wisconsin and
International Corporate Services, Inc., a 4 color printing company located
in Menomonee Falls, Wisconsin.

The Continental Trade Exchange Barter Network

   As a leader in the barter industry, Continental Trade Exchange has created a
network of more than 5,000 businesses who regularly trade their goods and
services with each other. Through their participation in our barter program,
these companies 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. CTE functions
as a third-party record keeper - a status granted by the Internal Revenue
Service - and also manages the barter system.  In addition, we act as a
principal in certain transactions in which we acquire products, fine art, real
estate and other commodities that are either held as investments or sold at a
profit. This allows us to fulfill one of the Company's objectives which is
long-term equity building.

   To provide clients with a flexible and effective means of trading,
Continental Trade Exchange 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
CTE 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
on magnetic media. 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 CTE trade dollars or other non-cash
consideration.

   The CTE barter system began operations in July of 1985 and has had a record
of consistent and steady growth. This growth has been generated both internally
and through the acquisition of other barter networks. As we have continued to
add 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 also acquired eight 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 we believe will enable us to achieve
and maintain a dominant market position. We believe that 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.

   One of those acquisitions were consummated during 2002. In August of 2002,
IMS acquired Tradecard/Tradecorp, Inc., a leading barter network located in
Columbus, Ohio. Tradecorp has been servicing businesses and professional
people in Columbus, Cincinnati and Dayton, Ohio since 1976. With the addition
of the Tradecorp client base, the Continental Trade Exchange barter network now
boasts a membership roster totaling more than 5,000 businesses.

                                        4
<PAGE>   5

Other Related Businesses

   In addition to expanding our Continental Trade Exchange, we intend to
acquire other related businesses that synergize with and enhance the barter
network. Following this plan, in April IMS, through its new subsidiary
International Corporate Services, Inc.,  purchased the assets of Imagers Ink,
LLC, a 4-color printing company located in Menomonee Falls, Wisconsin. We
believed that this printing company would enhance the operation of our JM
Graphics pre-press division.


ITEM 2. DESCRIPTION OF PROPERTY.

   Our company's executive offices and principal operating facilities -
including the JM Graphics operation - occupy 13,000 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
IMS. Rent and other terms of our lease, which expires September 30, 2004, 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) 1,600
square feet of office space at 2300 Green Bay Road, North Chicago, Illinois,
(2) 400 square feet of office space at 1545 University Avenue, Green Bay,
Wisconsin, (3) 2,200 square feet of office space at 5350 Commerce Blvd., Rohnert
Park, CA, (4) 300 square feet of office space at 2033 Gateway Place, San Jose,
California, 4,200 square feet at 8938 Cotter Street, Lewis Center, Ohio, and
(5) 300 square feet of office space at 45 Mill Street,  Orangeville, Ontario,
Canada (6) 18,000 square feet of office and warehouse space at W136 N5239
Campbell Court, Menomonee Falls, Wisconsin. This last lease, which is for the
International Corporate Services printing company, expires on July 1, 2005. The
leases on all other properties aside from the New Berlin, Wisconsin facility
are from unaffiliated parties and, except for the printing company lease in
Menomonee Falls, Wisconsin, are each on a month-to-month basis. 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.

   There are no material pending legal proceedings involving IMS 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, 2002.

                                        5


<PAGE>   6
                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

   (a) There currently is a limited trading market for our Common 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.
Because of the weak stock market and other factors, our stock has had a
relatively small amount of volume through December 31, 2002

   As of December 31, 2002, the approximate number of holders of record of our
Common Stock was 155.


ITEM 6. 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.

   Results of Operations

   Gross Revenue. Our consolidated gross revenues consist of (1) income from
the Continental Trade Exchange division in the form of: (a) transaction fees
on all client barter sales; (b) monthly maintenance fees; (c) membership
set-up fees; (d) proceeds from the sale of merchandise from our own inventory
and of dining or gift certificates, also known as "scrip"; (e) other
miscellaneous revenue; (2) income from our JM Graphics pre-press division;
and (3) income from our International Corporate Services 4-color printing
company. Clients are billed monthly for the fees in the CTE barter system,
and we have an excellent record of collections on our receivables. JM Graphics'
and International Corporate Services' customers are billed at the completion of
their jobs. Terms are 2% 10 days, net 30 days.

   During the calendar year ending on December 31, 2002, CTE processed
$24,250,000 in barter transactions which generated revenues of $2,792,647. This
compared to the year 2001 figures of $15,870,000 in barter transactions that
produced revenues of $1,945,030. Total barter transactions for 2002 showed an
increase of 53% over those for year 2001. In the same comparable period,
revenues increased by 44%. For calendar year 2002, the JM Graphics division
produced revenues of $518,642, and the International Corporate Services
printing division had gross revenues of $319, 336 for the last nine months
of 2002, giving International Monetary Systems, Ltd. total gross income of
$3,659,408 for the year, compared to income of $2,526,275 for 2001, an
increase of 45%.

   Most of the increased revenue was a result of the acquisitions of trade
exchange and the printing company which were made during 2002.

   Operating Expenses. For 2002, operating expenses increased by $923,961 or
146% over 2001.

                                         6
<PAGE>   7

   All additional operating expenses were a result of the acquisitions made
during 2002 along with higher-than-expected investor relations expenses for
marketing our newly trading stock. And though IMS now has more employees than
it had in the past, the personnel needed to operate the acquired offices has
been reduced from the number of employees that were there under previous
management. The result of these economies of scale was a substantially
increased profit for the year in the trade exchange. In Calendar 2002, the
Continental Trade Exchange operation (U.S. and Canada) had a net profit of
$414,215 compared to a profit of just $28,982 in 2001. The new printing
company, however, suffered substantial losses in 2002 because its operating
expenses exceeded its income by $153,604, and our JM Graphics pre-press
division had a loss of $59,745.16. Additional corporate expenses for investor
relations services and other costs related to the public trading of our stock
totaled $168,772.

   In 2002, payroll expenses increased by $385,966 or 32% over 2001.
Occupancy expenses increased from 159,497 in 2001 to $227,769 in 2002 or
43%. These increases were primarily a result of the rents paid at the new
Ohio barter office and the printing facility. Selling and other expenses
increased by $49,252 or 22%.

   General and administrative expenses increased by 87% from $390,141 in 2001 to
$729,845 in 2002.

   Net Income. For the calendar year ending December 31, 2002, IMS had earnings
of $27,968 or $.01 per share compared to a loss of $33,323 or $.01 per share
for the same period in 2001.

   Effects of Acquisitions.  During fiscal 2002, we incurred extraordinary
charges associated with the acquisition of International Corporate Services,
our new printing company and Tradecard, Inc. of Ohio. These extraordinary
charges, which resulted from the integration of the operations of those firms
into our business, were not itemized separately. In the future, as we continue
to acquire additional trade exchanges or other businesses, we expect to incur
extraordinary charges in connection with the integration of those acquired
operations.

   Though we intend to acquire barter exchanges in strategic locations around
the country, we may occasionally acquire businesses other than barter exchanges.
In April of 2002, through our new subsidiary, International Corporate Services,
Inc., we purchased the assets of Imagers Ink, LLC, a four-color printing
company. When acquiring unrelated businesses such as Imagers Ink, we may incur
costs associated with hiring and training personnel, as well as "learning costs"
associated with entering new lines of business. And while these types of charges
may depress earnings in the period following the acquisition, we intend to make
acquisitions and incur charges only when these have the projected effect of
enhancing our ability to earn and retain profits in the long run.

   We believe that each of these divisions will eventually operate profitably.
But as stated above, most future acquisitions may have temporary detrimental
effects on earnings, as we integrate those operations into our business.


