----

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

----

| PART      I                                                                                                                          | Page   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                 |   |
|    Item      1.  Description of Business                                                                    | 3      |
|    Item      2.  Description of Property                                                                    | 5      |
|    Item      3.  Legal Proceedings                                                                          | 5      |
|    Item      4.  Submission of Matters to a Vote of Security      Holders                                   | 5      |
|                                                                                                                                 |   |
| PART      II                                                                                                                         | 6      |
|                                                                                                                                 |   |
|    Item      5.  Market for IMSL Common Equity and Related Stockholder      Matters                         | 6      |
|    Item      6.  Management's Discussion and Analysis of Financial Condition      and Results of Operations | 6      |
|    Item      7.  Financial Statements                                                                       | 9      |
|    Item      8.  Changes in and Disagreements with Accountants on Accounting      and Financial Disclosures | 9      |
|                                                                                                                                 |   |
| PART      III                                                                                                                        | 12     |
|                                                                                                                                 |   |
|    Item      9.   Directors and Executive Officers                                                     | 12     |
|    Item      10.  Executive Compensation                                                                    | 14     |
|    Item      11.  Security Ownership of Certain Beneficial Owners and      Management                       | 18     |
|    Item      12.  Certain Relationships and Related    Transactions                                         | 19     |
|    Item      13.  Exhibits List and Reports On Form 8-K                                                     | 20     |
|    Item      14.  Principal Accountant Fees and Services                                                    | 20     |
|                                                                                                                                 |   |

----

----

----

----

|                                        |   | High   |   |   | Low    |   |
|---------------------------------------------|--------|--------|--------|--------|--------|--------|
| Fiscal      2006                            |   |   |   |   |   |   |
|                                        |   |   |   |   |   |   |
| First      quarter ended March 31, 2006     |   | $      | 0.33   |   |   | $      | 0.31 |   |
| Second      quarter ended June 30, 2006     |   | $      | 0.63   |   |   | $      | 0.60 |   |
| Third      quarter ended September 30, 2006 |   | $      | 0.70   |   |   | $      | 0.64 |   |
| Fourth      quarter ended December 31, 2006 |   | $      | 1.02   |   |   | $      | 0.98 |   |
|                                        |   |   |   |   |   |   |   |   |
| Fiscal      2007                            |   |   |   |   |   |   |   |   |
|                                        |   |   |   |   |   |   |   |   |
| First      quarter ended March 31, 2007     |   | $      | 0.98   |   |   | $      | 0.98 |   |
| Second      quarter ended June 30, 2007     |   | $      | 0.81   |   |   | $      | 0.81 |   |
| Third      quarter ended September 30, 2007 |   | $      | 0.62   |   |   | $      | 0.62 |   |
| Fourth      quarter ended December 31, 2007 |   | $      | 0.54   |   |   | $      | 0.53 |   |

| ·   | In      2006 and 2007 we invested more than $700,000 in new computers, monitors,      printers, servers, and other equipment to enhance the efficiency of our      trade brokering and sales staffs. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In      2007 we invested more than $250,000 to acquire the source code for TradeWorks, our      proprietary clearing system, and to migrate the entire database from the      original RPG format into a more current .net  technology. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      IMSbarter.com website is undergoing a facelift, toward the goal of      creating a fully interactive, web-based online marketplace. It is expected      to be completed in the spring of 2008. More than $200,000 has been spent      on this project. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      hired additional technicians to service the new hardware, to convert the      software and to develop the website. Our IT department has been expanded      to four full-time employees. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      hired a full-time national sales trainer and a full-time national broker      trainer to improve the quality and consistency of our sales and brokering      departments. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      doubled the size of our Columbus, OH office to expand our telemarketing      and tele-sales staff. There are now 12 people working to support our      outside sales force of more than two dozen sales professionals. As a      result IMS enrolled more than 3,500 new members during    2007. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      hired a full-time marketing and public relations director who is working      with the IT staff to improve and update our website. She is also designing      a campaign to develop and strengthen the IMS brand in the marketplace      through a comprehensive PR program scheduled for launch in the second      quarter of 2008. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | We      hosted the IMS Academy,      the Company’s first national convention/seminar, which was attended      by 118 Employees. The cost was more than $125,000, but proved to be highly      educational and motivational to the entire  staff. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      hired additional sales staff to expand the base of National Trade      Association, our corporate barter division, resulting in the enrollment of      a number of high-profilebusinesses. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| EBITDA      Calculation              |   |
|--------------------------------------|--------|
|                                 |   | 2007 |   |   | 2006 |   |
| Net      loss                        |   | $ | (414,290 | ) |   | $ | (421,652 | ) |
| Interest      expense                |   |   | 342,855 |   |   |   | 358,583 |   |
| Taxes                                |   |   | (54,769 | ) |   |   | 60,561 |   |
| Depreciation      & amortization |   |   | 1,465,367 |   |   |   | 880,062 |   |
| Impairment                           |   |   | 36,676 |   |   |   | 243,439 |   |
| Total      EBITDA                    |   | $ | 1,375,839 |   |   | $ | 1,120,993 |   |
|                                 |   |   |   |   |   |   |   |   |

----

----

----

----

| 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 disclosurein            |
| 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 andEthics   |
|                                                                          |

----

| Name                      | Age | Position                                                          |
|---------------------------|-----|-------------------------------------------------------------------|
| Donald      F. Mardak     | 71  |         Chief Executive Officer, President and Director |
| Danny      W. Weibling    | 59  |         Treasurer and Chief Financial Officer           |
| John      E. Strabley     | 44  |         Executive Vice President and Director           |
| Dale      L. Mardak       | 47  |         Senior Vice President and Director              |
| Patricia      A. Katisch  | 62  |         Corporate Secretary                             |
| Wayne      Emmer          | 53  |         Director                                        |
| Gerald      Van Dyn Hoven | 51  |         Director                                        |
| Thomas      Delacy        | 43  |         Director                                        |
| Wayne      Dalin          | 63  |         Director                                        |
| Stephen      Webster      | 63  |         Director                                        |

