----

----

| (Mark One) |                                                                                                                                                                                                                                                                                                                                                                                |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| x          | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                                                |
|       | For the fiscal year ended December 31, 2009                                                                                                                                                                                                                                                                                                                                         |
|       |                                                                                                                                                                                                                                                                                                                                                                                |
| OR         |
|       |                                                                                                                                                                                                                                                                                                                                                                                |
| o          | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                                                |
|       | For the transition period from                          to                                  |

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

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

----

| PART I                         |                                                                                  | Page     |
|--------------------------------|---------------------------------------------------------------------------------------|----------|
|                           |                                                                                  |     |
|    Item 1.      | Description of Business                                                               | 3        |
|    Item 2.      | Description of Property                                                               | 5        |
|    Item 3.      | Legal Proceedings                                                                     | 6        |
|    Item 4.      | Rescinded and Reserved                                                                | 6        |
|                           |                                                                                  |     |
| PART II                        |                                                                                  |     |
|                           |                                                                                  |     |
|    Item 5.      | Market for IMSL Common Equity and Related Stockholder Matters                         | 6        |
|    Item 6.      |  Selected Financial Data                                                         | 7        |
|    Item 7.      | Management's Discussion and Analysis of Financial Condition and Results of Operations | 7        |
|    Item 8.      | Financial Statements                                                                  | 11       |
|    Item 9.      | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  | 11       |
|    Item 9 A(T). | Controls and Procedures                                                               | 11       |
|    Item 9 B.         | Other Information                                                                     |  12 |
|                           |                                                                                  |     |
| PART III                       |                                                                                  |     |
|                           |                                                                                  |     |
|    Item 10.     | Directors and Executive Officers                                                      | 12       |
|    Item 11.     | Executive Compensation                                                                | 14       |
|    Item 12.     | Security Ownership of Certain Beneficial Owners and Management                        | 20       |
|    Item 13.     | Certain Relationships and Related Transactions                                        | 21       |
|    Item 14.     | Principal Accountant Fees and Services                                                | 22       |
|    Item 15.     | Exhibits, Financial Statement Shedules                                                | 23       |
|                           |                                                                                  |     |

----

----

----

| Location                                           |        Sq. Ft.                                             |
|----------------------------------------------------|-----------------------------------------------------------------------------------------------|
| 1545 University Avenue, Green Bay, WI              |  400                                                                                     |
| 5350 Commerce Blvd., Rohnert Park, CA              |            2,800                       |
| 8938 Cotter Street, Lewis Center, OH               |            6,840                       |
| 1317 Oakdale Road, Modesto, CA                     |            1,000                       |
| 7429 East Brainard Rd, Chattanooga, TN             |            1.230                       |
| 103 East Main Street, Plainview, CT                |            7,600                       |
| 6402 McLeod Drive, Las Vegas, NV                   |                833 |
| 7670 Wolff Court, Westminster, CO                  |            1,896                       |
| 7449 North Natchez Ave., Niles, IL                 |          21,630                                  |
| 438 S. Greenwood, Wichita, KS                      |            1,200                       |
| 3418 Frankfort Ave, Louisville, KY                 |                250 |
| 1751 2nd Avenue, New York, NY                      |            1,400                       |
| 800 Veterans Blvd, Hauppauge, NY                   |            522                         |
| One Edgewood Drive, Norwood, MA                    |            1,910                       |
| 3100 Steeles Avenue West, Concord, Ontario, Canada |            1,455                       |

----

|                                   |   | High   |   |   | Low    |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|
| Fiscal 2008                            |   |   |   |   |   |   |
|                                   |   |   |   |   |   |   |
| First quarter ended March 31, 2008     |   | $      | 3.30   |   |   | $      | 3.06 |   |
| Second quarter ended June 30, 2008     |   | $      | 2.94   |   |   | $      | 2.52 |   |
| Third quarter ended September 30, 2008 |   | $      | 1.98   |   |   | $      | 1.68 |   |
| Fourth quarter ended December 31, 2008 |   | $      | 1.20   |   |   | $      | 1.20 |   |
|                                   |   |   |   |   |   |   |   |   |
| Fiscal 2009                            |   |   |   |   |   |   |   |   |
|                                   |   |   |   |   |   |   |   |   |
| First quarter ended March 31, 2009     |   | $      | 0.48   |   |   | $      | 0.42 |   |
| Second quarter ended June 30, 2009     |   | $      | 0.84   |   |   | $      | 0.78 |   |
| Third quarter ended September 30, 2009 |   | $      | 0.45   |   |   | $      | 0.45 |   |
| Fourth quarter ended December 31, 2009 |   | $      | 0.81   |   |   | $      | 0.75 |   |

----

|   | * | In August, IMS executed a one-for-six reverse stock split, reducing issued and outstanding shares to 10,343,467. Of those, 646,095 are now in treasury stock. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | * | During the year, 262,005 shares of stock were repurchased and retired to treasury stock. That is equivalent to 1,554,030 shares prior to the reverse split. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | * |  International Monetary Systems, Ltd. had operating income or EBITDA (earnings before interest, taxes, depreciation and amortization) of $2,252,138 or $.23 per share. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | * | We have continued to make progress in upgrading our website. One of the most significant improvements is the growing use of our online marketplace, where sales volume continues to hit new records. Marketplace sales for the 4th quarter of 2009 increased by 124% over the same period last year. As a result we are seeing more and more members using the IMS website to sell, buy, input a transaction, or just check their account balance. We are transforming member behavior to positively impact our efficiency. All of this has led to substantially increased Internet traffic, as IMSbarter.com's website ratings continue to improve. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | * | Publicity for International Monetary Systems was at an all-time high during 2009. In May, our CEO Don Mardak was interviewed on Bloomberg Television's Venture show. Hosted by Cris Valerio, the half-hour Venture program was aired on a Friday evening and repeated numerous times that weekend. IMS was also featured twice on the CBS Evening News with Katie Couric, as well as on numerous local television and radio programs. In addition, the Company was covered in dozens of magazine and newspaper articles, ranging from the New York Times and Chicago Tribune to CNN Money and several business journals. This major media exposure can help to get the message of barter and IMS out to potential customers and investors. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| EBITDA Calculation              |   |
|---------------------------------|--------|
|                            |   | 2009 |   |   | 2008 |   |
| Net profit (loss)               |   | $ | 206,817 |   |   | $ | (940,521 | ) |
| Interest expense                |   |   | 228,936 |   |   |   | 275,332 |   |
| Taxes                           |   |   | 104,206 |   |   |   | (594,222 | ) |
| Depreciation & amortization |   |   | 1,631,809 |   |   |   | 1,643,534 |   |
| Impairment                      |   |   | 80,370 |   |   |   | 209,605 |   |
| Total EBITDA                    |   | $ | 2 ,252,138 |   |   | $ | 593,728 |   |
|                            |   |   |   |   |   |   |   |   |

----

----

----

----

| Name                 | Age                        | Position                                                                       |
|----------------------|----------------------------|--------------------------------------------------------------------------------|
| Donald F. Mardak     | 73                         | Principal Executive Officer, President and Director                            |
| John E. Strabley     | 46                         | Executive Vice President and Director                                          |
| Dale L. Mardak       | 49                         | Senior Vice President and Director                                             |
| David A. Powell      |     51 | Interim Chief Financial Officer and Principal Financial and Accounting Officer |
| Patricia A. Katisch  | 64                         | Corporate Secretary                                                            |
| Wayne Emmer          | 55                         | Director                                                                       |
| Gerald Van Dyn Hoven | 53                         | Director                                                                       |
| Thomas Delacy        | 45                         | Director                                                                       |
| Wayne Dalin          | 65                         | Director                                                                       |
| Stephen Webster      | 65                         | Director                                                                       |

----

----

|                              |   |                   |   |               |   |  Number of                 |
|-----------------------------------|--------|------------------------|--------|--------------------|--------|---------------------------------|
|                              |   |                   |   |  Number of    |   |  Transactions not reported |
|  Name                        |   |  Position         |   |  Late Reports |   |  Timely                    |
|                              |   |                   |   |               |   |                            |
| Patricia A. Katisch               |   | Corporate Secretary    |   | 1                  |   | 7                               |
| Gerald Van Dyn Hoven              |   | Director               |   | 2                  |   | 20                              |
| Thomas Delacy                     |   | Director               |   | 1                  |   | 7                               |
| Wayne Dalin                       |   | Director               |   | 1                  |   | 1                               |
| Stephen Webster                   |   | Director               |   | 1                  |   | 6                               |
| Praetorian Capital Management LLC |   | Greater than 10% owner |   | 1                  |   | 1                               |
|                              |   |                   |   |               |   |                            |