                                         7
<PAGE>   8

Financial Condition

   Liquidity; Commitments for Capital Resources; and Sources of Funds

   Our principal source of liquidity from operations has been cash earnings
from membership charges, monthly service fees, transaction processing charges,
profits from our own trading activities, and the proceeds from pre-press work
done by our JM Graphics division and printing jobs done by our International
Corporate Services division. We anticipate that our principal source of
liquidity during the next year will be cash from operations. We believe that
cash from operations alone will be adequate to provide for our liquidity needs
for the next year and on a continuing basis thereafter.

   On March 24, 2003, the company entered into an agreement to acquire a barter
exchange in the San Francisco Bay Area, California for approximately $750,000.
The acquisition is expected to add 1,200 to 1,400 customers and to produce
revenues of $50,000 per month.

   From July 25, 2000 to December 31, 2001, we conducted an initial public
offering of our company's stock. In this offering, we raised a gross amount
of $386,160 before expenses at a price of $6.00 per share. subsequently, we
split our shares six for one.

   Changes in Assets and Liabilities

   During 2002, our cash on hand was reduced from $46,663 at the end of year
2001 to $22,667 as of December 31, 2002. The decrease in cash was a result of
losses suffered by our printing and graphics divisions and investor relations
costs. However, we now have an additional $80,047 in restricted cash which has
been placed in an escrow account to guarantee the buyback of stock shares that
were issued in the acquisition of Tradecard, Inc.

   Accounts receivable and inventory increased from 2001 to 2002, by $180,948
and $32,547, respectively. Our earned trade dollar account decreased by $218,134
from 2001 to 2002, because of a trade deficit acquired from Tradecard, Inc. As a
result of these changes, our total current assets decreased slightly by $8,250
for 2002 as compared to 2001. Fixed assets increased by $577,149 or 80% from
2001 to 2002, primarily because of equipment acquired in the acquisitions of the
printing company and Tradecorp. From 2001 to 2002, our total assets increased
$1,667,341 or 91% from $1,824,691 at December 31, 2001 to $3,492,032 at December
31, 2002.

   Current liabilities increased by $328,226 or 92% from 2001 to 2002. Long-term
debt increased by $471,214 or 129% during the same period. The liabilities
assumed in the acquisition of the printing company were the primary reason for
these increases. As a result, the debt to equity ratio increased from 65% in
2001 to 77% in 2002.

   Common stock and paid in capital increased 98% from 2001 to 2002, from
$1,127,615 to $2,235,754, principally as a result of the acquisitions made
during 2002. Because of the net profit of $32,094 for fiscal 2002. our retained
earnings increased from 2001 to 2002, from a deficit of $23,268 to positive
earnings of $4,700.


ITEM 7. FINANCIAL STATEMENTS.

   Our consolidated financial statements and related notes, and the report of
Smith & Gesteland LLP, independent auditors, with respect thereto, as described
in the Index to Financial Statements, appear elsewhere in this report at pages
F-1 through F-22.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

   None.

                                        8

<PAGE>   9

                                     PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; FINANCIAL
DISCLOSURE.

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 IMS,
as of December 31, 2002.

<TABLE>
<CAPTION>
Name                            Age                      Position
----                            ---                      --------
<S>                             <C>                      <C>
Donald F. Mardak                 66                      Chief Executive Officer, President and Director
John E. Strabley, Jr.            39                      Executive Vice President and Director
Dale L. Mardak                   42                      Vice President and Director
Danny W. Weibling                54                      Treasurer and Chief Financial Officer
Patricia A. Katisch              57                      Corporate Secretary
Wayne Emmer                      48                      Director
Gerald Van Dyn Hoven             46                      Director
</TABLE>

   Donald F. Mardak has been the Chief Executive Officer, President and a
director of IMS 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, Jr. has been the Executive Vice President of IMS 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 IMS. 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 IMS.

                                       9

<PAGE>  10

   Dale L. Mardak has been Vice President of IMS 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 IMS. 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 IMS acquired in April of 2001. Mr. Weibling is also the
developer and programmer of TradeWorks, the barter industry's finest software
program, and he served six years as treasurer of the National Association of
Trade Exchanges. He became Treasurer and Chief Financial Officer of IMS in
April of 2001.

   Patricia A. Katisch is currently the owner of Katisch & Associates, a
marketing consulting and public relations firm. 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 currently 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 is currently the president of the Van Dyn Hoven
Automotive Group. Jerry is a director of American National Bank - Fox Cities,
and is a member of the Board of Trustees of Equitable Reserve Association.

   Donald F. and Judy E. Mardak are husband and wife. John E. Strabley, Jr. 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, Jr.,
is also employed by us as travel director and reciprocal accounts manager.

   All of our directors hold office until the next annual meeting of
stockholders and the election and qualification of their successors. Officers
are elected annually by our board of directors and serve at the discretion of
the board.

                                      10
<PAGE>  11

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 IMS 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, IMS believes that
there was compliance for the fiscal year ended December 31, 2002 with all
Section 16(a) reports filed by them.


ITEM 10. EXECUTIVE COMPENSATION.

   Summary Compensation Table. The following table provides information
concerning compensation earned by our Chief Executive Officer for services
rendered to us in all capacities during the fiscal years ended December 31,
2000, 2001 and 2002, respectively. We are required to disclose in the table
the compensation we paid to our Chief Executive Officer and to any other
executive officer of our company who was paid in excess of $100,000. These
persons are referred to in this report as "named executive officers". Because
no other executive officer of our company was paid more than $100,000 for any
of our last three fiscal years, only the compensation paid by us to our Chief
Executive Officer is included in the table,

<TABLE>
<CAPTION>
                                                            Annual Compensation
                                                      ------------------------------       All Other
             Name and Principal Positions             Year     Salary($)    Bonus($)      Compensation($)
             ----------------------------             ----     ---------    --------      ---------------
<S>                                                   <C>       <C>         <C>           <C>
Donald F. Mardak . . . . .. . . . . . . . . . . . . . 2002      122,000        --              ---
   Chief Executive Officer and President              2001      121,000        --              ---
                                                      2000      122,000        --              ---
</TABLE>

                                      11
<PAGE>  12

Options Grants in the Last Fiscal Year.  No options were granted to our Chief
Executive Officer, our only named executive officer,  for our fiscal year
ended December 31, 2002.

   In December of 2002, options covering 20,000 shares of common stock,
exercisable for five years commencing March 1, 2004 at $.25 per share, were
granted to each our Executive Vice President, John Strabley, our Vice
President, Dale Mardak, our Treasurer and CFO, Danny Weibling and to Judy
Mardak, office manager and wife of Donald Mardak, our President and Chief
Executive Officer.

   Option Exercises in 2002 and Aggregate Option Values at December 31, 2002.
No options were exercised by our chief Executive Officer, our only named
executive officer, during fiscal 2002. As of December 31, 2002, 90,000
unexercised options that were issued in fiscal 2000 plus 72,000 unexercised
options issued in 2001 were held by our Chief Executive Officer. No options
were exercised by our other officers during fiscal 2001. As of December 31,
2002, unexercised options that were issued in fiscal 2000 and 2001 were held
by our other officers in the following amounts: John Strabley, 132,000 shares,
Dale Mardak, 132,000 shares and Danny Weibling, 90,000 shares, respectively.