----

----

|                                |   |   |   |    |   |   |   |   |   |   |   |   |   |   | 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,              | 2007   |   |   | 200,000 |   |   |   | --     |   |   |   | --     |   |   |               | --     |   |                |   | --     |           |   |   | --     |   |   |   | 6,960 |   |   |   | 206,960 |   |
|  Chief      Executive          | 2006   |   |   | 175,500 |   |   |   | --     |   |   |   | --     |   |   |               | --     |   |                |   | --     |           |   |   | --     |   |   |   | 11,985 |   |   |   | 187,485 |   |
|  Officer      & President  |   |   |   |    |   |   |   |   |   |   |   |   |   |   |               |   |   |                |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   |   |   |    |   |   |   |   |   |   |   |   |   |   |               |   |   |                |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   |   |   |    |   |   |   |   |   |   |   |   |   |   |               |   |   |                |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Danny      W. Weibling,             | 2007   |   |   | 165,000 |   |   |   | --     |   |   |   | --     |   |   |               | --     |   |                |   | --     |           |   |   | --     |   |   |   | 3,975 |   |   |   | 168,975 |   |
|  Chief      Financial          | 2006   |   |   | 143,667 |   |   |   | --     |   |   |   | --     |   |   |               | --     |   |                |   | --     |           |   |   | --     |   |   |   | 3,668 |   |   |   | 147,335 |   |
|  Officer      & Treasurer  |   |   |   |    |   |   |   |   |   |   |   |   |   |   |               |   |   |                |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   |   |   |    |   |   |   |   |   |   |   |   |   |   |               |   |   |                |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   |   |   |    |   |   |   |   |   |   |   |   |   |   |               |   |   |                |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| John      E. Strabley,              | 2007   |   |   | 150,000 |   |   |   | --     |   |   |   | --     |   |   |               | --     |   |                |   | --     |           |   |   | --     |   |   |   | 4,706 |   |   |   | 154,706 |   |
|  Executive      Vice           | 2006   |   |   | 134,084 |   |   |   | --     |   |   |   | --     |   |   |               | --     |   |                |   | --     |           |   |   | --     |   |   |   | 6,262 |   |   |   | 140,346 |   |
|  President      & Director |   |   |   |    |   |   |   |   |   |   |   |   |   |   |               |   |   |                |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   |   |   |    |   |   |   |   |   |   |   |   |   |   |               |   |   |                |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

----

| Option      Awards |   | Stock      Awards |
|--------------------|--------|-------------------|
|               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   | Equity |   | Equity |
|               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   | incentive |   | incentive |
|               |   |              |   |   |   |   |   |   |   |   |   | Number |   | Market |   | plan |   | plan      awards: |
|               |   |              |   |   |   | Equity |   |   |   |   |   | of |   | value |   | awards: |   | Market      or |
|               |   |              |   |   |   | incentive |   |   |   |   |   | shares |   | of |   | number      of |   | payout |
|               |   |              |   |   |   | plan |   |   |   |   |   | or |   | shares |   | unearned |   | value      of |
|               |   |              |   |   |   | awards: |   |   |   |   |   | units |   | or      units |   | shares      or |   | unearned |
|               |   | Number      of    |   | Number      of |   | Number      of |   |   |   |   |   | of |   | of |   | units      or |   | shares, |
|               |   | securities        |   | securities |   | securities |   |   |   |   |   | stock |   | stock |   | other |   | units      or |
|               |   | underlying        |   | underlying |   | underlying |   |   |   |   |   | that |   | that |   | rights |   | other |
|               |   | unexercised       |   | unexercised |   | unexercised |   | Option |   |   |   | have |   | have |   | that      have |   | rights |
|               |   | options           |   | options |   | unearned |   | exercise |   | Option |   | not |   | not |   | not |   | that      have |
|               |   | exercisable       |   | unexercisable |   | options |   | price |   | expiration |   | vested |   | vested |   | vested |   | not      vested |
| Name               |   | (#)               |   | (#) |   | (#) |   | ($) |   | date |   | (#) |   | ($) |   | (#) |   | ($) |
|               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Donald      F.     |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mardak             |   | --                |   | -- |   | -- |   | -- |   | -- |   | -- |   | -- |   | -- |   | -- |
|               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Danny      W.      |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weibling           |   | 100,000           |   | -- |   | -- |   | 0.15(1) |   | Dec      2008 |   | -- |   | -- |   | -- |   | -- |
|               |   | 400,000           |   | -- |   | -- |   | 0.15(1) |   | Jan      2009 |   | -- |   | -- |   | -- |   | -- |
|               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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          |   |   900     |   | 7,000     |   | --     |   | --                  |   | --           |   | --             |   | 7,900  |
| Thomas      Delacy        |   |   600     |   | 7,000     |   | --     |   | --                  |   | --           |   | --             |   | 7,600  |
| Wayne      Emmer          |   |  400           |   | 7,000     |   | --     |   | --                  |   | --           |   | --             |   | 7,400  |
| Gerald      Van Dyn Hoven |   |  700           |   | 7,000     |   | --     |   | --                  |   | --           |   | --             |   | 7,700  |
| Stephen      Webster      |   | --                  |   | --        |   | --     |   | --                  |   | --           |   | --             |   | --     |