----

|                        |   |   |   |    |   |                  |   |   |   |   |   | Pension Value |   |           |   |         |   |    |
|-----------------------------|--------|--------|--------|---------|--------|-----------------------|--------|--------|--------|--------|--------|---------------|--------|----------------|--------|--------------|--------|---------|
|                        |   |   |   |    |   |                  |   |   |   |   |   | and           |   |           |   |         |   |    |
|                        |   |   |   |    |   |                  |   |   |   |   |   | Nonqualified  |   |           |   |         |   |    |
|                        |   |   |   |    |   |                  |   |   |   |   |   | Deferred      |   | Non-Equity     |   |         |   |    |
|                        |   |   |   |    |   |                  |   | Stock  |   | Option |   | Compensation  |   | Incentive Plan |   | All Other    |   |    |
| Name and                    |   |   |   | Salary  |   | Bonus                 |   | Awards |   | Awards |   | Earnings      |   | Compensation   |   | Compensation |   | Total   |
| Principle Position          |   | Year   |   | ($)     |   | ($)                   |   | ($)    |   | ($)    |   | ($)           |   | ($)            |   | ($) (1)      |   | ($)     |
|                        |   |   |   |    |   |                  |   |   |   |   |   |          |   |           |   |         |   |    |
|                        |   |   |   |    |   |                  |   |   |   |   |   |          |   |           |   |         |   |    |
| Donald F. Mardak,           |   | 2009   |   | 203,166 |   | --                    |   | --     |   | --     |   | --            |   | --             |   | 14,337       |   | 217,503 |
| Principal Executive         |   | 2008   |   | 230,000 |   | --                    |   | --     |   | --     |   | --            |   | --             |   | 10,367       |   | 240,367 |
| Officer & President     |   |   |   |    |   |                  |   |   |   |   |   |          |   |           |   |         |   |    |
|                        |   |   |   |    |   |                  |   |   |   |   |   |          |   |           |   |         |   |    |
| Danny W. Weibling,          |   | 2009   |   | 167,833 |   |    500 |   | --     |   | --     |   | --            |   | --             |   | 5,394        |   | 173,727 |
| Principal Financial         |   | 2008   |   | 190,000 |   | 2,500                 |   | --     |   | --     |   | --            |   | --             |   | 4,367        |   | 196,867 |
| Officer & Treasurer (2) |   |   |   |    |   |                  |   |   |   |   |   |          |   |           |   |         |   |    |
|                        |   |   |   |    |   |                  |   |   |   |   |   |          |   |           |   |         |   |    |
| John E. Strabley,           |   | 2009   |   | 154,583 |   |   750       |   | --     |   | --     |   | --            |   | --             |   | 6,626        |   | 161,959 |
| Executive Vice              |   | 2008   |   | 175,000 |   | 2,500                 |   | --     |   | --     |   | --            |   | --             |   | 6,092        |   | 183,592 |
| President & Director    |   |   |   |    |   |                  |   |   |   |   |   |          |   |           |   |         |   |    |
|                        |   |   |   |    |   |                  |   |   |   |   |   |          |   |           |   |         |   |    |

----

----

| Option Awards |   |                                                          | Stock Awards |   |
|---------------|--------|---------------------------------------------------------------|--------------|--------|
| Name          |   | Number ofsecuritiesunderlyingunexercisedoptionsexercisable(#) |         |   | Number ofsecuritiesunderlyingunexercisedoptionsunexercisable(#) |   |   | Equityincentiveplanawards:Number ofsecuritiesunderlyingunexercisedunearnedoptions(#) |   |   | Optionexerciseprice($) |   |   | Optionexpirationdate |   |   | Numberofsharesorunitsofstockthathavenotvested(#) |   |   | Marketvalueofsharesor unitsofstockthathavenotvested($) |   |   | Equityincentiveplanawards:number ofunearnedshares orunits orotherrightsthat havenotvested(#) |   |   | Equityincentiveplan awards:Market orpayoutvalue ofunearnedshares,units orotherrightsthat havenot vested($) |   |
|          |   |                                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          |   |                                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Donald F.     |   |                                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mardak        |   |                                                          | --           |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|          |   |                                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Danny W.      |   |                                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weibling (1)  |   |                                                          | --           |   |   |   | -- |   |   |   | -- |   |   |   | - |   |   |   | - |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|          |   |                                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| John E.       |   |                                                          |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Strabley      |   |                                                          | --           |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |

----

|                 |   |           |   |   |       |   |   |   |   |   |           |   |   | Nonqualified |   |   |         |   |   |   |   |
|----------------------|--------|----------------|--------|--------|------------|--------|--------|--------|--------|--------|----------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------|--------|
|                 |   |           |   |   |       |   |   |   |   |   | Non-Equity     |   |   | Deferred     |   |   |         |   |   |   |   |
|                 |   | Fees Earned or |   |   | Stock      |   |   | Option |   |   | Incentive Plan |   |   | Compensation |   |   | All Other    |   |   |   |   |
|                 |   | Paid in Cash   |   |   | Awards (1) |   |   | Awards |   |   | Compensation   |   |   | Earnings     |   |   | Compensation |   |   | Total  |   |
| Name                 |   | ($)            |   |   | ($)        |   |   | ($)    |   |   | ($)            |   |   | ($)          |   |   | ($)          |   |   | ($)    |   |
|                 |   |           |   |   |       |   |   |   |   |   |           |   |   |         |   |   |         |   |   |   |   |
| Wayne Dalin          |   |           | 2,250  |   |       |   | 2,000  |   |   |   | --             |   |   |         | --     |   |         |   | --     |   |   |   | -- |   |   |   | 4,250 |   |
| Thomas Delacy        |   |           | 900    |   |       |   | 2,000  |   |   |   | --             |   |   |         | --     |   |         |   | --     |   |   |   | -- |   |   |   | 2,900 |   |
| Wayne Emmer          |   |           | 700    |   |       |   | 2,000  |   |   |   | --             |   |   |         | --     |   |         |   | --     |   |   |   | -- |   |   |   | 2,700 |   |
| Patricia Katisch     |   |           | 1,800  |   |       |   | 2,000  |   |   |   |           |   |   |         |   |   |         |   |   |   |   |   | 720 |   |   |   | 4,520 |   |
| Gerald Van Dyn Hoven |   |           | 1,400  |   |       |   | 2,000  |   |   |   | --             |   |   |         | --     |   |         |   | --     |   |   |   | -- |   |   |   | 3,400 |   |
| Stephen Webster      |   |           | 1,300  |   |       |   | 2,000  |   |   |   | --             |   |   |         | --     |   |         |   | --     |   |   |   | -- |   |   |   | 3,300 |   |

----

| honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;                               |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                  |
| full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us;          |
|                                                                                                                                                                                  |
| compliance with applicable governmental laws, rules and regulations;                                                                                                                  |
|                                                                                                                                                                                  |
| the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and |
|                                                                                                                                                                                  |
| accountability for adherence to the Code of Business Conduct and Ethics                                                                                                               |

----

| · each person known by us to beneficially own more than 5% of our common stock; |
|-------------------------------------------------------------------------------------------|
| · each of our directors and our named executive officers; and                   |
| · all of our directors and executive officers as a group.                       |

|                                             |   | Shares beneficially owned |      |
|--------------------------------------------------|--------|---------------------------|-----------|
|                                             |   | as of December 31, 2009   |      |
|                                             |   |                      |      |   |   |   |
| Name of Beneficial Owner                         |   | Number                    |      |   | Percent |   |
|                                             |   |                      |      |   |   |   |
| Donald F. Mardak (1)                             |   |                      | 2,964,000 |   |   |   | 28.66 | % |
| Dale L. Mardak (2)                               |   |                      | 232,000   |   |   |   | 2.24 | % |
| John E. Strabley (3)                             |   |                      | 112,667   |   |   |   | 1.09 | % |
| David A. Powell (4)                              |   |                      | 22,188    |   |   |   | 0.21 | % |
| Stephen Webster                                  |   |                      | 270,668   |   |   |   | 2.62 | % |
| Thomas Delacy                                    |   |                      | 97,334    |   |   |   | 0.94 | % |
| Gerald Van Dyn Hoven                             |   |                      | 75,667    |   |   |   | 0.73 | % |
| Wayne Emmer                                      |   |                      | 45,334    |   |   |   | 0.44 | % |
| Wayne Dalin                                      |   |                      | 49,577    |   |   |   | 0.48 | % |
| Patricia Katisch                                 |   |                      | 13,334    |   |   |   | 0.13 | % |
|                                             |   |                      |      |   |   |   |   |   |
| All directors and executive officers             |   |                      |      |   |   |   |   |   |
|    as a group (10 persons)        |   |                      | 3,882,769 |   |   |   | 37.54 | % |
|                                             |   |                      |      |   |   |   |   |   |
|                                             |   |                      |      |   |   |   |   |   |
| Other Beneficial Owner                           |   |                      |      |   |   |   |   |   |
|                                             |   |                      |      |   |   |   |   |   |
| Praetorian Capital Management LLC  (5) |   |                      | 1,492,966 |   |   |   | 14.43 | % |

| (1)   | Does not include 112,667 shares held by his wife, Judy E. Mardak, as to which Mr. Mardak disclaims beneficial ownership. All shares owned by Donald F. and Judy E. Mardak are now held in a revocable living trust. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Does not include 1,400 shares held by his wife, Lisa L. Mardak, as to which Mr. Mardak disclaims beneficial ownership. |
|-----------------|------------------------------------------------------------------------------------------------------------------------|

| (3)   | Does not include 213,334 shares held by his wife, Kimberly A. Strabley, as to which Mr. Strabley disclaims beneficial ownership. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------|

| (4)   | 13,855 shares are owned jointly with his wife, Janice L. Powell, in a revocable living trust. |
|-----------------|-----------------------------------------------------------------------------------------------|

| (5)   | Does not include 366,667 shares of exercisable warrants. |
|-----------------|----------------------------------------------------------|