Employment Agreements

   As of October 19, 2000, we entered into employment agreements with Donald F.
Mardak, our president, and Dale L. Mardak and John E. Strabley, Jr., our vice
presidents, pursuant to which these employees will receive annual base salaries
of $120,000, $70,000 and $75,000, respectively, plus commissions and bonuses,
if any, to be determined by our chief executive officer in his discretion. On
April 1, 2001, Danny W. Weibling, our Treasurer and chief Financial Officer also
entered into an employment agreement, pursuant to which he will receive an
annual base salary of $70,000 plus bonuses and increases for additional company
acquisitions. Each such contract is for an initial term of three years,
commencing as of November 1, 2000 for Messrs. Mardak, Mardak and Strabley and
as of April 1, 2001 for Mr. Weibling. Each of these contracts will be
automatically extended for additional one-year periods thereafter, unless
terminated by either IMS 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 IMS.

   Each of the agreements entitle them to receive stock options at the
discretion of Management. All agreements contain a change of control provision.
In the event of a merger, acquisition of IMS 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 $100,000, John Strabley's and Dale Mardak's
contracts provide for compensation equal to one year's salary plus a lump sum
payment of $75,000, and Danny Weibling's contract provides for compensation
equal to one year's salary.


                                        12
<PAGE>  13

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.

                                       13

<PAGE>  14

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

   The following table sets forth certain information with respect to the
beneficial ownership of our common stock, as of December 31, 2002, by:

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

   -  each of our directors and our sole named executive officer; 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.

<TABLE>
<CAPTION>
                                                                                        Shares beneficially owned
                                                                                         as of December 31, 2002
                                                                                        -------------------------
Name Beneficial Owner                                                                      Number       Percent
------------------------------------                                                    -----------    -------
<S>                                                                                     <C>            <C>
Donald F. Mardak (1) ...............................................................     8,738,500       54.4%

Dale L. Mardak (2) .................................................................       828,000        5.2%

John E. Strabley, Jr. (3) ..........................................................       450,000        2.8%

Danny W Weibling (4) ...............................................................       165,000        1.0%

Gerald Van Dyn Hoven  ..............................................................       184,000        1.1%

Wayne Enner  .......................................................................       100,000        0.6%

Patricia Katisch  ..................................................................         4,000        0.002%

All directors and executive officers
   as a group (7 persons)...........................................................    10,469,500       65.1%
</TABLE>

(1) Does not include 270,000 shares held by his wife, Judy E. Mardak, as to
    which Mr. Mardak disclaims beneficial ownership. Does include 162,000
    shares subject to options exercisable within 6 months.

*   All shares owned by Donald F. and Judy E. Mardak are how held in a
    revokable living trust.

(2) Does not include 4,200 shares held by his wife, Lisa L. Mardak, as to which
    Mr. Mardak disclaims beneficial ownership. Does include 132,000 shares
    subject to options exercisable within 6 months.

(3) Does not include 600,000 shares held by his wife, Kimberly A. Strabley, as
    to which Mr. Strabley disclaims beneficial ownership. Does include 132,000
    shares subject to options exercisable within 6 months.

(4) Does not include 75,000 shares held by his wife, Alesia Peters, as to which
    Mr. Weibling disclaims beneficial ownership. Does include 90,000 shares
    subject to options exercisable within 6 months.

                                        14

<PAGE>  15

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

   Certain Transactions

   We currently lease our executive offices and principal operating facilities,
consisting of 10,000 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, Jr., officers and directors of our company, under a triple net lease
which commenced in October, 2002 and expires September 30, 2004. For the fiscal
year ended December 31, 2001, we made rental payments of $54,000 and in the
fiscal year ended December 31, 2002, we made rental payments of $91,000 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.

   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 IMS 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 IMS 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 IMS at the time it is authorized or approved by our directors.


                                        15

<PAGE>  16

ITEM 13. EXHIBITS LIST AND REPORTS ON FROM 8-K

(a) Exhibits:

<TABLE>
<CAPTION>

   Exhibit
   Number                                       Description
   ------                                       -----------
<S>          <C>
     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 *
</TABLE>

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

(b) Reports on Form 8-K

   No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended December 31, 2002.


ITEM 14. CONTROLS AND PROCEDURES.

   (a) Evaluation of disclosure controls and procedures. An evaluation was
performed under the supervision and with the participation of the Company's
management, including the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), of the effectiveness of the design and operation of the
Company's disclosure controls and procedures within 90 days before the filing
date of this Form 10-KSB. Based on their evaluation, the Company's principal
executive officer and principal financial officer have concluded that the
Company's disclosure controls and procedures (as defined in Rules 13a-14(c)
and 15d-14(c) under the Securities Exchange Act of 1934 (the "Exchange Act"))
are effective to ensure that information required to be disclosed by the C
ompany in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. (b) Changes in internal
controls. There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls
subsequent to their evaluation. There were no significant deficiencies or
material weaknesses, and therefore there were no corrective actions taken.

                                        16

<PAGE>  17

                                   SIGNATURES

   Pursuant to the requirements 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:  March 31, 2003                  By:      /s/ DONALD F. MARDAK
                                             -----------------------------------
                                                  Donald F. Mardak, President
                                                 (Principal Executive Officer)




     Dated:  March 31, 2003                  By:      /s/ DANNY W. WEIBLING, CPA
                                             -----------------------------------
                                                 Danny W. Weibling, Treasurer
                                                 (Principal Financial Officer)



   In accordance with the requirements of the Exchange Act, this Registration
Statement has been signed by the following persons in the capacities and on
the dates stated.


          SIGNATURE                       TITLE                       DATE

    /s/ DONALD F. MARDAK        Chief Executive Officer,         March 31, 2003
-----------------------------     President (Principal
      Donald F. Mardak             Executive Officer)
                                      and Director

     /s/ DALE L. MARDAK              Vice President              March 31, 2003
-----------------------------         and Director
       Dale L. Mardak


  /s/ JOHN E. STRABLEY, JR.     Executive Vice President         March 31, 2003
-----------------------------         and Director
    John E. Strabley, Jr.

                                        17

<PAGE>  18

CERTIFICATION PURSUANT TO RULE 13-A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT
OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Donald F Mardak, certify that:

1. I have reviewed this annual report on Form 10-KSB of International Monetary
Systems, LTD;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

   a. designed such disclosure controls and procedures to ensure the material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

   b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

   c. presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date.

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

   a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

   b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:      March 31, 2003          /s/ Donald F. Mardak
           --------------          ---------------------------------------------
                                       Donald F. Mardak, President
                                       (Chief Executive Officer)

                                        18
<PAGE>  19

CERTIFICATION PURSUANT TO RULE 13-A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT
OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Danny W. Weibling, certify that:

1. I have reviewed this annual report on Form 10-KSB of International Monetary
Systems, LTD;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

   a. designed such disclosure controls and procedures to ensure the material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

   b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

   c. presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date.

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

   a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

   b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:      March 31, 2003          /s/ Danny W. Weibling
           --------------         ----------------------------------------------
                                       Danny W. Weibling, Treasurer
                                       (Chief Financial Officer)

                                        19
<PAGE>  20

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



<TABLE>
<CAPTION>
                                                                        Page
                                                                        ----
<S>                                                                     <C>
Report of Independent Certified Public Accountants ...................  F-1

Financial Statements:

Consolidated Balance Sheets at December 31, 2002 and 2001 ............  F-2

Consolidated Statements of Income for the years ended
         December 31, 2002 and 2001 ..................................  F-4

Consolidated Statements of Changes in Stockholder Equity
         for the years ended December 31, 2002 and 2001 ..............  F-5

Consolidated Statements of Cash Flows for the years ended
         December 31, 2002 and 2001 ..................................  F-6

Notes to Consolidated Financial Statements ...........................  F-8
</TABLE>




<PAGE>  21


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Shareholders and Board of Directors
International Monetary Systems, Ltd.
New Berlin, Wisconsin


   We have audited the accompanying consolidated balance sheets of International
Monetary Systems, Ltd., and subsidiaries as of December 31, 2002 and 2001, and
the related consolidated statements of income, changes in stockholder equity,
and cash flows for each of the two years in the period ended December 31, 2002.
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 auditing standards generally
accepted in the United States of America.  Those standards require that we plan
and perform the audit 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 financial statements referred to above present fairly
the consolidated financial position of International Monetary Systems, Ltd.,
and subsidiaries at December 31, 2002 and 2001, and the results of its
operations and cash flows for each of the two years in the period ended
December 31, 2002, in conformity with accounting principles generally
accepted in the United States of America.