----

| · 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, 2007   |       |
|                                                  |   |                           |       |   |   |   |
| Name      of Beneficial Owner                         |   | Number                         |       |   | Percent |   |
|                                                  |   |                           |       |   |   |   |
| Donald      F. Mardak (1)                             |   |                           | 17,707,800 |   |   |   | 29.24 | % |
| Dale      L. Mardak (2)                               |   |                           | 1,392,000  |   |   |   | 2.30 | % |
| John      E. Strabley (3)                             |   |                           | 676,000    |   |   |   | 1.12 | % |
| Danny      W Weibling (4)                             |   |                           | 393,500    |   |   |   | 0.65 | % |
| Stephen      Webster                                  |   |                           | 3,333,333  |   |   |   | 5.50 | % |
| Thomas      Delacy                                    |   |                           | 550,000    |   |   |   | 0.37 | % |
| Gerald      Van Dyn Hoven                             |   |                           | 432,000    |   |   |   | 0.71 | % |
| Wayne      Emmer                                      |   |                           | 250,000    |   |   |   | 0.91 | % |
| Wayne      Dalin                                      |   |                           | 225,960    |   |   |   | 0.37 | % |
| Patricia      Katisch                                 |   |                           | 58,000     |   |   |   | 0.10 | % |
|                                                  |   |                           |       |   |   |   |   |   |
| All      directors and executive officers             |   |                           |       |   |   |   |   |   |
|    as      a group (10 persons)        |   |                           | 25,018,593 |   |   |   | 41.31 | % |
|                                                  |   |                           |       |   |   |   |   |   |
|                                                  |   |                           |       |   |   |   |   |   |
| Other      Beneficial Owner                           |   |                           |       |   |   |   |   |   |
|                                                  |   |                           |       |   |   |   |   |   |
| Praetorian      Capital Management LLC  (5) |   |                           | 15,175,000 |   |   |   | 25.05 | % |

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

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

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

| (4)   | Does      not include 246,000 shares held by his wife, Alesia Peters, as to which      Mr. Weibling disclaims beneficial ownership. Does not include 500,000      shares of exercisable options. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Does      not include 2,750,000 shares of exercisable  warrants. |
|-----------------|------------------------------------------------------------------|

----

----

| 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 Chief Executive Officer pursuant to Section 302  of        |
|    | the      Sarbanes-Oxley Act of 2002 **                                             |
| 31.2    | Certificate      of the Chief Financial Officer pursuant to Section 302  of        |
|    | the      Sarbanes-Oxley Act of 2002 **                                             |
| 32.1    | Certificate      of the Chief Executive Officer to Section 906 of                  |
|    | the      Sarbanes-Oxley Act of 2002 **                                             |
| 32.2    | Certificate      of the Chief 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                                                               |

|                                                        |   | 2007   |   |   | 2006   |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                        |   |   |   |   |   |   |
| Audit      Fees                                             |   | $      | 55,741 |   |   | $      | 72,056 |   |
| Audit-Related      Fees                                     |   |   | 955    |   |   |   | 0 |   |
| Tax      Fees                                               |   |   | 0      |   |   |   | 0 |   |
| All      Other Fees                                         |   |   | 0      |   |   |   | 0 |   |
|                                                        |   |   |   |   |   |   |   |   |
|          Total |   | $      | 56,696 |   |   | $      | 72,056 |   |

----

----

| Dated:      April 1, 2008            |   | By:    | /s/      DONALD F. MARDAK          |
|--------------------------------------|--------|--------|------------------------------------|
|                                 |   |   |                               |
|                                 |   |   | Donald      F. Mardak, President   |
|                                 |   |   | (Principal      Executive Officer) |
|                                 |   |   |                               |
|                                 |   |   |                               |
|                                 |   |   |                               |
| Dated:  April      1, 2008 |   | By:    | /s/      DANNY W. WEIBLING, CPA    |
|                                 |   |   |                               |
|                                 |   |   | Danny      W. Weibling, Treasurer  |
|                                 |   |   | (Principal      Financial Officer) |
|                                 |   |   |                               |

| SIGNATURE                 |   | TITLE                         |   | DATE               |
|---------------------------|--------|-------------------------------|--------|--------------------|
|                      |   |                          |   |               |
|                      |   |                          |   |               |
| /s/      DONALD F. MARDAK |   | Chief      Executive Officer, |   | April      1, 2008 |
|                      |   | President      (Principal     |   |               |
| Donald      F. Mardak     |   | Executive      Officer)       |   |               |
|                      |   | and      Director             |   |               |
|                      |   |                          |   |               |
| /s/      DALE L. MARDAK   |   | Senior      Vice President    |   | April      1, 2008 |
|                      |   | and      Director             |   |               |
| Dale      L. Mardak       |   |                          |   |               |
|                      |   |                          |   |               |
|                      |   |                          |   |               |
| /s/      JOHN E. STRABLEY |   | Executive      Vice President |   | April      1, 2008 |
|                      |   | and      Director             |   |               |
| John      E. Strabley     |   |                          |   |               |

----

----

|                                                                |
|---------------------------------------------------------------------|
|                                                                |
|                                                                | Page |
|                                                                |   |
|                                                                |   |
| REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM        | 1 |
|                                                                |   |
|                                                                |   |
| FINANCIAL      STATEMENTS                                           |   |
|                                                                |   |
| Consolidated Balance      Sheets                                    | 2 -      3 |
|                                                                |   |
| Consolidated Statements of      Operations and Comprehensive Income | 4 |
|                                                                |   |
| Consolidated Statements of      Changes in Stockholder Equity       | 5 |
|                                                                |   |
| Consolidated Statements of Cash      Flows                          | 6 -      7 |
|                                                                |   |
| Notes to Consolidated Financial      Statements                     | 8 -      30 |