----

----

|                                                        |   | 2009   |   |   | 2008   |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                        |   |   |   |   |   |   |
| Audit Fees                                                  |   | $      | 63,324 |   |   | $      | 47,167 |   |
| Audit-Related Fees                                          |   |   | 0      |   |   |   | 0 |   |
| Tax Fees                                                    |   |   | 0      |   |   |   | 0 |   |
| All Other Fees                                              |   |   | 0      |   |   |   | 0 |   |
|                                                        |   |   |   |   |   |   |   |   |
|          Total |   | $      | 63,324 |   |   | $      | 47,167 |   |

----

| Exhibit |                                                                                                                |
|---------|---------------------------------------------------------------------------------------------------------------------|
| Number  | Description                                                                                                         |
| 3.1     | Articles of Incorporation of the Registrant *                                                                       |
| 3.2     | Articles of Amendment of the Registrant *                                                                           |
| 3.3     | Bylaws of the Registrant *                                                                                          |
| 10.1    | Lease Agreement, between Glendale Investments, LLC. and the Registrant *                                            |
| 23.1    | Consent of Independent Registered Public Accounting Firm**                                                          |
| 31.1    | Certificate of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **         |
| 31.2    | Certificate of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **         |
| 32.1    | Certificate of the Principal Executive Officer to Section 906 of the Sarbanes-Oxley Act of 2002 **                  |
| 32.2    | Certificate of the Principal Financial Officer to Section 906 of the Sarbanes-Oxley Act of 2002 **                  |
|    |                                                                                                                |
|    | *  Incorporated by reference to the registration statement of the company on Form SB-2 File No. 333-94597 |
|    |                                                                                                                |
|    | ** Filed herein                                                                                                     |

----

| Dated:  April 1, 2010 |   | By:    |  /s/ Donald F. Mardak                       |
|---------------------------------|--------|--------|--------------------------------------------------|
|                            |   |   |                                             |
|                            |   |   | Donald F. Mardak, President                      |
|                            |   |   | (Principal Executive Officer)                    |
|                            |   |   |                                             |
|                            |   |   |                                             |
| Dated:  April 1, 2010 |   | By:    | /s/ David A. Powell                         |
|                            |   |   |                                             |
|                            |   |   | David A. Powell, Interim Chief Financial Officer |
|                            |   |   | (Principal Financial Officer)                    |

| SIGNATURE               |   | TITLE                        |   | DATE          |
|-------------------------|--------|------------------------------|--------|---------------|
|                    |   |                         |   |          |
|                    |   |                         |   |          |
| /s/ Donald F. Mardak    |   | Principal Executive Officer, |   | April 1, 2010 |
|                    |   | President and Director       |   |          |
| Donald F. Mardak        |   |                         |   |          |
|                    |   |                         |   |          |
| /s/ David A Powell |   | Principal Financial Officer, |   | April 1, 2010 |
|                    |   | Principal Accounting Officer |   |          |
| David A Powell          |   |                         |   |          |
|                    |   |                         |   |          |
| /s/ Dale L. Mardak      |   | Senior Vice President        |   | April 1, 2010 |
|                    |   | and Director                 |   |          |
| Dale L. Mardak          |   |                         |   |          |
|                    |   |                         |   |          |
| /s/ John E. Strabley    |   | Executive Vice President     |   | April 1, 2010 |
|                    |   | and Director                 |   |          |
| John E. Strabley        |   |                         |   |          |
|                    |   |                         |   |          |
| /s/ Thomas E. Delacy    |   | Director                     |   | April 1, 2010 |
|                    |   |                         |   |          |
| Thomas E. Delacy        |   |                         |   |          |
|                    |   |                         |   |          |
| /s/ Wayne R. Dalin      |   | Director                     |   | April 1, 2010 |
|                    |   |                         |   |          |
| Wayne R. Dalin          |   |                         |   |          |
|                    |   |                         |   |          |

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|                                                                  |
|-----------------------------------------------------------------------|
|                                                                  |
|                                                                  | Page |
|                                                                  |   |
|                                                                  |   |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM               | F-1 |
|                                                                  |   |
| FINANCIAL STATEMENTS                                                  |   |
|                                                                  |   |
| Consolidated Balance Sheets                                           | F-2 - F-3 |
|                                                                  |   |
| Consolidated Statements of Operations and Comprehensive Income (Loss) | F-4 |
|                                                                  |   |
| Consolidated Statements of Changes in Stockholder Equity              | F-5 |
|                                                                  |   |
| Consolidated Statements of Cash Flows                                 | F-6 - F-7 |
|                                                                  |   |
| Notes to Consolidated Financial Statements                            | F-8 - F-29 |

----

----

| INTERNATIONAL MONETARY SYSTEMS, LTD.AND SUBSIDIARIES                                                                 |   |
|----------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                 |   |
| CONSOLIDATED BALANCE SHEETS                                                                                          |   |
| December 31                                                                                                          |   |
|                                                                                                                 |   |   |   |   |   |   |
|                                                                                                                 |   | 2009 |   |   | 2008 |   |
| ASSETS                                                                                                               |   |   |   |   |   |   |
| Current assets                                                                                                       |   |   |   |   |   |   |
|       Cash                                                                             |   | $ | 894,396 |   |   | $ | 279,227 |   |
|       Restricted cash                                                                  |   |   | 149,682 |   |   |   | 495,803 |   |
|       Marketable securities                                                            |   |   | 115,110 |   |   |   | 84,808 |   |
|       Accounts receivable, net of allowance for doubtful                               |   |   |   |   |   |   |   |   |
|          accounts of $492,338  in 2009 and $739,540 in 2008   |   |   | 1,201,403 |   |   |   | 1,401,383 |   |
|       Refundable income taxes                                                          |   |   | 133,000 |   |   |   | 48,500 |   |
|       Earned trade account                                                             |   |   | 33,561 |   |   |   | 6,991 |   |
|       Prepaid expenses                                                                 |   |   | 103,027 |   |   |   | 109,710 |   |
|       Inventory                                                                        |   |   | - |   |   |   | 33,839 |   |
|                 Total current assets |   |   | 2,630,179 |   |   |   | 2,460,261 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|  Property and equipment, net                                                                                    |   |   | 921,473 |   |   |   | 1,056,526 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|  Other assets                                                                                                   |   |   |   |   |   |   |   |   |
|       Membership lists, net                                                            |   |   | 8,153,093 |   |   |   | 9,577,257 |   |
|       Goodwill                                                                         |   |   | 3,435,479 |   |   |   | 3,435,479 |   |
|       Deferred tax asset                                                               |   |   | - |   |   |   | 75,000 |   |
|       Assets held for investment                                                       |   |   | 99,298 |   |   |   | 99,298 |   |
|       Investment in real estate                                                        |   |   | 26,000 |   |   |   | 26,000 |   |
|       Cash surrender value                                                             |   |   | 49,361 |   |   |   | 43,125 |   |
|                 Total other assets   |   |   | 11,763,231 |   |   |   | 13,256,159 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                 Total assets         |   | $ | 15,314,883 |   |   | $ | 16,772,946 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |

----

| INTERNATIONAL MONETARY SYSTEMS, LTD.AND SUBSIDIARIES                                                                               |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                               |   |   |   |   |   |   |
| CONSOLIDATED BALANCE SHEETS                                                                                                        |   |
| December 31                                                                                                                        |   |
|                                                                                                                               |   | 2009 |   |   | 2008 |   |
| LIABILITIES AND STOCKHOLDER EQUITY                                                                                                 |   |   |   |   |   |   |
| Current liabilities                                                                                                                |   |   |   |   |   |   |
|      Accounts payable                                                                                     |   | $ | 344,265 |   |   | $ | 245,579 |   |
|      Accrued compensation                                                                                 |   |   | 412,109 |   |   |   | 298,317 |   |
|      Accrued payroll taxes                                                                                |   |   | 79,412 |   |   |   | 103,150 |   |
|      Accrued sales taxes                                                                                  |   |   | 31,683 |   |   |   | 33,702 |   |
|      Accrued income taxes                                                                                 |   |   | 422,995 |   |   |   | 8,150 |   |
|      Trade payable                                                                                        |   |   | - |   |   |   | 321,476 |   |
|      Credit lines                                                                                         |   |   | 246,385 |   |   |   | 340,736 |   |
|      Current portion of notes payable                                                                     |   |   | 236,997 |   |   |   | 838,992 |   |
|      Current portion of convertible notes payable                                                         |   |   | 299,226 |   |   |   | 175,466 |   |
|      Current portion of notes payable, related parties                                                    |   |   | 50,000 |   |   |   | - |   |
|      Current portion of common stock subject to guarantees                                                |   |   | 706,500 |   |   |   | 1,268,500 |   |
|                Total current liabilities                |   |   | 2,829,572 |   |   |   | 3,634,068 |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |
| Long-term liabilities                                                                                                              |   |   |   |   |   |   |   |   |
|      Notes payable, less current portion                                                                  |   |   | 100,000 |   |   |   | 154,334 |   |
|      Convertible notes payable, less current portion                                                      |   |   | 1,423,445 |   |   |   | 1,306,813 |   |
|      Notes payable, related parties                                                                       |   |   | 50,000 |   |   |   | - |   |
|      Common stock subject to guarantees, less current portion                                             |   |   | 620,000 |   |   |   | 1,359,500 |   |
|      Deferred compensation                                                                                |   |   | 275,000 |   |   |   | 260,000 |   |
|      Deferred income taxes                                                                                |   |   | 1,679,565 |   |   |   | 2,039,000 |   |
|                Total long-term liabilities              |   |   | 4,148,010 |   |   |   | 5,119,647 |   |
|                Total liabilities                        |   |   | 6,977,582 |   |   |   | 8,753,715 |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                      |   |   | - |   |   |   | - |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |
| STOCKHOLDER EQUITY                                                                                                                 |   |   |   |   |   |   |   |   |
| Preferred stock, $.0001 par value; 20,000,000 shares                                                                               |   |   |   |   |   |   |   |   |
|    authorized, none outstanding                                                                                     |   |   | - |   |   |   | - |   |
| Common stock, $.0001 par value; 280,000,000 shares                                                                                 |   |   |   |   |   |   |   |   |
|    authorized, 10,343,467and 10,270,939 shares                                                                      |   |   |   |   |   |   |   |   |
|    issued and outstanding, respectively                                                                             |   |   | 1,030 |   |   |   | 1,028 |   |
| Paid in capital                                                                                                                    |   |   | 12,772,904 |   |   |   | 11,702,173 |   |
| Treasury stock, 646,095 and 387,090 shares                                                                                         |   |   |   |   |   |   |   |   |
|    outstanding, respectively                                                                                        |   |   | (2,428,422 | ) |   |   | (1,403,216 | ) |
| Deferred compensation                                                                                                              |   |   | - |   |   |   | (25,467 | ) |
| Accumulated other comprehensive income                                                                                             |   |   | (10,581 | ) |   |   | (50,840 | ) |
| Accumulated deficit                                                                                                                |   |   | (1,997,630 | ) |   |   | (2,204,447 | ) |
|                Total stockholder equity                 |   |   | 8,337,301 |   |   |   | 8,019,231 |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |
|                Total liabilities and stockholder equity |   | $ | 15,314,883 |   |   | $ | 16,772,946 |   |

----

| INTERNATIONAL MONETARY SYSTEMS, LTD.                                                   |   |
|----------------------------------------------------------------------------------------|--------|
| AND SUBSIDIARIES                                                                       |   |
| CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME (LOSS)                   |   |
|                                                                                   |   |
|                                                                                   |   |   |   |   |   |   |
|                                                                                   |   | 2009 |   |   | 2008 |   |
|                                                                                   |   |   |   |   |   |   |
| Revenue                                                                                |   | $ | 13,968,152 |   |   | $ | 14,203,550 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| Operating expenses                                                                     |   |   |   |   |   |   |   |   |
|      Payroll, related taxes and employee benefits             |   |   | 7,727,461 |   |   |   | 9,483,364 |   |
|      General and administrative                               |   |   | 2,041,020 |   |   |   | 2,014,856 |   |
|      Occupancy                                                |   |   | 1,208,104 |   |   |   | 1,078,288 |   |
|      Selling                                                  |   |   | 665,394 |   |   |   | 840,926 |   |
|      Depreciation and amortization                            |   |   | 1,631,809 |   |   |   | 1,643,534 |   |
|      Impairment of membership list                            |   |   | 80,370 |   |   |   | 209,605 |   |
|      Provision for bad debts                                  |   |   | 74,689 |   |   |   | 177,513 |   |
|      Total operating expenses                                 |   |   | 13,428,847 |   |   |   | 15,448,086 |   |
| Net income (loss) from operations                                                      |   |   | 539,305 |   |   |   | (1,244,536 | ) |
| Other income (expense)                                                                 |   |   |   |   |   |   |   |   |
|      Interest income                                          |   |   | 654 |   |   |   | 8,910 |   |
|      Loss on disposal of fixed assets                         |   |   | - |   |   |   | (23,786 | ) |
|      Interest expense                                         |   |   | (228,936 | ) |   |   | (275,332 | ) |
|      Total other income (expense)                             |   |   | (228,282 | ) |   |   | (290,208 | ) |
|                                                                                   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes                                                      |   |   | 311,023 |   |   |   | (1,534,744 | ) |
|                                                                                   |   |   |   |   |   |   |   |   |
| Income tax expense (benefit)                                                           |   |   | 104,206 |   |   |   | (594,222 | ) |
|                                                                                   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                      |   | $ | 206,817 |   |   | $ | (940,521 | ) |
|                                                                                   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per common share                                                 |   | $ | 0.02 |   |   | $ | (0.10 | ) |
| Diluted earnings (loss) per common share                                               |   | $ | 0.02 |   |   | $ | (0.10 | ) |
| Weighted average shares outstanding, basic                                             |   |   | 9,731,062 |   |   |   | 9,926,699 |   |
| Weighted average shares outstanding, diluted                                           |   |   | 9,731,062 |   |   |   | 9,926,999 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss):                                                           |   |   | 2009 |   |   |   | 2008 |   |
| Net income (loss)                                                                      |   | $ | 206,817 |   |   | $ | (940,521 | ) |
| Comprehensive income:                                                                  |   |   |   |   |   |   |   |   |
|      Foreign currency translation gain (loss)                 |   |   | 18,321 |   |   |   | (24,046 | ) |
|      Unrealized gain (loss) on available for sale investments |   |   | 21,938 |   |   |   | (42,104 | ) |
| Comprehensive income (loss)                                                            |   | $ | 247,076 |   |   | $ | (1,006,671 | ) |
|                                                                                   |   |   |   |   |   |   |   |   |