Madison, Wisconsin                              /s/ SMITH & GESTELAND, LLP
February 26, 2003, except for Note 14               SMITH & GESTELAND, LLP
as to which the date is March 24, 2003



                                      F-1

<PAGE>  22

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                           CONSOLIDATED BALANCE SHEETS
                                   December 31


<TABLE>
<CAPTION>
                                                               2002            2001
                                                             ---------       ---------
<S>                                                          <C>             <C>
             ASSETS

Current assets
   Cash                                                     $   22,667      $   46,663
   Accounts receivable, net of allowance for doubtful
     accounts of $153,290 in 2002 and $119,844 in 2001         724,659         543,711
   Earned trade account                                                        197,749
   Inventory                                                   146,252         113,705
                                                             ---------       ---------
        Total current assets                                   893,578         901,828
                                                             ---------       ---------
Property and equipment
   Leasehold improvements                                       27,219          27,219
   Furniture and equipment                                   1,273,594         696,445
                                                             ---------       ---------
                                                             1,300,813         723,664

      Less accumulated depreciation                           (405,956)       (254,602)
                                                             ---------       ---------
        Net property and equipment                             894,857         469,062
                                                             ---------       ---------
Other assets
   Restricted cash                                              80,047
   Membership lists                                            876,639         266,806
   Goodwill                                                    626,400         133,860
   Investment in real estate                                    43,000          38,000
   Other                                                        77,511          15,135
                                                             ---------       ---------
        Total other assets                                   1,703,597         453,801
                                                             ---------       ---------
        Total assets                                        $3,492,032      $1,824,691
                                                             =========       =========
</TABLE>

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


                                     F-2

<PAGE>  23

<TABLE>
<CAPTION>
                                                               2002            2001
                                                             ---------       ---------
<S>                                                          <C>             <C>
             LIABILITIES

Current liabilities
   Accounts payable                                         $  233,519      $  146,253
   Earned trade account - deficit                               20,385
   Payroll and payroll taxes                                    69,722          59,492
   Sales taxes                                                  11,813           1,799
   Accrued income taxes                                         10,350          10,239
   Other accrued expenses                                       16,500
   Current portion of long-term debt                           321,128         137,308
                                                             ---------       ---------
        Total current liabilities                              683,417         355,091
                                                             ---------       ---------
Long-term liabilities
   Capital leases                                                5,479          13,033
   Notes payable                                               650,086         281,530
   Notes payable to related parties                            127,817          70,690
   Deferred compensation payable                                53,085
                                                             ---------       ---------
        Total long-term liabilities                            836,467         365,253
                                                             ---------       ---------
        Total liabilities                                    1,519,884         720,344
                                                             ---------       ---------
             STOCKHOLDER EQUITY

Common stock, $.0001 par value                                   1,605             244

Paid in capital                                              2,234,149       1,127,371

Treasury stock                                                (268,306)

Retained earnings (deficit)                                      4,700         (23,268)
                                                             ---------       ---------
        Total stockholder equity                             1,972,148       1,104,347
                                                             ---------       ---------
        Total liabilities and stockholder equity            $3,492,032      $1,824,691
                                                             =========       =========
</TABLE>



                                      F-3

<PAGE>  24

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                        CONSOLIDATED STATEMENTS OF INCOME
                         For the Years Ended December 31

<TABLE>
<CAPTION>
                                                           2002              2001
                                                        -----------       -----------
<S>                                                     <C>               <C>
Income
  Gross revenue                                         $ 3,659,408         2,526,275

  Cost of sales                                             694,397           467,150
                                                        -----------       -----------
        Net revenue                                       2,965,011         2,059,125
                                                        -----------       -----------
Expenses

  Payroll, related taxes and employee benefits            1,585,991         1,200,025

  General and administrative                                729,845           390,141

  Occupancy                                                 227,769           159,497

  Selling                                                   268,911           219,659

  Other                                                     120,401            39,634
                                                        -----------       -----------
        Total expenses                                    2,932,917         2,008,956
                                                        -----------       -----------
Income before income taxes                                   32,094            50,169

Income tax expense                                            4,126            16,846
                                                        -----------       -----------
        Net income                                     $     27,968      $     33,323
                                                        ===========       ===========
        Basic earnings per common share                $       0.01      $       0.01

        Diluted earnings per common share                      0.01              0.01
</TABLE>


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



                                      F-4
<PAGE>  25

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

            CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER EQUITY
                         For the Years Ended December 31

<TABLE>
<CAPTION>
                                                         Common Stock                             Retained           Total
                                                   --------------------------      Paid in        Earnings        Stockholder
                                                      Shares         Amount        Capital        (Deficit)          Equity
                                                   ------------    ----------   -------------    ----------      -------------
<S>                                                <C>             <C>          <C>              <C>             <C>
Balance December 31, 2000                          13,986,312       $  1,399       $ 735,755       $  (56,591)    $  680,563

                 2001
------------------------------------------
Net income for 2001                                                                                    33,323         33,323
Stock offering                                         74,664              7          74,657                          74,664
Expenses of stock offering                                                          (109,203)                       (109,203)
Shares issued in conjunction with
  acquistion of businesses                            580,002             58         424,942                         425,000
                                                   ----------       --------       ---------       ----------      ---------
Balance December 31, 2001                          14,640,978          1,464       1,126,151          (23,268)     1,104,347

                 2002
------------------------------------------
Net income for 2002                                                                                    27,968         27,968
Stock offering                                        266,942             27          58,112                          58,139
Shares issued in conjunction with
  acquisition of businesses                         1,140,000            114       1,049,886                       1,050,000
                                                   ----------       --------       ---------       ----------      ---------
Balance December 31, 2002                          16,047,920      $   1,605      $2,234,149       $    4,700     $2,240,454
                                                                    ========       =========       ==========
  Less treasury stock                                (268,306)                                                      (268,306)
                                                   ----------                                                      ---------
                                                   15,779,614                                                     $1,972,148
                                                   ==========                                                      =========
</TABLE>


Common stock authorized was 20,000,000 shares at December 31, 2001 and 2002.
Shares are retroactively adjusted for the six-for-one stock split on
January 2, 2002.