----

----

| INTERNATIONAL      MONETARY SYSTEMS, LTD.AND      SUBSIDIARIES                                                            |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                      |   |   |   |   |   |   |
| CONSOLIDATED      BALANCE SHEETS                                                                                          |   |
| December      31                                                                                                          |   |
|                                                                                                                      |   |   |   |   |   |   |
|                                                                                                                      |   | 2007 |   |   | 2006 |   |
| ASSETS                                                                                                                    |   | (restated) |   |   |   |   |
| Current      assets                                                                                                       |   |   |   |   |   |   |
|       Cash                                                                                  |   | $ | 812,365 |   |   | $ | 930,962 |   |
|       Restricted      cash                                                                  |   |   | 483,443 |   |   |   | - |   |
|       Marketable      securities                                                            |   |   | 118,380 |   |   |   | 105,330 |   |
|       Accounts      receivable, net of allowance for doubtful                               |   |   |   |   |   |   |   |   |
|          accounts      of $739,540 in 2007 and $649,926 in 2006              |   |   | 1,516,938 |   |   |   | 1,644,299 |   |
|       Earned      trade account                                                             |   |   | 314,928 |   |   |   | - |   |
|       Prepaid      expenses                                                                 |   |   | 112,233 |   |   |   | 227,835 |   |
|       Inventory                                                                             |   |   | 33,839 |   |   |   | 33,839 |   |
|                 Total      current assets |   |   | 3,392,126 |   |   |   | 2,942,265 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|  Property      and equipment, net                                                                                    |   |   | 1,269,263 |   |   |   | 647,884 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|  Other      assets                                                                                                   |   |   |   |   |   |   |   |   |
|       Membership      lists, net                                                            |   |   | 9,962,154 |   |   |   | 8,505,059 |   |
|       Goodwill                                                                              |   |   | 3,435,479 |   |   |   | 2,785,478 |   |
|       Covenant      not to compete, net                                                     |   |   | 14,883 |   |   |   | 44,650 |   |
|       Purchase      option                                                                  |   |   | 112,500 |   |   |   | 112,500 |   |
|       Assets      held for investment                                                       |   |   | 99,298 |   |   |   | 99,298 |   |
|       Investment      in real estate                                                        |   |   | 28,695 |   |   |   | 33,695 |   |
|       Cash      surrender value                                                             |   |   | 37,056 |   |   |   | 33,058 |   |
|                 Total      other assets   |   |   | 13,690,065 |   |   |   | 11,613,738 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|                 Total      assets         |   | $ | 18,351,454 |   |   | $ | 15,203,887 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |

----

| INTERNATIONAL      MONETARY SYSTEMS, LTD.AND      SUBSIDIARIES                                                                    |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                              |   |   |   |   |   |   |
| CONSOLIDATED      BALANCE SHEETS                                                                                                  |   |
| December      31                                                                                                                  |   |
|                                                                                                                              |   | 2007 |   |   | 2006 |   |
| LIABILITIES      AND STOCKHOLDER EQUITY                                                                                           |   | (restated) |   |   |   |   |
| Current      liabilities                                                                                                          |   |   |   |   |   |   |
|      Accounts      payable                                                                               |   | $ | 324,808 |   |   | $ | 308,172 |   |
|      Accrued      compensation                                                                           |   |   | 377,515 |   |   |   | 318,965 |   |
|      Accrued      payroll taxes                                                                          |   |   | 99,602 |   |   |   | 52,138 |   |
|      Accrued      sales taxes                                                                            |   |   | 51,807 |   |   |   | 47,567 |   |
|      Accrued      income taxes                                                                           |   |   | 149,000 |   |   |   | 50,000 |   |
|      Trade      payable                                                                                  |   |   | - |   |   |   | 316,299 |   |
|      Current      portion of notes payable                                                               |   |   | 1,980,737 |   |   |   | 1,645,610 |   |
|      Current      portion of notes payable, related party                                                |   |   | - |   |   |   | 110,024 |   |
|      Current      portion of common stock subject to guarantees                                          |   |   | 995,000 |   |   |   | 155,000 |   |
|                Total      current liabilities          |   |   | 3,978,469 |   |   |   | 3,003,775 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
| Long-term      liabilities                                                                                                        |   |   |   |   |   |   |   |   |
|      Notes      payable, less current portion                                                            |   |   | 716,037 |   |   |   | 2,234,755 |   |
|      Common      stock subject to guarantees, less current portion                                       |   |   | 1,890,000 |   |   |   | - |   |
|      Deferred      compensation                                                                          |   |   | 136,000 |   |   |   | 121,000 |   |
|      Deferred      income taxes                                                                          |   |   | 2,550,000 |   |   |   | 2,065,000 |   |
|                Total      long-term liabilities        |   |   | 5,292,037 |   |   |   | 4,420,755 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
|                Total      liabilities                  |   |   | 9,270,506 |   |   |   | 7,424,530 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
| 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,      60,565,436 and 52,623,769 shares                                                               |   |   |   |   |   |   |   |   |
|    issued      and outstanding, respectively                                                                       |   |   | 6,057 |   |   |   | 5,263 |   |
| Paid      in capital                                                                                                              |   |   | 10,901,944 |   |   |   | 9,291,988 |   |
| Treasury      stock, 1,276,542 and 1,566,542 shares                                                                               |   |   |   |   |   |   |   |   |
|    outstanding,      respectively                                                                                  |   |   | (547,241 | ) |   |   | (626,241 | ) |
| Subscription      receivable                                                                                                      |   |   | (31,196 | ) |   |   | (42,017 | ) |
| Accumulated      other comprehensive income                                                                                       |   |   | 15,310 |   |   |   | - |   |
| Accumulated      deficit                                                                                                          |   |   | (1,263,926 | ) |   |   | (849,636 | ) |
|                Total      stockholder equity           |   |   | 9,080,948 |   |   |   | 7,779,357 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
|               Total      liabilities and stockholder equity |   | $ | 18,351,454 |   |   | $ | 15,203,887 |   |