----

| INTERNATIONAL MONETARY SYSTEMS, LTD. AND SUBSIDIARIES    |   |
|----------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER EQUITY |   |
| For the Years Ended December 31                          |   |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |   |   |   |   | Treasury |   |   | Total |   |
|                                                     |   | Preferred Stock |   |   | Common Stock |   |   | Paid in |   |   | Subscription |   |   | Comprehensive |   |   | Deferred |   |   | Accumulated |   |   | Stock |   |   | Stockholder |   |
|                                                     |   | Shares |   |   | Amount |   |   | Shares |   |   | Amount |   |   | Capital |   |   | Receivable |   |   | Income |   |   | Compensation |   |   | Deficit |   |   | Shares |   |   | Amount |   |   | Equity |   |
| Balance, December 31, 2007                               |   |   | - |   |   | $ | - |   |   |   | 10,094,272 |   |   | $ | 1,011 |   |   | $ | 10,906,990 |   |   | $ | (31,196 | ) |   | $ | 15,310 |   |   | $ | - |   |   | $ | (1,263,926 | ) |   |   | (212,757 | ) |   | $ | (547,241 | ) |   | $ | 9,080,948 |   |
| Foreign currency translation adjustment                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (24,046 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (24,046 | ) |
| Unrealized loss on available for sale securities         |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (42,104 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (42,104 | ) |
| Net loss for 2008                                        |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (940,521 | ) |   |   | - |   |   |   | - |   |   |   | (940,521 | ) |
| Total comprehensive loss                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,006,671 | ) |
| Stock issued for services                                |   |   | - |   |   |   | - |   |   |   | 51,667 |   |   |   | 5 |   |   |   | 85,695 |   |   |   | - |   |   |   | - |   |   |   | (25,467 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 60,233 |   |
| Shares issued in conjunction with the                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| acquisition of businesses                                |   |   | - |   |   |   | - |   |   |   | 33,333 |   |   |   | 3 |   |   |   | 149,997 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 150,000 |   |
| Warrants redeemed                                        |   |   | - |   |   |   | - |   |   |   | 91,667 |   |   |   | 9 |   |   |   | 302,491 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 302,500 |   |
| Treasury stock purchases                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (174,333 | ) |   |   | (855,975 | ) |   |   | (855,975 | ) |
| Subscription receivable written off                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 31,196 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 31,196 |   |
| Reclassification of shares released at                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| guaranteed prices to liabilities                         |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 257,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 257,000 |   |
| Balance December 31, 2008                                |   |   | - |   |   | $ | - |   |   |   | 10,270,939 |   |   | $ | 1,028 |   |   | $ | 11,702,173 |   |   | $ | - |   |   | $ | (50,840 | ) |   | $ | (25,467 | ) |   | $ | (2,204,447 | ) |   |   | (387,090 | ) |   | $ | (1,403,216 | ) |   | $ | 8,019,231 |   |
| Foreign currency translation adjustment                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 18,321 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 18,321 |   |
| Unrealized gain on available for sale securities         |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 21,938 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 21,938 |   |
| Net income for 2009                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 206,817 |   |   |   | - |   |   |   | - |   |   |   | 206,817 |   |
| Total comprehensive income                               |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 247,076 |   |
| Stock issued for services                                |   |   | - |   |   |   | - |   |   |   | 122,333 |   |   |   | 7 |   |   |   | 69,226 |   |   |   | - |   |   |   | - |   |   |   | (24,000 | ) |   |   | - |   |   |   | 3,000 |   |   |   | 1,500 |   |   |   | 46,733 |   |
| Deferred comp expensed                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 49,467 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 49,467 |   |
| Stock converted to notes                                 |   |   | - |   |   |   | - |   |   |   | (50,000 | ) |   |   | (5 | ) |   |   | (299,995 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (300,000 | ) |
| Treasury stock purchases                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (262,005 | ) |   |   | (1,026,706 | ) |   |   | (1,026,706 | ) |
| Stock split adjustments                                  |   |   | - |   |   |   | - |   |   |   | 195 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Reclassification of shares released at                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| guaranteed prices to liabilities                         |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,301,500 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,301,500 |   |
| Balance December 31, 2009                                |   |   | - |   |   | $ | - |   |   |   | 10,343,467 |   |   | $ | 1,030 |   |   | $ | 12,772,904 |   |   | $ | - |   |   | $ | (10,581 | ) |   | $ | - |   |   | $ | (1,997,630 | ) |   |   | (646,095 | ) |   | $ | (2,428,422 | ) |   | $ | 8,337,301 |   |

----

| INTERNATIONAL MONETARY SYSTEMS, LTD.                                 |   |
|----------------------------------------------------------------------|--------|
| AND SUBSIDIARIES                                                     |   |
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                |   |
| For the Years Ended December 31                                      |   |
|                                                                 |   | 2009 |   |   | 2008 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                 |   |   |   |   |   |   |
| Net income (loss)                                                    |   | $ | 206,817 |   |   | $ | (940,521 | ) |
| Adjustments to reconcile net loss to net cash                        |   |   |   |   |   |   |   |   |
|    provided by operating activities                   |   |   |   |   |   |   |   |   |
|      Depreciation and amortization          |   |   | 1,631,809 |   |   |   | 1,643,534 |   |
|      Impairment loss                        |   |   | 80,370 |   |   |   | 209,605 |   |
|      Provision for bad debts                |   |   | (303,923 | ) |   |   | 177,513 |   |
|      Stock issued for services              |   |   | 96,200 |   |   |   | 60,233 |   |
|      Loss on disposal of fixed assets       |   |   | - |   |   |   | 23,786 |   |
|      Accretion of discount on notes payable |   |   | - |   |   |   | 4,723 |   |
|      Deferred compensation                  |   |   | 15,000 |   |   |   | 124,000 |   |
|      Amortization of deferred compensation  |   |   | - |   |   |   | 26,196 |   |
| Changes in operating assets and liabilities:                         |   |   |   |   |   |   |   |   |
|      Accounts receivable                    |   |   | 503,903 |   |   |   | (30,957 | ) |
|      Refundable income taxes                |   |   | (84,500 | ) |   |   | (48,500 | ) |
|      Earned trade account                   |   |   | (26,570 | ) |   |   | 257,937 |   |
|      Prepaid expense                        |   |   | 6,683 |   |   |   | 2,523 |   |
|      Inventory                              |   |   | 33,839 |   |   |   | - |   |
|      Deferred tax asset                     |   |   | 75,000 |   |   |   | (75,000 | ) |
|      Accounts payable                       |   |   | 98,686 |   |   |   | (79,229 | ) |
|      Accrued compensation                   |   |   | 113,792 |   |   |   | (79,198 | ) |
|      Accrued payroll taxes                  |   |   | (23,738 | ) |   |   | 3,548 |   |
|      Accrued sales taxes                    |   |   | (2,019 | ) |   |   | (18,105 | ) |
|      Accrued income taxes                   |   |   | 414,845 |   |   |   | (140,850 | ) |
|      Trade payable                          |   |   | (321,476 | ) |   |   | - |   |
|      Deferred income taxes                  |   |   | (359,435 | ) |   |   | (511,000 | ) |
| Net cash provided by operating activities                            |   |   | 2,155,283 |   |   |   | 610,238 |   |
|                                                                 |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                 |   |   |   |   |   |   |   |   |
| (Increase) decrease in restricted cash                               |   |   | (480,379 | ) |   |   | (12,360 | ) |
| (Increase) decrease in marketable securities                         |   |   | (8,365 | ) |   |   | (8,531 | ) |
| Capital expenditures                                                 |   |   | (152,962 | ) |   |   | (89,985 | ) |
| Cash payments for business acquisitions                              |   |   | - |   |   |   | (495,000 | ) |
| Proceeds from sale of real estate                                    |   |   | - |   |   |   | 2,695 |   |
| Increase in cash surrender value                                     |   |   | (6,236 | ) |   |   | (6,069 | ) |
| Net cash used in investing activities                                |   |   | (647,942 | ) |   |   | (609,250 | ) |

----

| INTERNATIONAL MONETARY SYSTEMS, LTD.             |   |
|--------------------------------------------------|--------|
| AND SUBSIDIARIES                                 |   |
| CONSOLIDATED STATEMENTS OF CASH FLOWS            |   |
| For the Years Ended December 31                  |   |
|                                             |   | 2009 |   |   | 2008 |   |
| CASH FLOWS FROM FINANCING ACTIVITIES             |   |   |   |   |   |   |
| Proceeds from notes payable to related parties   |   |   | 100,000 |   |   |   | 25,000 |   |
| Proceeds from credit lines                       |   |   | 25,092 |   |   |   | 480,000 |   |
| Proceeds from notes payable                      |   |   | 100,000 |   |   |   | - |   |
| Proceeds from convertible notes payable          |   |   | - |   |   |   | 300,000 |   |
| Payments on notes payable to related parties     |   |   | - |   |   |   | (25,000 | ) |
| Payments on credit lines                         |   |   | (119,443 | ) |   |   | (139,264 | ) |
| Payments on notes payable                        |   |   | (885,176 | ) |   |   | (956,095 | ) |
| Payments on convertible notes payable            |   |   | (59,608 | ) |   |   | (17,721 | ) |
| Purchase of treasury stock                       |   |   | (897,859 | ) |   |   | (484,499 | ) |
| Proceeds from subscription receivable            |   |   | - |   |   |   | 5,000 |   |
| Proceeds from issuance of stock                  |   |   | 826,500 |   |   |   | 302,500 |   |
| Net cash used in financing activities            |   |   | (910,494 | ) |   |   | (510,079 | ) |
|                                             |   |   |   |   |   |   |   |   |
| Effect of exchange rate changes                  |   |   | 18,322 |   |   |   | (24,047 | ) |
|                                             |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash                  |   |   | 615,169 |   |   |   | (533,138 | ) |
|                                             |   |   |   |   |   |   |   |   |
| Cash at beginning of year                        |   |   | 279,227 |   |   |   | 812,365 |   |
|                                             |   |   |   |   |   |   |   |   |
| Cash at end of year                              |   | $ | 894,396 |   |   | $ | 279,227 |   |
|                                             |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES                         |   |   |   |   |   |   |   |   |
| Cash paid for interest                           |   | $ | 228,936 |   |   | $ | 280,107 |   |
| Cash paid for income taxes                       |   | $ | 58,296 |   |   | $ | 181,128 |   |
|                                             |   |   |   |   |   |   |   |   |
| NON CASH FINANCING AND INVESTING ACTIVITIES      |   |   |   |   |   |   |   |   |
| Acquisitions:                                    |   |   |   |   |   |   |   |   |
| Fair value of assets acquired                    |   |   | - |   |   | $ | 1,155,424 |   |
| Less: liabilities assumed                        |   |   |   |   |   |   |   |   |
| Stock issued                                     |   |   | - |   |   |   | (150,000 | ) |
| Purchase option                                  |   |   | - |   |   |   | (112,500 | ) |
| Issuance of long-term debt                       |   |   | - |   |   |   | (397,924 | ) |
| Net cash paid for acquisitions                   |   | $ | - |   |   | $ | 495,000 |   |
|                                             |   |   |   |   |   |   |   |   |
| Stock issued for services                        |   | $ | 96,200 |   |   | $ | 60,233 |   |
| Unrealized net gain (loss) on equity investments |   | $ | (21,302 | ) |   | $ | (42,103 | ) |
| Stock guarantees on acquisitions                 |   |   | - |   |   | $ | 300,000 |   |
| Stock guarantees released                        |   | $ | 1,301,500 |   |   | $ | 557,000 |   |
| Treasury stock acquired with trade payable       |   | $ | - |   |   | $ | 321,476 |   |