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


                                      F-5
<PAGE>  26

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         For the Years Ended December 31

<TABLE>
<CAPTION>
                                                                    2002            2001
                                                                  ----------      ----------
<S>                                                               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                     $  27,968       $  33,323
  Adjustments to reconcile net income to net cash
    provided by operating activities:
       Depreciation and amortization                               185,221          91,867
       Deferred income taxes                                                         6,607
       Changes in assets and liabilities:
          Accounts receivable                                       43,982        (166,151)
          Earned trade account                                     (86,622)        (35,667)
          Inventory                                                (27,547)         (1,720)
          Security deposits                                           (852)         (2,547)
          Accounts payable                                          35,063)         76,425
          Payroll and payroll taxes                                 11,009             523
          Accrued rent                                              16,500
          Sales taxes                                                8,345          (2,205)
          Accrued income taxes                                         111          10,239
                                                                 ---------       ---------
        Net cash provided by operating activities                  143,052          10,694
                                                                 ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash deposited in escrow account                                 (80,047)
  Business acquisitions                                             (3,175)       (202,585)
  Capital expenditures                                             (60,649)       (225,649)
  Treasury stock acquisitions                                      (49,000)
                                                                 ---------       ---------
        Net cash used in investing activities                     (192,871)       (428,234)
                                                                 ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings (repayment) of debt                               (56,752)        225,975
  Net borrowings (repayment) for capital leases                     (7,554)         13,033
  Net borrowings from related parties                               31,991          28,030
  Proceeds (net costs) from issuance of stock                       58,138         (34,539)
                                                                 ---------       ---------
        Net cash provided by financing activities                   25,823         232,499
                                                                 ---------       ---------
        Net decrease in cash                                       (23,996)       (185,041)

Cash at beginning of period                                         46,663         231,704
                                                                 ---------       ---------
Cash at end of period                                            $  22,667          46,663
                                                                 =========       =========

</TABLE>


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

                                      F-6
<PAGE>  27

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         For the Years Ended December 31
                                   continued

<TABLE>
<CAPTION>
                                                                    2002            2001
                                                                  ----------      ----------
<S>                                                               <C>             <C>

SUPPLEMENTAL DISCLOSURES:
  Cash paid for interest                                         $   77,749      $   39,783
  Cash paid for income taxes                                          4,777

SCHEDULE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES:
    Acquisitions
      Fair value of assets acquired                             $ 1,954,761      $  715,656
      Less: Liabilities assumed                                    (818,061)        (88,071)
            Stock issued                                         (1,050,000)       (425,000)
            Trade dollars paid                                      (76,000)
            Cash acquired                                            (7,525)
                                                                 ----------       ---------
      Net cash paid for acquisitions                            $     3,175      $  202,585
                                                                 ==========       =========

  Treasury stock acquired for debt                              $   198,306      $
  Treasury stock acquired for trade dollars                          21,000
</TABLE>










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



                                      F-7

<PAGE>  28

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -  INFORMATION ABOUT THE COMPANY AND SUMMARY OF SIGNIFICANT
               ACCOUNTING POLICIES

          A.   ORGANIZATION

               International Monetary Systems, Ltd. (IMS - the company), is a
               holding company located in New Berlin, Wisconsin with four
               wholly-owned operating subsidiaries.  Continental Trade Exchange,
               Ltd. (CTEL) operates a barter industry trade exchange business in
               the United States.  Continental Trade Exchange of Canada, Ltd.
               (CTE-Canada) operates a barter trade exchange business primarily
               in Ontario, Canada.  JM Graphics, Inc. (JMG) operates a pre-press
               company in New Berlin, Wisconsin and International Corporate
               Services, Inc. (ICS) operates a printing company, doing business
               as Imagers Ink in Menomonee Falls, Wisconsin.  During 2001,
               Continental Trade Exchange of Illinois, Inc. was merged into
               Continental Trade Exchange, Ltd.


          B.   ACQUISITIONS

               In April 2001, CTEL purchased the assets of Trade Systems
               Interchange, a barter trade exchange located in Rohnert Park,
               California for $125,000 payable $40,000 in cash, $60,000 in
               notes, and $25,000 in stock.  The acquisition included $75,000
               for membership lists.

               In April 2001, IMS created a new Canadian corporation,
               Continental Trade Exchange of Canada, Ltd., through which it has
               started up a new barter trade exchange with two offices in
               Ontario, Canada.

               In April 2001, IMS purchased the stock of JM Graphics, Inc., a
               pre-press company located in New Berlin, Wisconsin for $71,000
               and assumption of liabilities in excess of assets of $19,413,
               thereby recognizing goodwill of $90,413.

               On September 2, 2001, CTEL purchased the assets of Tradius
               Corporation, a barter trade exchange located in San Jose,
               California for $100,000 cash and $400,000 in stock.  The
               acquisition included $200,000 for membership lists.

               In April 2002, IMS purchased the assets of Imagers Ink, LLC, a
               four-color printing company.  The acquisition was made through
               a new IMS subsidiary, International Corporate Services, Inc.
               Assets acquired approximated liabilities assumed, plus 90,000
               shares of IMS stock, cash of $5,000 and trade dollars of $30,000.

               Also in April 2002, IMS purchased the client list and receivables
               of a Chicago based trade exchange for $51,700 (cash of $5,700 and
               trade dollars of $46,000).

                                      F-8

<PAGE>  29

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -  INFORMATION ABOUT THE COMPANY AND SUMMARY OF SIGNIFICANT
               ACCOUNTING POLICIES (continued)

               On September 1, 2002, IMS acquired all the outstanding stock of
               Tradecard, Inc., an Ohio corporation, in exchange for 1,050,000
               shares of IMS stock valued at $1,050,000.  Tradecard, Inc.
               operated a barter exchange in Ohio with approximately 1,200
               active accounts. IMS guaranteed that Tradecard shareholders will
               receive a minimum of $800,000 cash and $250,000 trade dollars.

               To facilitate this guarantee, IMS agreed to deposit $20,000 per
               month into an escrow account for the first thirty-five months
               following closing.  If during the thirty-six months following
               closing, the sellers shall have received a total of $1,050,000
               through a combination of deposits to the escrow account and sale
               of any of their stock, the agreement for deposits will end.
               During this thirty-six month period, sellers have the right to
               sell back at a price of $1.00 per share, 20,000 shares per
               month for the first thirty-five months, starting in September
               2002, which right shall be cumulative.  If sellers are unable to
               sell any shares into the market for at least $1.00 per share,
               IMS will be obligated to pay the guarantee of $800,000 cash and
               $250,000 trade dollars.

               If at the end of the thirty-six month period sellers have sold
               all of their shares either into the public market or to IMS, all
               funds remaining in the escrow account and sellers trade accounts,
               less accumulated interest, shall be the property of IMS.

               A portion of the purchase price has been allocated to assets
               acquired (including $600,000 for membership lists) and
               liabilities assumed (including a negative trade dollar balance
               of $304,756) based on estimated fair market value at the date of
               acquisition, while the balance was recorded as goodwill in the
               amount of $492,540.


          C.   RESTRICTED CASH

               The cash balance in the escrow account related to the purchase
               of Tradecard, Inc. discussed above is shown as restricted cash
               included in other assets.


          D.   OPERATIONS OF BARTER EXCHANGES

               Barter exchanges not only operate with traditional cash currency,
               but they can also issue trade credits, which constitute their own
               unique currency. Trade exchanges permit members/clients to barter
               their goods and services with other clients in several ways. Some
               sell their products to the barter network directly, others issue
               trade certificates that are redeemable for their goods or
               services, and the balance transact their barter business through
               electronic data transmission as authorizations are provided
               through a twenty-four hour authorization system. In return, the
               selling clients receive trade credits from the exchange, which
               may be used to purchase services or products from other members
               in the exchange.



                                      F-9

<PAGE>  30

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -  INFORMATION ABOUT THE COMPANY AND SUMMARY OF SIGNIFICANT
               ACCOUNTING POLICIES (continued)

          E.   REVENUE SOURCES

               The company and its subsidiaries earn revenues in both
               traditional dollars (cash income) and in trade dollars.  Cash
               income is earned through membership set-up fees assessed when a
               member joins, through service fees generated when clients spend
               and/or generate their trade dollars to purchase and/of sell
               goods and services through the exchange to/from other members,
               through monthly maintenance fees, and through sales for cash of
               products originally purchased by IMS with its own trade dollars.