----

| INTERNATIONAL      MONETARY SYSTEMS, LTD.                                            |   |
|--------------------------------------------------------------------------------------|--------|
| AND      SUBSIDIARIES                                                                |   |
| CONSOLIDATED      STATEMENTS OF OPERATIONSAND      COMPREHENSIVE INCOME              |   |
| For      the Years Ended December 31                                                 |   |
|                                                                                 |   |   |   |   |   |   |
|                                                                                 |   | 2007 |   |   | 2006 |   |
|                                                                                 |   |   |   |   |   |   |
| Revenue                                                                              |   | $ | 14,772,045 |   |   | $ | 8,782,666 |   |
|                                                                                 |   |   |   |   |   |   |   |   |
| Operating      expenses                                                              |   |   |   |   |   |   |   |   |
|      Payroll,      related taxes and employee benefits      |   |   | 9,228,485 |   |   |   | 4,812,595 |   |
|      General      and administrative                        |   |   | 2,319,680 |   |   |   | 1,557,795 |   |
|      Occupancy                                              |   |   | 969,243 |   |   |   | 591,304 |   |
|      Selling                                                |   |   | 687,079 |   |   |   | 614,034 |   |
|      Depreciation      and amortization                     |   |   | 1,465,367 |   |   |   | 880,062 |   |
|      Impairment      of membership list                     |   |   | 36,676 |   |   |   | 243,439 |   |
|      Provision      for bad debts                           |   |   | 239,215 |   |   |   | 158,569 |   |
|      Total      operating expenses                          |   |   | 14,945,745 |   |   |   | 8,857,798 |   |
| Net      loss from operations                                                        |   |   | (173,700 | ) |   |   | (75,132 | ) |
| Other      income (expense)                                                          |   |   |   |   |   |   |   |   |
|      Interest      income                                   |   |   | 47,496 |   |   |   | 72,624 |   |
|      Interest      expense                                  |   |   | (342,855 | ) |   |   | (358,583 | ) |
|      Total      other income (expense)                      |   |   | (295,359 | ) |   |   | (285,959 | ) |
|                                                                                 |   |   |   |   |   |   |   |   |
| Loss      before income taxes                                                        |   |   | (469,059 | ) |   |   | (361,091 | ) |
|                                                                                 |   |   |   |   |   |   |   |   |
| Income      tax expense (benefit)                                                    |   |   | (54,769 | ) |   |   | 60,561 |   |
|                                                                                 |   |   |   |   |   |   |   |   |
| Net      loss                                                                        |   | $ | (414,290 | ) |   | $ | (421,652 | ) |
|                                                                                 |   |   |   |   |   |   |   |   |
| Basic      earnings per common share                                                 |   | $ | (0.01 | ) |   | $ | (0.01 | ) |
| Diluted      earnings per common share                                               |   | $ | (0.01 | ) |   | $ | (0.01 | ) |
| Weighted      average shares outstanding, basic                                      |   |   | 57,061,451 |   |   |   | 47,010,579 |   |
| Weighted      average shares outstanding, diluted                                    |   |   | 57,061,451 |   |   |   | 47,010,579 |   |
|                                                                                 |   |   |   |   |   |   |   |   |
| Comprehensive      (loss)                                                            |   | 2007 |   |   | 2006 |   |
| Net      loss                                                                        |   | $ | (414,290 | ) |   | $ | (421,652 | ) |
| Comprehensive      income:                                                           |   |   |   |   |   |   |   |   |
|      Foreign      currency translation gain                 |   |   | 12,863 |   |   |   | - |   |
|      Unrealized      gain on available for sale investments |   |   | 2,447 |   |   |   | - |   |
| Comprehensive      loss                                                              |   | $ | (398,980 | ) |   | $ | (421,652 | ) |
|                                                                                 |   |   |   |   |   |   |   |   |