----

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

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

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

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

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

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

|   | As a condition to issuing the guarantee on the purchase of certain exchanges, IMS agreed to deposit a monthly amount into an escrow account for the repurchase of common stock under guaranteed transactions. As of December 31, 2009 and 2008, the Company has made all required deposits into the escrow account. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, restricted cash, prepaid expense and other assets, accounts payable, accrued liabilities, notes payable and deferred compensation approximate their fair value due as of December 31, 2009 because of their short-term natures. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

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

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

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

|   | The consolidated financial statements for 2009 and 2008 include the accounts of the Company and its wholly owned subsidiaries Continental Trade Exchange, Ltd., National Trade Association, Inc., and INLM CN, Inc. Significant inter-company accounts and transactions have been eliminated in consolidation. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

----

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

----

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

|   | Inventory consisted primarily of jewelry and other merchandise held for sale by the Company. Inventory is carried at the lower of actual cost of acquisition, or fair value. The inventory was sold at cost in 2009. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

|   | Extensive software has been developed to manage and track trade activity and member account balances and calculate fees in the Exchange. Qualifying costs are accounted for in accordance with ASC 350. Accordingly, costs incurred in the planning and post-implementation stages are expensed as incurred, and costs related to development have been capitalized. Qualifying software development costs are included in property and equipment in the consolidated balance sheets and are amortized over their estimated useful life of 60 months. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | The Company has adopted FASB ASC 350, which requires that goodwill and intangible assets with indefinite lives be tested annually for impairment. In 2009, the Company recorded an impairment loss of $80,370 on membership lists of the Louisville, KY and Boston, MA operations. In 2008 the Company recorded an impairment loss of $209,605 on membership lists related to its Modesto, CA, Chattanooga, TN, Las Vegas, NV, and Louisville, KY operations. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

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

|   | The Company accounts for income taxes in accordance with FASB ASC 740.  Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash |
|--------|------|

|   | Cash includes deposits at financial institutions with maturities of three months or less. The Company at times has cash in banks in excess of FDIC insurance limits and places its temporary cash investments with high credit quality financial institutions. At December 31, 2009 and 2008, respectively, the Company had approximately $358,000 and $198,000 in cash balances at financial institutions which were in excess of the FDIC insured limits. The FDIC insured limit at December 31, 2009 and 2008, was $250,000. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Accounts Receivable |
|--------|---------------------|

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

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

|   | Advertising costs, which are principally included in selling expenses, are expensed as incurred. Advertising expense was $436,698 and $503,997 for the years ended December 31, 2009 and 2008, respectively. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | FASB ASC 220 establishes rules for reporting and displaying comprehensive income and its components. Comprehensive income is the sum of net loss as reported in the consolidated statements of operations and other comprehensive income transactions as reported in the consolidated statement of changes in stockholders' equity. Other comprehensive income transactions that currently apply to the Company result from unrealized gains or losses on equity investments and from changes in exchange rates used in translating the financial statements of its wholly owned subsidiary INLM CN, Inc. of Canada. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The financial statements of the Company's foreign subsidiary have been translated into U.S. dollars in accordance with FASB ASC 830. All balance sheet accounts have been translated using the exchange rate in effect at the balance sheet date. Income statement amounts have been translated using an appropriately weighted average exchange rate for the year. The translation gains and losses of $18,321 and $(24,046) resulting from the changes in exchange rates during 2009 and 2008, respectively, have been reported in accumulated other comprehensive income, except for gains and losses resulting from the translation of intercompany receivables and payables, which are included in earnings for the period. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Basic and diluted net gain or loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC 260. As of December 31, 2009 and 2008 there were 1,322,288 and 1,216,860 common share equivalents outstanding which consisted of: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                          |   | 2009   |      |   | 2008   |   |
|-----------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Shares issuable upon the                      |   |   |      |   |   |   |
|    conversion of notes payable |   |   | 955,621   |   |   |   | 740,193 |   |
| Shares issuable upon the                      |   |   |      |   |   |   |   |   |
|    exercise of warrants        |   |   | 366,667   |   |   |   | 366,667 |   |
| Shares issuable upon the                      |   |   |      |   |   |   |   |   |
|    conversion of stock options |   |   | -         |   |   |   | 110,000 |   |
|                                          |   |   | 1,322,288 |   |   |   | 1,216,860 |   |

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

----

----

|                                                |   | 2009   |    |   | 2008   |   |
|-----------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Available for sale securities:                      |   |   |    |   |   |   |
| Cost                                                |   |   | 107,966 |   |   | $      | 98,966 |   |
| Unrealized gain or (loss)                           |   |   | 7,144   |   |   |   | (14,158 | ) |
| Marketable equity securities                        |   |   |    |   |   |   |   |   |
|      classified as current |   | $      | 115,110 |   |   | $      | 84,808 |   |

|                   |   | 2009 |   |   | 2008   |   |
|------------------------|--------|------|--------|--------|--------|--------|
| Unrealized gain (loss) |   | $    | 21,302 |   |   | $      | (42,104 | ) |

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

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

----

| B.     | On May 2, 2008, IMS acquired the assets of Business Network, Inc. of Hauppauge, New York for $400,000. Terms include a down payment of $200,000 and a $100,000 note to the seller, payable over 18 months with interest at 6% per annum, starting June 10, 2008. In addition IMS issued 133,333 shares of common stock guaranteed to a value of $100,000 ($ 4.50 per share). |
|-----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| C.     | On July 31, 2008, IMS completed its acquisition of the assets of Bartermax of Norwood, Massachusetts for $400,000. Terms include a cash down payment of $175,000, $50,000 in IMS trade dollars, and a $125,000 note to the seller, payable over 24 months with interest at 6% per annum, starting September 20, 2008. In addition IMS issued 11,111 shares of IMS common stock guaranteed to a value of $50,000 ($4.50 per share). |
|-----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                           |   | 2008   |        |
|--------------------------------|--------|--------|-------------|
| Gross revenue                  |   | $      | 14,631,508  |   |
| Total expenses                 |   |   | (16,084,089 | ) |
| Net income (loss) before taxes |   | $      | (1,452,581  | ) |
| Earnings per share             |   | $      | (0.02       | ) |

----

|   | Intangible assets consist of membership lists, goodwill and a covenant not to compete, and for the years ended December 31, 2009 and 2008 are as follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|                              |   | 2009   |       |    | 2008   |   |
|-----------------------------------|--------|--------|------------|---------|--------|--------|
| Membership lists                  |   | $      | 13,345,448 |    |   | $      | 13,425,818 |   |
| Accumulated amortization          |   |   | (5,192,355 | )  |   |   | (3,848,561 | ) |
|      Net |   | $      | 8,153,093  |    |   | $      | 9,577,257 |   |
|                              |   |   |       |    |   |   |   |   |
| Covenant not to compete           |   | $      | -          |    |   | $      | 89,300 |   |
| Accumulated amortization          |   |   |       |    |   |   | (89,300 | ) |
|      Net |   | $      | -          |    |   | $      | - |   |
|                              |   |   |       |    |   |   |   |   |
| Goodwill                          |   | $      | 3,448,602  |    |   | $      | 3,448,602 |   |
| Accumulated amortization          |   |   | (13,123    | )       |   |   | (13,123 | ) |
|      Net |   | $      | 3,435,479  |    |   | $      | 3,435,479 |   |

|   | Aggregate amortization expense was $1,343,794 and $1,345,098 for the years ended December 31, 2009 and 2008, respectively. In 2009, the Company recorded an impairment loss of $80,370 on membership lists of the Louisville, KY and Boston, MA operations. In 2008 the Company recorded an impairment loss of $209,605 on membership lists related to its California, Kentucky, Nevada and Tennessee operations. Estimated future amortization expense is as follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2010       |   | $      | 1,335,756 |   |
|------------|--------|--------|-----------|--------|
| 2011       |   |   | 1,321,229 |   |
| 2012       |   |   | 1,277,704 |   |
| 2013       |   |   | 1,187,009 |   |
| 2014       |   |   | 1,122,881 |   |
| thereafter |   |   | 1,908,514 |   |
|       |   | $      | 8,153,093 |   |