               Trade profits are generated in various ways.  Monthly maintenance
               fees are assessed in trade dollars as well as in cash.
               Transaction fees are assessed in trade dollars rather than cash
               for clients in certain industries such as radio and TV stations.
               Occasionally the company will accept a favorable trade ratio in
               lieu of a cash service fee. The company also has an opportunity
               to create additional trade profits by purchasing wholesale,
               closeout, and liquidation merchandise for cash, and the
               liquidating of such products through the trade program.

               Earned trade dollars are used by the company 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.

          F.   PRINCIPLES OF CONSOLIDATION

               The consolidated financial statements include the accounts of the
               company and its subsidiaries.  Significant intercompany accounts
               and transactions have been eliminated in consolidation.

          G.   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 could differ from those estimates.


                                      F-10

<PAGE>  31

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -  INFORMATION ABOUT THE COMPANY AND SUMMARY OF SIGNIFICANT
               ACCOUNTING POLICIES (continued)

          H.   RECEIVABLES AND ALLOWANCE FOR BAD DEBTS

               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 daily balances of
               the principal 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
               receivables, past collection experience, current economic
               conditions, volume, growth and composition of the receivables,
               and other relevant factors.  The allowance is increased by
               provisions for bad debts charged against income.

          I.   INVENTORY

               Inventory consists primarily of fine art and other merchandise
               which the company intends to sell.  Inventory is carried at the
               lower of actual cost of acquisition or fair value.

          J.   EARNED TRADE ACCOUNT

               As part of the operations of the subsidiaries, trade dollars are
               earned which can be and are used to purchase goods and services.
               This account is increased principally for service, membership and
               transaction fees, and is decreased by the company's purchase of
               goods and services for trade dollars.  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 its trade
               dollars.

          K.   PROPERTY AND EQUIPMENT

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


                                      F-11

<PAGE>  32

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -  INFORMATION ABOUT THE COMPANY AND SUMMARY OF SIGNIFICANT
               ACCOUNTING POLICIES (continued)

          L.   BUSINESS COMBINATIONS, GOODWILL, AND OTHER INTANGIBLE ASSETS

               Goodwill and membership lists are stated at cost and were
               incurred when the additional exchanges were purchased.
               Membership lists are being amortized over their estimated life
               of fifteen years.

               During 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 no longer be amortized but, instead, be
               tested annually for impairment.  There was no impairment of
               goodwill in 2002.  Prior to 2002 goodwill was being amortized on
               a straight-line basis over 15 years.  Amortization expense on
               these intangible assets was $3,749 in 2001.

          M.   INCOME TAXES

               Income taxes are provided for the tax effects of transactions
               reported in the financial statements and consist of taxes
               currently due plus deferred taxes related to differences between
               the financial and income tax basis of assets and liabilities, and
               to the tax benefit of net operating loss carryovers.

               The deferred tax assets and liabilities represent the future tax
               return consequences of those differences, which will either be
               taxable or deductible when the assets and liabilities are
               recovered or settled.

          N.   CONCENTRATIONS OF CREDIT RISK

               The company grants credit to its customers, substantially all of
               whom are members of the Continental Trade Exchange barter network
               located in eastern Wisconsin and northern Illinois, California,
               Ohio and Ontario, Canada; and pre-press customers located in
               eastern Wisconsin.  The company routinely assesses the financial
               strength of its customers and, as a consequence, believes that
               its trade accounts receivable credit risk exposure is limited.

          O.   ADVERTISING

               Advertising costs, which are principally included in selling
               expenses, are expensed as incurred.  Advertising expense was
               $70,160 and $29,624 for the years ended December 31, 2002 and
               2001, respectively.


                                      F-12

<PAGE>  33

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 -  GOODWILL - ADOPTION OF STATEMENT 142

          Prior to adoption of SFAS No. 142, goodwill had a stated cost of
          $146,983 and accumulated amortization of $13,123 as of December
          31, 2001.

          A summary of the effects of the adoption of SFAS No. 142 on net
          income is as follows:

<TABLE>
<CAPTION>
                                                                   For the year ended
                                                                       December 31
                                                               -------------------------
                                                                  2002          2001
                                                               ----------     ----------
<S>                                                            <C>            <C>
          Reported net income                                   $  32,094      $  33,323
          Add back: goodwill amortization                                          3,749
                                                                ---------      ---------
          Adjusted net income                                   $  32,094      $  37,072
                                                                =========      =========

          The changes in the carrying amount of goodwill for the year ended December 31,
          2002, are as follows:

          Balance as of January 1, 2002                                        $ 133,860
          Goodwill related to 2002 acquisitions                                  492,540
                                                                               ---------
          Balance December 31, 2002                                            $ 626,400
                                                                               =========
</TABLE>

NOTE 3 -  OTHER INTANGIBLE ASSETS

          A summary of other intangible assets for the years ended December
          31,2002 and 2001, are as follows

<TABLE>
<CAPTION>
                                                                  2002
                                                  --------------------------------------
                                                    Gross
                                                   Carrying    Accumulated
                                                    Amount     Amortization       Net
                                                  ----------   ------------  ----------
<S>                                               <C>          <C>           <C>
          Amortizable intangible assets:
            Membership lists                       $ 918,700    $  42,061     $ 876,639
                                                   =========    =========     =========

                                                                   2001
                                                  --------------------------------------
                                                    Gross
                                                   Carrying    Accumulated
                                                    Amount     Amortization       Net
                                                  ----------   ------------  ----------
<S>                                               <C>          <C>           <C>
          Amortizable intangible assets:
            Membership lists                       $ 275,000    $   8,194     $ 266,806
                                                   =========    =========     =========
</TABLE>


                                     F-13

<PAGE>  34

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 -  OTHER INTANGIBLE ASSETS (continued)

          Aggregate amortization expense on other intangible assets was $33,867
          and $8,194 for the years ended December 31, 2002 and 2001,
          respectively:

          Estimated future amortization expense is as follows:

                          For the year ended December 31
                                        2003                    $  61,247
                                        2004                       61,247
                                        2005                       61,247
                                        2006                       61,247
                                        2007                       61,247
                                     Thereafter                   570,404
                                                                ---------
                                                                $ 876,639
                                                                =========


NOTE 4 -  PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                             Accumulated
                                                             Cost           Depreciation
                                                         -------------     ----------------
<S>                                                      <C>               <C>
                  Balance January 1, 2001                $    280,228       $    174,678
                  Additions during 2001                       443,436
                  Depreciation expense for 2001                                   79,924
                                                         -------------      -------------
                  Balance December 31, 2001                   723,664            254,602
                  Additions during 2002                       577,149
                  Depreciation expense for 2002                                  151,354
                                                         -------------      -------------
                  Balance December 31, 2002              $  1,300,813       $    405,956
                                                         =============      =============
</TABLE>



                                      F-14

<PAGE>  35

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 -  NOTES PAYABLE - LONG-TERM

          A subsidiary of the company (CTEL) has a revolving line of credit with
          Bank One in the amount of $100,000, with a final maturity of May 5,
          2005.  Amounts drawn and outstanding were $77,326 and $45,778 as of
          December 31, 2002 and 2001, respectively.  Monthly payments are due
          based on the greatest of accrued interest, $250 or 3% of the total
          amount outstanding.  Interest is computed at prime plus 1.25% (5.50%
          as of December 31, 2002).

          CTEL has an additional business line of credit with Wells Fargo Bank
          in the amount of $90,000.  The line has no maturity date.  The balance
          outstanding was $79,180 and $70,030 as of December 31, 2002 and 2001,
          respectively.  Monthly payments are based on 2% of the outstanding
          balance.  Interest is computed at prime plus 6.0% (10.25% as of
          December 31, 2002).