----

| 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, 2005                                     |         - | $                - | 41,925,558 | $         4,224 | $         3,002,114 | $           (68,622) | $                     - | $               (2,043) | $           (427,984) | (1,244,904) | $(423,090) | $      2,084,599 |
| Net      loss for 2006                                              |         - |          - |                  - |           - |                    - |                 - |             - |                    - |     (421,652) |                 - |                  - |    (421,652) |
| Stock      offering                                                 |         - |          - | 10,036,365 |   1,004 |     4,066,996 |                 - |             - |                    - |                  - |                 - |                  - |   4,068,000 |
| Treasury      stock purchases                                       |         - |          - |                  - |           - |                    - |                 - |             - |                    - |                  - |    (960,750) |    (462,700) |    (462,700) |
| Stock      issued for services                                      |         - |          - |        15,000 |          1 |            3,000 |                 - |             - |                    - |                  - |         80,000 |         29,049 |        32,050 |
| Shares      issued in conjunction with                              |   |   |   |   |   |   |   |   |   |   |   |   |
|      the      acquisition of businesses    |         - |          - |                  - |           - |                    - |                 - |             - |                    - |                  - |      346,667 |       180,500 |      180,500 |
| Warrants      redeemed                                              |         - |          - |                  - |           - |                    - |                 - |             - |                    - |                  - |       200,000 |         50,000 |        50,000 |
| Options      exercised                                              |         - |          - |      416,000 |         42 |        207,958 |                 - |             - |                    - |                  - |                 - |                  - |      208,000 |
| Shares      issued as collateral, redeemed                          |   |   |   |   |   |   |   |   |   |   |   |   |
|      upon      payment of debt             |         - |          - |      310,846 |           - |        145,329 |                 - |             - |                    - |                  - |      (67,555) |                  - |      145,329 |
| Deferred      stock compensation                                    |         - |          - |                  - |           - |                    - |                 - |             - |             2,043 |                  - |                 - |                  - |          2,043 |
| Beneficial      conversion on notes payable                         |         - |          - |                  - |           - |          39,833 |                 - |             - |                    - |                  - |                 - |                  - |        39,833 |
| Shares      cancelled                                               |         - |          - |      (80,000) |        (8) |                   8 |                 - |             - |                    - |                  - |         80,000 |                  - |                  - |
| Subscription      receivable                                        |         - |          - |                  - |           - |                    - |        26,605 |             - |                    - |                  - |                 - |                  - |        26,605 |
| Reclassification      of shares released at                         |   |   |   |   |   |   |   |   |   |   |   |   |
|      guaranteed      prices to liabilities |         - |          - |                  - |           - |     1,826,750 |                 - |             - |                    - |                  - |                 - |                  - |   1,826,750 |
| Balance,      December 31, 2006                                     |         - |          - | 52,623,769 |    5,263 |     9,291,988 |      (42,017) |             - |                    - |     (849,636) | (1,566,542) |    (626,241) |   7,779,357 |
| Foreign      currency translation adjustment                        | - | - | - | - | - | - | 12,863 | - | - | - | - | 12,863 |
| Unrealized      gain on available for sale                          |   |   |   |   |   |   |   |   |   |   |   |   |
|     securities                                  |         - |          - |                  - |           - |                    - |                 - |      2,447 |                    - |                  - |                 - |                  - |          2,447 |
| Net      loss for 2007                                              |         - |          - |                  - |           - |                    - |                 - |             - |                    - |     (414,290) |                 - |                  - |    (414,290) |
|    Total      comprehensive loss                     | - | - | - | - | - | - | - | - | - | - | - | (398,980) |
| Stock      issued for services                                      |         - |          - |        75,000 |          8 |          48,242 |                 - |             - |                    - |                  - |                 - |                  - |        48,250 |
| Stock      issued for software                                      |         - |          - |                  - |           - |                    - |                 - |             - |                    - |                  - |         75,000 |         50,000 |        50,000 |
| Shares      issued in conjunction with                              |   |   |   |   |   |   |   |   |   |   |   |   |
|      the      acquisition of businesses    |         - |          - |   3,683,333 |       368 |     2,849,632 |                 - |             - |                    - |                  - |                 - |                  - |   2,850,000 |
| Warrants      redeemed                                              |         - |          - |      750,000 |         75 |        412,425 |                 - |             - |                    - |                  - |                 - |                  - |      412,500 |
| Options      exercised                                              |         - |          - |                  - |           - |                    - |                 - |             - |                    - |                  - |       190,000 |         29,000 |        29,000 |
| Options      exercised for 2004, unissued                           |   |   |   |   |   |   |   |   |   |         25,000 |                  - |                  - |
| Shares      issued on conversion of                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|      notes      payable                    |         - |          - |   3,433,334 |       343 |     1,029,657 |                 - |             - |                    - |                  - |                 - |                  - |   1,030,000 |
| Subscription      receivable                                        |         - |          - |                  - |           - |                    - |        10,821 |             - |                    - |                  - |                 - |                  - |        10,821 |
| Reclassification      of shares released at                         |   |   |   |   |   |   |   |   |   |   |   |   |
|      guaranteed      prices to liabilities |         - |          - |                  - |           - |  (2,730,000) |                 - |             - |                    - |                  - |                 - |                  - | (2,730,000) |
| Balance      December 31, 2007                                      |         - | $                | 60,565,436 | $         6,057 | $         10,901,944 |  $           (31,196) | $               15,310 | $                         - | $          (1,263,926) | (1,276,542) | $(547,241) | $      9,080,948 |

----

| INTERNATIONAL      MONETARY SYSTEMS, LTD.                                 |   |
|---------------------------------------------------------------------------|--------|
| AND      SUBSIDIARIES                                                     |   |
| CONSOLIDATED      STATEMENTS OF CASH FLOWS                                |   |
| For      the Years Ended December 31                                      |   |
|                                                                      |   | 2007 |   |   | 2006 |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES                                 |   |   |   |   |   |   |
| Net      loss                                                             |   | $ | (414,290 | ) |   | $ | (421,652 | ) |
| Adjustments      to reconcile net loss to net cash                        |   |   |   |   |   |   |   |   |
|    provided      by operating activities                   |   |   |   |   |   |   |   |   |
|      Depreciation      and amortization          |   |   | 1,465,263 |   |   |   | 880,062 |   |
|      Impairment      loss                        |   |   | 36,676 |   |   |   | 243,439 |   |
|      Provision      for bad debts                |   |   | 239,215 |   |   |   | 158,569 |   |
|      Stock      issued for services              |   |   | 98,250 |   |   |   | 32,050 |   |
|      Loss      on disposal of fixed assets       |   |   | 4,216 |   |   |   | 20,023 |   |
|      Accretion      of discount on notes payable |   |   | 37,097 |   |   |   | 57,542 |   |
|      Deferred      compensation                  |   |   | 15,000 |   |   |   | 15,000 |   |
|      Amortization      of deferred compensation  |   |   | - |   |   |   | 2,043 |   |
| Changes      in operating assets and liabilities:                         |   |   |   |   |   |   |   |   |
|      Accounts      receivable                    |   |   | 48,418 |   |   |   | (144,808 | ) |
|      Earned      trade account                   |   |   | (761,228 | ) |   |   | (72,041 | ) |
|      Prepaid      expense                        |   |   | 115,602 |   |   |   | (128,418 | ) |
|      Accounts      payable                       |   |   | 16,637 |   |   |   | 99,371 |   |
|      Accrued      compensation                   |   |   | 58,550 |   |   |   | 61,927 |   |
|      Accrued      payroll taxes                  |   |   | 47,464 |   |   |   | 6,389 |   |
|      Accrued      sales taxes                    |   |   | 4,241 |   |   |   | 11,135 |   |
|      Accrued      income taxes                   |   |   | 99,000 |   |   |   | 40,000 |   |
|      Deferred      income taxes                  |   |   | (165,000 | ) |   |   | 11,000 |   |
| Net      cash provided by operating activities                            |   |   | 945,111 |   |   |   | 871,631 |   |
|                                                                      |   |   |   |   |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES                                 |   |   |   |   |   |   |   |   |
| (Increase)      decrease in restricted cash                               |   |   | (483,443 | ) |   |   | 363,400 |   |
| (Increase)      decrease in marketable securities                         |   |   | (9,000 | ) |   |   | (21,124 | ) |
| Capital      expenditures                                                 |   |   | (768,588 | ) |   |   | (224,048 | ) |
| Cash      received in business acquisitions                               |   |   | 498,453 |   |   |   |   |   |
| Cash      payments for business acquisitions                              |   |   | - |   |   |   | (5,431,405 | ) |
| Trade      payments for business acquisitions                             |   |   | - |   |   |   | (15,000 | ) |
| Proceeds      from sale of real estate                                    |   |   | 5,000 |   |   |   | - |   |
| Increase      in cash surrender value                                     |   |   | (5,600 | ) |   |   | (5,350 | ) |
| Net      cash used in investing activities                                |   |   | (763,178 | ) |   |   | (5,333,527 | ) |