|   | Property and equipment consist of the following as of December 31, 2009 and 2008: |
|--------|-----------------------------------------------------------------------------------|

|                                     |   | 2009   |       |   | 2008   |   |
|------------------------------------------|--------|--------|------------|--------|--------|--------|
| Office furniture, equipment,             |   |   |       |   |   |   |
|    computers and software |   | $      | 1,906,801  |   |   | $      | 1,753,839 |   |
| Leasehold improvements                   |   |   | 211,202    |   |   |   | 211,202 |   |
|                                     |   |   | 2,118,003  |   |   |   | 1,965,041 |   |
| Accumulated depreciation                 |   |   | (1,196,530 | )      |   |   | (908,515 | ) |
|                                     |   | $      | 921,473    |   |   | $      | 1,056,526 |   |

|   | NOTES PAYABLE: |
|--------|----------------|

|   | In connection with the purchase of Barternet in 2003, the Company assumed an unsecured note payable to an individual with maturity in February, 2010 and monthly payments of $2,500. The face value of the original note was $207,500, discounted at 7.5% to $161,510. The balance as of December 31, 2009 was $5,000 discounted to $4,953 and at December 31, 2008 was $35,000, discounted to $33,412. The discount is being amortized over the life of the promissory notes as additional interest expense. During the years ended December 31, 2009 and 2008, the Company recorded interest expense from the discounts of $1,541 and $3,591, respectively. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | On July 17, 2009, the Company redeemed 18,222 shares of IMS common stock from the former owner of Long Island Trade, who will be paid $82,000 ($6,000 per month starting August 2009) in cash per the stock guarantee agreement.  The stock was placed in treasury. A discounted note in the amount of $79,907 was issued for the transaction using an imputed interest rate of 4.25%. The balance as of December 31, 2009 was $52,000 discounted to $51,119. The discount is being amortized over the life of the promissory notes as additional interest expense. During the year ended December 31, 2009 the Company recorded interest expense from the discount of $1,213. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | On August 20, 2009, the Company redeemed 11,111 shares of IMS common stock from the former owner of Bartermax of Boston, who will be paid $50,000 ($4,500 per month starting in September 2009) in cash per the stock guarantee agreement.  The stock was placed in treasury. A discounted note in the amount of $48,944 was issued for the transaction using an imputed interest rate of 4.25%. The balance as of December 31, 2009 was $32,000 discounted to $31,544. The discount is being amortized over the life of the promissory notes as additional interest expense. During the year ended December 31, 2009 the Company recorded interest expense from the discount of $601. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On January 15, 2009 IMS issued notes payable totaling $300,000 in exchange for release of the stock guarantee on, and the return of 300,000 shares of IMS stock. The notes were interest only at 4.5% per annum. In December, 2009, the company and the note holder renegotiated the agreement so that interest is now at 7% and annual principal payments begin January 21, 2011. Principal payments range from $0 to $100,000 at the discretion of the note holders. If mutually agreed, the company can issue stock to repay principal at share price equivalent of $6.00 per share. The outstanding balance of the notes at December 31, 2009 was $300,000. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | RELATED PARTY NOTES PAYABLE |
|--------|-----------------------------|

|   | From time to time officers and stockholders of the Company have loaned funds to IMS, as follows: |
|--------|--------------------------------------------------------------------------------------------------|

|                       |   | 2009   |    |   | 2008   |   |
|----------------------------|--------|--------|---------|--------|--------|--------|
| Balance January 1          |   | $      | -       |   |   | $      | - |   |
| New loans during the year  |   |   | 100,000 |   |   |   | 25,000 |   |
| Repayments during the year |   |   | -       |   |   |   | (25,000 | ) |
| Balance December 31        |   | $      | 100,000 |   |   | $      | - |   |

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

|                                             |   | Balance as of     |      |   | Current |   |    | Long-term |   |
|--------------------------------------------------|--------|-------------------|-----------|--------|---------|--------|---------|-----------|--------|
|                                             |   | December 31, 2009 |      |   | Portion |   |    | Portion   |   |
| Financial institutions credit lines              |   | $                 | 246,385   |   |    | $      | 246,385 |      |   | $ | - |   |
| Individual – note payable                  |   |              | 100,000   |   |    |   | -       |      |   |   | 100,000 |   |
| Individual – note payable                  |   |              | 51,119    |   |    |   | 51,119  |      |   |   | - |   |
| Individual – note payable                  |   |              | 31,544    |   |    |   | 31,544  |      |   |   | - |   |
| Individual – note payable                  |   |              | 106,041   |   |    |   | 106,041 |      |   |   | - |   |
| Individual – note payable                  |   |              | 43,340    |   |    |   | 43,340  |      |   |   | - |   |
| Individual – note payable                  |   |              | 4,953     |   |    |   | 4,953   |      |   |   | - |   |
| Related Party – notes payable              |   |              | 100,000   |   |    |   | 50,000  |      |   |   | 50,000 |   |
| Individuals –  convertible notes |   |              | 1,722,671 |   |    |   | 299,226 |      |   |   | 1,423,445 |   |
|                                             |   | $                 | 2,406,053 |   |    | $      | 832,608 |      |   | $ | 1,573,445 |   |
| Discounts                                        |   |              | -         |   |    |   | -       |      |   |   | - |   |
|                                             |   | $                 | 2,406,053 |   |    | $      | 832,608 |      |   | $ | 1,573,445 |   |

----

| 2010   |   |   | 832,608   |   |
|--------|--------|--------|-----------|--------|
| 2011   |   |   | 417,098   |   |
| 2012   |   |   | 266,742   |   |
| 2013   |   |   | 889,605   |   |
| 2014   |   |   | -         |   |
|   |   | $      | 2,406,053 |   |

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

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

|   | Assets intended to fund this liability include an investment in marketable securities (Note 2) with a balance of $115,110 and $84,808, as of December 31, 2009 and 2008, respectively, and a life insurance policy with a $300,000 death benefit and a cash surrender value as of December 31, 2009 and 2008, of $49,361 and $43,125, respectively. All incidents of ownership accrue to the Company, which is the designated beneficiary. There are no loans outstanding on the insurance policy, but the cash surrender value has been pledged by the Company to secure the liability for deferred compensation. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Income tax expense for the years ended December 31, 2009 and 2008 reflect a higher or lower effective tax rate due to certain expenses that are not deductible for tax purposes, such as the impairment loss of the membership list and 50% of meals and entertainment. The difference between actual and expected tax liability also includes the effects of timing differences in deducting certain expenses such as bad debts, charitable contributions and depreciation, as well as the permanent effects of different financial accounting and tax bases of certain assets. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

----

|   | The company’s 2007 and 2008 income and employment tax returns are currently under examination by the IRS. The IRS has proposed adjustments and the company is defending its positions. Even though company feels its positions are reasonable, it has made a provision for a potential settlement in the 2009 financial statements. The payment of the tax refund receivable has been delayed, pending the finalizing of the audits. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Income tax expense consists of the following components: |
|--------|----------------------------------------------------------|

|                             |   | Years Ended December 31 |     |
|----------------------------------|--------|-------------------------|----------|
|                             |   | 2009                    |     |   | 2008 |   |
| Federal                          |   |                    |     |   |   |   |
|     Current  |   | $                       | 355,016  |   |   | $ | (48,500 | ) |
|     Deferred |   |                    | (222,261 | ) |   |   | (453,622 | ) |
| State and Local                  |   |                    |     |   |   |   |   |   |
|     Current  |   |                    | 33,711   |   |   |   | 8,150 |   |
|     Deferred |   |                    | (62,260  | ) |   |   | (100,250 | ) |
|                             |   |                    |     |   |   |   |   |   |
|                             |   | $                       | 104,206  |   |   | $ | (594,222 | ) |
|                             |   |                    |     |   |   |   |   |   |