          CTEL, in connection with its acquisition of Trade Systems Interchange,
          has a loan payable to DWW Software in the amount of $60,000, with no
          specified maturity date.  The balance outstanding was $59,616  as of
          December 31, 2002.  Quarterly payments of $5,000 of principal plus
          interest are due until the balance is paid.  Interest is computed at
          9%.  The owner of DWW Software is also a shareholder in the company.

          A subsidiary of the company (JMG) has a business loan with M&I
          Marshall & Ilsley Bank, with a final maturity date of May 1, 2004.
          The balance outstanding was $29,532 as of December 31, 2002.  Monthly
          payments of $1,847 of principal and interest are due until the
          balance is paid.  Interest is computed at 8.5%.

          JMG also has a $100,000 loan payable to Joseph Lekan, the former owner
          of JM Graphics, Inc., arising from the company's purchase of JMG
          during April 2001.  The balance outstanding was $88,127 as of December
          31, 2002.  Quarterly payments of $5,000 plus interest are payable with
          a maturity date of March 15, 2005, at which time any unpaid amount is
          due.  Interest is computed at 9%.

          CTEL has a business loan with Creative Services in the amount of
          $35,842 with no specified maturity date and an interest rate of 12.0%
          as of December 31, 2002.

          CTEL has a business loan with Great Lakes Advisors, Inc. in the amount
          of $24,728 as of December 31, 2002.  Quarterly payments of $2,000,
          including interest, are payable with no specified maturity date.
          Interest is computed at 10.0%.

          A subsidiary of the company (ICS) has a business loan with Marshall &
          Ilsley Bank with a final maturity of May 1, 2005.  The balance
          outstanding was $306,687 as of December 31, 2002.  Monthly payments
          of $5,712 of principal and interest of 6.9% are due until the balance
          is paid.


                                      F-15

<PAGE>  36

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 -  NOTES PAYABLE - LONG-TERM (continued)

          The company has agreed to purchase as treasury stock 247,306 shares
          from Mehdi Ghafourifar at $1.00 per share.  A down payment of $28,000
          and three monthly payments of $7,000 have been received, bringing the
          balance to $198,306 as of December 31, 2002.

          Monthly payments of $7,000 plus interest of 10% per annum are due with
          a balloon payment due on March 15, 2004.

          CTEL has business lines of credit with several credit card companies
          in the aggregate amount of $131,500.  Balances outstanding on the
          credit lines were $62,952 as of December 31, 2002.  Monthly payments
          approximate $3,000.  Interest rates range from 8.25% to 27%.

<TABLE>
<CAPTION>
                                                   Balance
                                                    as of
                                                 December 31,         Current         Long-Term
                                                     2002             Portion          Portion
                                               -----------------   --------------   --------------
<S>                                            <C>                 <C>              <C>
          Bank One                             $      77,326       $    20,552      $    56,774
          Wells Fargo                                 79,180            10,227           68,953
          Credit cards                                62,952            33,580           29,372
          DWW Software                                59,616            20,000           39,616
          M&I Marshall & Ilsley Bank                 336,219            69,353          266,866
          Joseph Lekan                                88,127            11,945           76,182
          Great Lakes Advisors                        24,728             8,000           16,728
          Creative Services                           35,842            11,947           23,895
          Medhi Ghafourifar                          198,306            84,000          114,306
          Related parties (see Note 6)               127,817            42,606           85,211
          Capital leases                              14,397             8,918            5,479
                                                -------------      ------------     ------------
                    Total                       $  1,404,510       $   321,128      $   783,382
                                                =============      ============     ============
</TABLE>

          The aggregate amount of maturities of long-term debt for each of the
          next five years is as follows:
<TABLE>
<S>                                                            <C>
                                     2003                      $   321,128
                                     2004                          326,701
                                     2005                          402,129
                                     2006                            9,015
                                     2007                            5,882
                                   Thereafter                       39,655
                                                               ------------
                                                               $ 1,104,510
                                                               ============
</TABLE>
                                      F-16

<PAGE>  37

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 -  NOTES PAYABLE TO STOCKHOLDER

          From time to time officers and stockholders of the company have
          loaned funds to the subsidiaries.  There is no definite repayment
          schedule, although management has elected to treat approximately
          one-third as currently payable.  Interest is payable quarterly based
          on rates of 9% to 12% per annum.
 <TABLE>
<CAPTION>
                                                                                         2002           2001
                                                                                     -----------    -----------
<S>                                                                                  <C>            <C>
          Related party notes as of January 1                                        $   86,195    $    42,660
          New loans during the year                                                      81,980        170,353
          Repayments during the year                                                    (40,355)      (126,821)
                                                                                     -----------    -----------
                    Balance at December 31                                           $  127,817     $   86,192
                                                                                     ===========    ===========
</TABLE>

NOTE 7 -  DEFERRED COMPENSATION PAYABLE

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

          The present value, using an after-tax interest factor of 7% of future
          payments required under the agreement, is being charged to operations
          over the period of active employment until her age 65 retirement date
          in approximately nine years.

          The company received assets intended to fund this liability of a
          Merrill Lynch investment account with a value of $42,003 as of
          December 31, 2002, and a life insurance policy with a $300,000 death
          benefit payable to the company and a cash value as of December 31,
          2002, of $11,082.  The investment account and the cash value are
          included in other assets.


NOTE 8 -  INCOME TAXES

          Income tax expense consists of the following components:
<TABLE>
<CAPTION>
                                                                                         2002           2001
                                                                                     -----------    -----------
<S>                                                                                  <C>            <C>
          Currently payable - foreign                                                $   (8,271)    $    8,271
          Currently payable - federal                                                     8,859          1,108
          Currently payable - state                                                       3,808            860
          Deferred
              Federal                                                                                    4,076
              State                                                                                      2,531
                                                                                     -----------    -----------
                    Total expense                                                    $    4,126     $   16,846
                                                                                     ===========    ===========
          Deferred income tax assets are attributable to the
            tax benefits of net operating loss carryforwards as
            follows:
              Classified as a long-term asset                                                       $    6,607
                                                                                                    ===========
</TABLE>
                                      F-17

<PAGE>  38

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9 -  STOCK OPTIONS

          During 2000, the company adopted an incentive stock option plan under
          which certain officers, key employees, or prospective employees may
          purchase shares of the company's stock at an established exercise
          price, which shall not be less than the fair market value at the time
          the option is granted. Final exercise date is any time prior to the
          five year anniversary of the first exercise date.

          Pursuant to the plan, options were granted to purchase shares at $3.00
          per share ($.50 per share after six-for-one split) as follows:

<TABLE>
<CAPTION>

                    Grant Date           First Exercise Date        Shares
                    ----------           -------------------        --------
<S>                 <C>                  <C>                        <C>
                    July 17, 2000        January 15, 2002           354,000
                    July 26, 2000        August 1, 2001             168,000
                    July 26, 2000        September 1, 2001           48,000
                    July 26, 2000        December 1, 2001            60,000
                    August 26, 2000      September 1, 2001           60,000
                    March 28, 2001       April 1, 2003               60,000
                    April 5, 2001        April 1, 2003               90,000
                                                                   --------
                              Total at $.50 per share               840,000
                                                                   ========
</TABLE>


          Also during 2001, options were granted to purchase shares at $6.00
          ($1.00 per share after six-for-one split) as follows:

<TABLE>
<CAPTION>

                    Grant Date           First Exercise Date       Shares
                    ----------           -------------------       --------
<S>                 <C>                  <C>                       <C>
                    January 26, 2001     April 1, 2002              600,000
                    December 21, 2001    March 1, 2003              288,000
                    December 21, 2001    September 1, 2003          108,000
                    December 21, 2001    March 1, 2004               24,000
                    December 21, 2001    April 1, 2004              180,000
                    December 21, 2001    June 1, 2004                18,000
                    December 21, 2001    October 1, 2004             96,000
                                                                  ---------
                              Total at $1.00 per share            1,314,000
                                                                  =========
</TABLE>

                                      F-18
<PAGE>  39

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9 -  STOCK OPTIONS (continued)


          During 2002, options were granted to purchase shares as follows:

<TABLE>
<CAPTION>

                    Grant Date           First Exercise Date       Shares
                    -----------------    -------------------       --------
<S>                 <C>                  <C>                       <C>
                    At $.60 per Share
                    -----------------
                    November 8, 2002     September 30, 2004          15,000

                    At $.25 per Share
                    -----------------
                    December 12, 2002    March 1, 2004              100,000


</TABLE>

          Statement of Financial Accounting Standards No. 123 (SFAS 123),
          "Accounting for Stock-Based Compensation" establishes financial
          accounting and reporting standards for stock-based employee
          compensation plans.