----

| INTERNATIONAL      MONETARY SYSTEMS, LTD.                          |   |
|--------------------------------------------------------------------|--------|
| AND      SUBSIDIARIES                                              |   |
| CONSOLIDATED      STATEMENTS OF CASH FLOWS                         |   |
| For      the Years Ended December 31                               |   |
|                                                               |   | 2007 |   |   | 2006 |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES                          |   |   |   |   |   |   |
| Proceeds      from notes payable to related parties                |   |   | - |   |   |   | 20,000 |   |
| Payments      on notes payable to related parties                  |   |   | (110,024 | ) |   |   | (201,653 | ) |
| Proceeds      from notes payable                                   |   |   | - |   |   |   | 2,626,773 |   |
| Payments      on notes payable                                     |   |   | (655,689 | ) |   |   | (1,029,701 | ) |
| Payments      on notes payable from earned trade account           |   |   | - |   |   |   | (32,795 | ) |
| Purchase      of treasury stock                                    |   |   | - |   |   |   | (412,700 | ) |
| Beneficial      conversion; notes payable                          |   |   | - |   |   |   | 39,833 |   |
| Proceeds      from subscription receivable                         |   |   | 10,820 |   |   |   | 26,605 |   |
| Proceeds      from issuance of stock                               |   |   | 441,500 |   |   |   | 4,276,000 |   |
| Net      cash provided by financing activities                     |   |   | (313,393 | ) |   |   | 5,312,362 |   |
|                                                               |   |   |   |   |   |   |   |   |
| Effect      of exchange rate changes                               |   |   | 12,863 |   |   |   | - |   |
|                                                               |   |   |   |   |   |   |   |   |
| Net      increase (decrease) in cash                               |   |   | (118,597 | ) |   |   | 850,466 |   |
|                                                               |   |   |   |   |   |   |   |   |
| Cash      at beginning of year                                     |   |   | 930,962 |   |   |   | 80,496 |   |
|                                                               |   |   |   |   |   |   |   |   |
| Cash      at end of year                                           |   | $ | 812,365 |   |   | $ | 930,962 |   |
|                                                               |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL      DISCLOSURES                                      |   |   |   |   |   |   |   |   |
| Cash      paid for interest                                        |   | $ | 332,891 |   |   | $ | 351,236 |   |
| Cash      paid for income taxes                                    |   | $ | 11,231 |   |   | $ | 20,561 |   |
|                                                               |   |   |   |   |   |   |   |   |
| NON      CASH FINANCING AND INVESTING ACTIVITIES                   |   |   |   |   |   |   |   |   |
| Acquisitions:                                                      |   |   |   |   |   |   |   |   |
| Fair      value of assets acquired                                 |   | $ | 4,095,000 |   |   | $ | 7,752,206 |   |
| Less:      liabilities assumed                                     |   |   | (130,000 | ) |   |   | (41,934 | ) |
| Stock      issued                                                  |   |   | (2,850,000 | ) |   |   | (180,500 | ) |
| Trade      dollars paid                                            |   |   | - |   |   |   | (598,367 | ) |
| Deferred      tax liability                                        |   |   | (650,000 | ) |   |   | (1,500,000 | ) |
| Net      cash paid for acquisitions                                |   | $ | 465,000 |   |   | $ | 5,431,405 |   |
|                                                               |   |   |   |   |   |   |   |   |
| Stock      issued for services                                     |   | $ | 98,250 |   |   | $ | 32,050 |   |
| Treasury      stock redeemed for fixed assets                      |   | $ | 50,000 |   |   | $ | - |   |
| Notes      payable beneficial conversion                           |   | $ | - |   |   | $ | 39,833 |   |
| Stock      guarantees on acquisitions                              |   | $ | 2,500,000 |   |   | $ | - |   |
| Stock      guarantees released due to changes in market conditions |   | $ | - |   |   | $ | 1,826,750 |   |
| Payment      of long-term debt with stock                          |   | $ | 1,030,000 |   |   | $ | - |   |