----

|                                                                                       |   | Years Ended December 31 |     |
|--------------------------------------------------------------------------------------------|--------|-------------------------|----------|
|                                                                                       |   | 2009                    |     |   | 2008 |   |
|                                                                                       |   |                    |     |   |   |   |
| Statutory rate applied to earnings (loss) before income taxes                              |   | $                       | 124,132  |   |   | $ | (614,100 | ) |
| Increase (decrease) in income taxes resulting from:                                        |   |                    |     |   |   |   |   |   |
|    Nondeductible impairment loss                                            |   |                    | 32,148   |   |   |   | 83,800 |   |
|    Disallowed meals                                                         |   |                    | 6,995    |   |   |   | 9,700 |   |
|    Change in allowance for                                                  |   |                    |     |   |   |   |   |   |
|         doubtful accounts                          |   |                    | (117,844 | ) |   |   | 22,700 |   |
|    Charitable contributions carryover                                       |   |                    | 890      |   |   |   | 900 |   |
|    Depreciation and amortization                                            |   |                    |     |   |   |   |   |   |
|       variances due to tax basis and useful life differences |   |                    | 21,785   |   |   |   | (14,000 | ) |
|                                                                                       |   |                    |     |   |   |   |   |   |
|    Utilization of net operating loss carryover                              |   |                    | 18,240   |   |   |   | - |   |
|    Other                                                                    |   |                    | 17,858   |   |   |   | (83,222 | ) |
|                                                                                       |   | $                       | 104,206  |   |   | $ | (594,222 | ) |

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

|                                                                        |   | 2009   |      |   | 2008   |   |
|-----------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Deferred income tax asset:                                                  |   |   |      |   |   |   |
|      Net operating loss                            |   |   |      |   |   |   |
|         carryover to future periods |   | $      | -         |   |   | $      | 75,000 |   |
|                                                                        |   |   |      |   |   |   |   |   |
| Deferred income tax liabilities:                                            |   |   |      |   |   |   |   |   |
|   Primarily difference in tax basis of                            |   |   |      |   |   |   |   |   |
|       membership lists and goodwill           |   | $      | 1,679,565 |   |   | $      | 2,039,000 |   |

|   | In 2008, 33,333 shares of common stock were issued as part of the purchase of two trade exchanges. The fair value of the shares was $150,000. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | On April 14, 2008, 91,666 warrants were exercised for IMS common stock. IMS received cash in the amount of $302,500 ($3.30 per share). |
|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | In 2008, 41,666 shares of common stock were issued to consulting firms. 10,000 shares of common stock were issued to the outside members of the Board of Directors. Total fair value was $60,233. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On December 9, 2008, IMS paid $321,476 in trade dollars for 58,333 shares of common stock, which were placed into treasury stock. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

----

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

|   | On January 2, 2009, the Company redeemed 100,000 shares of IMS common stock from the former owner of Alliance Barter, who was paid $450,000 in cash per the stock guarantee agreement.  Payment was made from restricted cash, and the stock was placed in treasury. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                    |   | December 31, 2009 |     |   | December 31, 2008 |   |
|---------------------------------------------------------|--------|-------------------|----------|--------|-------------------|--------|
|                                                    |   |              |     |   | Weighted Average  |   |   |   |   |   | Weighted Average |   |
| Fixed Options                                           |   | Shares            |     |   | Exercise Price    |   |   | Shares |   |   | Exercise Price |   |
| Outstanding at                                          |   |              |     |   |              |   |   |   |   |   |   |   |
|      beginning of period       |   |              | 110,000  |   |              | $      | 0.96 |   |   |   | 136,666 |   |   | $ | 0.96 |   |
| Granted                                                 |   |              |     |   |              | $      | - |   |   |   | - |   |   | $ | - |   |
| Purchased                                               |   |              |     |   |              | $      | - |   |   |   | - |   |   | $ | - |   |
| Forfeited                                               |   |              | (3,333   | )      |              | $      | - |   |   |   | - |   |   | $ | - |   |
| Expired                                                 |   |              | (106,667 | )      |              | $      | - |   |   |   | (26,666 | ) |   | $ | 0.90 |   |
| Outstanding at end of period                            |   |              | -        |   |              | $      | - |   |   |   | 110,000 |   |   | $ | 0.96 |   |
|                                                    |   |              |     |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Options exercisable at                                  |   |              |     |   |              |   |   |   |   |   |   |   |   |   |   |   |
|      period end                |   |              | -        |   |              |   |   |   |   |   | 110,000 |   |   |   |   |   |
|                                                    |   |              |     |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average fair value                             |   |              |     |   |              |   |   |   |   |   |   |   |   |   |   |   |
|      of options granted to     |   |              |     |   |              |   |   |   |   |   |   |   |   |   |   |   |
|      employees during the year |   | $                 | -        |   |              |   |   |   |   | $ | - |   |   |   |   |   |

|   | As of December 31, 2009, there were no options outstanding. |
|--------|-------------------------------------------------------------|

|   | As of December 31, 2008 there were 110,000 options outstanding and exercisable, with a weighted average remaining contractual life of .07 years, and a weighted average exercise price of $.96. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Warrants |
|--------|----------|

|   | In May, 2006, the Company issued 583,333 fully vested warrants with an option price of $3.30, which expire in May, 2011. 91,666 warrants were exercised in March 2008 with proceeds of $302,500. 125,000 warrants were exercised in 2007 with proceeds of $412,500. The remaining balance was 366,667 as of both December 31, 2009 and 2008. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Stock Guarantee Liability |
|--------|---------------------------|

|   | The stock guarantee liability was reduced by $1,301,500 and $557,000 during 2009 and 2008, respectively, pursuant to the release from owners of guaranteed stock. The liability was increased by $150,000 for two acquisitions in 2008, and an additional $150,000 for the settlement of a prior years’ dispute in 2008 for a net decrease in 2008 of $257,000. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Other Comprehensive Income (Loss) |
|--------|-----------------------------------|

|   | In 2009, marketable securities had an unrealized gain of $21,302 and the cash surrender value had an unrealized gain of $636, resulting in other comprehensive income of $21,937. In 2008, marketable securities had an unrealized loss of $42,572 and the cash surrender value had an unrealized gain of $468, resulting in other comprehensive loss of $42,104. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The effect of the exchange rate on the currency conversion between our U.S. and Canadian offices resulted in comprehensive income of $18,321 for 2009, and a comprehensive loss of $24,046 for 2008. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company leases its executive offices and principal operating facilities in New Berlin, Wisconsin from Glendale Investments, LLC, a Wisconsin limited liability company which is owned by officers and stockholders of the Company. The original lease began October 1, 2002 and extends through September 30, 2010. Lease payments are $8,000 monthly plus certain operating costs, including sales and use taxes, insurance, utilities, maintenance, and non-structural repairs. Total payments in 2009 and 2008 were $91,500 and $90,000, respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Leases |
|--------|--------|

|   | The Company has various leases for office facilities and vehicles which are classified as operating leases, and which expire at various times through 2014. Total rent expense for all operating leases for 2009 and 2008 is summarized as follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                |   | 2009   |    |   | 2008   |   |
|---------------------|--------|--------|---------|--------|--------|--------|
| Related party lease |   | $      | 91,500  |   |   | $      | 90,000 |   |
| Office leases       |   |   | 886,490 |   |   |   | 768,405 |   |
| Vehicle leases      |   |   | 15,795  |   |   |   | 18,157 |   |
|                |   | $      | 993,785 |   |   | $      | 876,562 |   |

|   | Minimum future lease commitments as of December 31, 2009, are summarized as follows: |
|--------|-------------------------------------------------------------------------------------------|

----

|                    |   | Office     |      |   |     |   |
|-------------------------|--------|------------|-----------|--------|----------|--------|
| Year ending December 31 |   | Facilities |      |   | Vehicles |   |
| 2010                    |   |       | 624,478   |   |     | $      | 14,922 |   |
| 2011                    |   |       | 157,368   |   |     |   | 9,612 |   |
| 2012                    |   |       | 84,380    |   |     |   | 801 |   |
| 2013                    |   |       | 74,520    |   |     |   | - |   |
| thereafter              |   |       | 68,310    |   |     |   | - |   |
|                    |   | $          | 1,009,056 |   |     | $      | 25,335 |   |

|   | Employment Agreements |
|--------|-----------------------|

|   | The Company has employment agreements with key employees, including the chief executive officer, the chief financial officer, and the senior vice presidents, pursuant to which these employees will receive base salaries in 2010 of $230,000, $190,000, $175,000 and $165,000, plus commissions and bonuses at the discretion of the chief executive officer. Each contract is for a term of three years, and will be automatically extended for additional one-year periods thereafter, unless terminated by the Company or by the employee. On November 20, 2008 we amended the contracts to freeze the compensation schedule at the above 2008 salaries. Each contract was modified to add one additional year to the original three year terms. On March 31, 2009, each of the above officers agreed to a 10% reduction in salary. In January, 2010, the 10% reduction was rescinded and the salaries were reinstated to the 2008 schedule. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The agreements also provide for the issuance of stock options at the chief executive officer’s discretion. All agreements contain a change of control provision. In the event of a merger, acquisition of the Company or sale of substantially all of its assets, the chief executive officer’s contract provides for compensation equal to two years' salary plus a lump sum payment of $400,000. The chief financial officer and senior vice presidents will receive compensation equal to one year's salary plus lump sum payments of $200,000 each. Another officer will receive one year’s salary plus a lump sum payment of $100,000. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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----