          SFAS 123 defines a fair value based method of accounting for employee
          stock option or similar equity instruments.  Under the fair value
          based method, compensation cost is measured at the grant date based on
          the fair value of the award using an option-pricing model that takes
          into account the stock price at the grant date, the exercise price,
          the expected life of the option, the volatility of the underlying
          stock, expected dividends, and the risk-free interest rate over the
          expected life of the option.  The resulting compensation cost is
          recognized over the service period, which is usually the vesting
          period.

          Compensation cost can also be measured and accounted for using the
          intrinsic value based method of accounting prescribed in Accounting
          Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued
          to Employees."  Under the intrinsic value based method, compensation
          cost is the excess, if any, of the quoted market price of the stock at
          grant date or other measurement date over the amount paid to acquire
          the stock.  Under APB 25, no compensation cost is recognized for the
          stock option plan because the exercise price is at least equal to the
          quoted market price at the date of grant and therefore there is no
          intrinsic value.

          As permitted by SAFS 123, the company continues to measure
          compensation cost for the stock option plan using the accounting
          method prescribed by APB 25.  Compensation cost based on SFAS 123 is
          not estimable.  Accordingly, proforma net income and earnings per
          share data based on SFAS 123 is not presented.



                                      F-19

<PAGE>  40

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10 - RELATED PARTY TRANSACTIONS

          The company currently leases its executive offices and principal
          operating facilities in New Berlin, Wisconsin from Glendale
          Investments, LLC, a Wisconsin limited liability company which is 100%
          owned by officers and stockholders of the company.  The lease
          commenced October 1, 2002, and expires September 30, 2004.  Lease
          payments are $5,000 per month plus certain operating costs including
          insurance, utilities, maintenance and other-than-structural repairs,
          and 50% of increased real estate taxes over the 2002 taxes.

          JM Graphics also leases its operating facilities in New Berlin,
          Wisconsin from Glendale Investments, LLC.  The lease commenced January
          1, 2001, and expires December 31, 2003.  Lease payments are $3,000
          per month.


NOTE 11 - COMMITMENTS AND CONTINGENCIES

          The company has various leases for office facilities and vehicles
          which are classified as operating leases. Total rent expense for all
          operating leases for 2002 and 2001, is summarized below:
<TABLE>
<CAPTION>
                                                                           2001              2000
                                                                      --------------    --------------
<S>                                                                   <C>               <C>
               Office facilities on month-to-month leases             $       2,400     $      30,475
               Related party lease (see Note 9)                              92,500            54,000
               North Chicago, Illinois                                       25,200
               Rohnert Park, California                                      20,328            14,784
               San Jose, California                                          16,060             8,363
               Lewis Center, Ohio                                            16,000
               Durham, Ontario, Canada                                        4,905             2,583
               Vehicle leases                                                26,662            28,586
               Equipment                                                     48,289
                                                                      --------------    --------------
                                                                      $     252,344     $     138,791
                                                                      ==============    ==============
</TABLE>
          Minimum future lease commitments as of December 31, 2002, are
          summarized as follows:
<TABLE>
<CAPTION>
                                                                Office
                                                              Facilities        Vehicles        Equipment
                                                              ----------      ------------     ------------
<S>                                                           <C>             <C>              <C>
                    Year ended December 31
                                2003                           $ 214,995       $   24,966       $   46,811
                                2004                             205,050           20,226           12,738
                                2005                             124,294            8,499
                                2006                              42,257
                                2007                              43,526
                                After                              3,636
                                                               ---------       ----------       ----------
                                                               $ 633,758       $   53,691       $   59,549
                                                               =========       ==========       ==========
</TABLE>

                                     F-20

<PAGE>  41

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - EARNINGS PER SHARE

          Earnings per share are based on the weighted average number of shares
          outstanding for the year, restated for the two stock splits in 1999.
          Weighted average shares outstanding were 15,141,659 and 14,313,466
          for 2002 and 2001, respectively.  Common stock option shares have
          not been included due to their antidilutive effect.


NOTE 13 - BUSINESS SEGMENTS

          The company has two business segments for which discrete financial
          information is available:  the barter trade exchange business and the
          printing business.

          The barter trade exchange business is operated in the United States
          by Continental Trade Exchange, Ltd. and in Canada by Continental
          Trade Exchange of Canada, Ltd.  The Canadian operation is aggregated
          with the United States business because it is significantly less
          than 10 percent of company revenue, profit, and assets. Barter trade
          exchanges permit members to barter their goods and services with
          other members in a variety of different ways.

          The printing business is operated in the Milwaukee, Wisconsin area by
          JM Graphics, Inc., which operates a pre-press company and by
          International Corporate Service, Inc. which operates a four-color
          printing company.

          Segment data for 2002 is as follows:

<TABLE>
<CAPTION>
                                                                             Inter-
                                      Barter      Printing    Corporate     Company       Total
                                    -----------  -----------  -----------  -----------  -----------
                                    <C>          <C>          <C>          <C>          <C>
          Gross revenue             $ 2,883,154   $  837,978   $      137   $  (61,861)  $ 3,659,408
          Net revenue                 2,878,614      124,273          137      (38,014)    2,965,010
          Net interest expense           32,524       32,030       12,781                     77,335
          Pretax income (loss)          414,215     (213,349)    (168,772)                    32,094
          Assets                      2,695,323      714,088       82,621                  3,492,032
          Depreciation and
            amortization                117,207       68,014                                 185,221
</TABLE>

          For 2001, the printing business committed only of the pre-press
          company, which had sales of $581,245, net revenue of $155,144, and
          a pretax loss of 47,577.  Interest expense was $11,921 and
          depreciation was $31,384.


                                   F-21

<PAGE>  42

                      INTERNATIONAL MONETARY SYSTEMS, LTD.
                              New Berlin, Wisconsin

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 14 - SUBSEQUENT EVENT

          On February 26, 2003, the shareholders of the company approved
          amending the articles of incorporation to increase the authorized
          capital to 100,000,000 shares divided into 10,000,000 shares of
          preferred stock and 90,000,000 shares of common stock, both with
          $.0001 par value per share.

          On March 24, 2003, the company entered into an agreement to acquire
          a California barter exchange in the San Francisco Bay Area for
          approximately $750,000.  The acquisition is expected to add 1,200
          to 1,400 customers and to produce revenues of $50,000 per month.



                                      F-22

<PAGE>  43

EXHIBIT INDEX

<TABLE>
<CAPTION>

   Exhibit
   Number                                       Description
   ------                                       -----------
<S>          <C>
     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 *
</TABLE>

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