----

|   | 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 that      provides an alternative paymentsystem. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 orservices. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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, 2007 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, 2007 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 collectibility 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 2007 and 2006 include the accounts      of the Company and its wholly owned subsidiaries Continental Trade      Exchange, Ltd., National Trade Association, Inc., and INLM CN, Inc. (from      the acquisition date of February 1, 2007 through December 31, 2007).      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 amountoutstanding. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

|   | 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-nineyears. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | In      2002 the Company adopted Statement of Financial Accounting Standards      (SFAS) No. 142, “Goodwill and Other Intangibles,” which requires that      goodwill and intangible assets with indefinite lives be tested annually      for impairment. In 2007 the Company recorded an impairment loss of $36,676      on membership lists related to its Virginia, Memphis, TN and Indiana      operations. In 2006 the Company recorded an impairment loss of $243,439 on      membership lists related to its Nevada and Modesto, CA      operations. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | Investment      in real estate includes two parcels of undeveloped land valued at $26,000,      and deeded vacation timeshares valued at $2,695. Both are valued at the      lower of cost or fair marketvalue. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

|   | 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, 2007 and 2006,      respectively, the Company had approximately $835,786 and $556,473 in cash      balances at financial institutions which were in excess of the FDIC      insured limits. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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,      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 $334,028 and $158,135 for the years      ended December 31, 2007 and 2006,  respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | FAS      No. 130, Reporting Comprehensive Income (SFAS 130) establishes rules for      reporting and displaying of 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 SFAS No. 52, Foreign      Currency Translation (SFAS 52). All balance sheet accounts have been      translated using the exchange rate in effect at the balance sheet date.      Income statement amounts have been translated using an appropriately      weighted average exchange rate for the year. The translation gains and      losses of $12,863 resulting from the changes in exchange rates during 2007      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 loss per common share is computed based upon the weighted      average common shares outstanding as defined by Financial Accounting      Standards No. 128, “Earnings Per Share.” As of December 31, 2007 and 2006      there were 6,477,528 and 10,940,862 common share equivalents outstanding      which consisted of: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                               |   | 2007   |      |   | 2006   |   |
|----------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Shares      issuable upon the                      |   |   |      |   |   |   |
|    conversion      of notes payable |   |   | 2,907,528 |   |   |   | 6,390,862 |   |
| Shares      issuable upon the                      |   |   |      |   |   |   |   |   |
|    exercise      of warrants        |   |   | 2,750,000 |   |   |   | 3,500,000 |   |
| Shares      issuable upon the                      |   |   |      |   |   |   |   |   |
|    conversion      of stock options |   |   | 820,000   |   |   |   | 1,050,000 |   |
|                                               |   |   | 6,477,528 |   |   |   | 10,940,862 |   |

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

|   | On      January 1, 2007 IMS adopted the provisions of FASB Interpretation No. 48,      “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation      of FASB Statement No. 109. FIN 48 establishes a single model to address      accounting for uncertain tax positions. FIN 48 clarifies the accounting      for income taxes by prescribing a minimum recognition threshold a tax      position is required to meet before being recognized in the financial      statements. FIN 48 also provides guidance on de-recognition, measurement      clarification, interest and penalties, accounting in interim periods,      disclosure and transition. The adoption of this pronouncement did not have      a material impact on the financialstatements. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      December 2007, the Financial Accounting Standards Board (FASB) issued SFAS      No. 141 (revised 2007), “Business Combinations,” which establishes      principles and requirements for how the acquirer recognizes, measures, and      discloses the identifiable assets acquired, the liabilities assumed, and      any non-controlling interest in the acquiree; and the goodwill acquired or      a gain from a bargain purchase. SFAS No. 141 (revised 2007) is effective      for business combinations for |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | In      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in      Consolidated Financial Statements - An amendment of ARB No. 51,” which      establishes accounting and reporting standards for the non-controlling      interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS      No. 160 is effective for fiscal years, and the interim periods within      those fiscal years, beginning on or after December 15, 2008. We do not      expect the adoption of SFAS 160 to have a material impact on our financial      statements. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for      Financial Assets and Financial Liabilities - Including an amendment to      FASB Statement No. 115,” which permits entities to choose to measure many      financial instruments and certain other items at fair value. SFAS No. 159      is effective as of the beginning of an entity’s first fiscal year that      begins after November 15, 2007. We do not expect the adoption of SFAS 159      to have a material impact on our financial  statements. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,”      which defines fair value, establishes a framework for measuring fair value      in generally accepted accounting principles, and expands disclosures about      fair value measurements. SFAS No 157, as originally issued, was effective      for fiscal years beginning after November 15, 2007. However, on December      14, 2007, the FASB issued FASB Staff Position FAS 157-b, which deferred      the effective date of SFAS No. 157 for one year, as it relates to      nonfinancial assets and liabilities. We do not expect the adoption of SFAS      157 to have a material impact on our financial  statements. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company has reclassified general and administrative, and occupancy      expenses for 2006 for consistency in presentation with 2007, as      follows: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   | December      31, 2006 |      |
|-------------------------------------------|--------|------------------------|-----------|
|                                      |   | As      Reported       |      |   | As      Restated |   |
| Consolidated      Statement of Operations |   |                   |      |   |   |   |
|                                      |   |                   |      |   |   |   |
| General      and administrative           |   | $                      | 1,388,059 |   |   | $ | 1,557,795 |   |
|                                      |   |                   |      |   |   |   |   |   |
| Occupancy                                 |   | $                      | 761,040   |   |   | $ | 591,304 |   |
|                                      |   |                   |      |   |   |   |   |   |

----

|                                                     |   | 2007   |    |   | 2006   |   |
|----------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Available      for sale securities:                      |   |   |    |   |   |   |
| Cost                                                     |   | $      | 90,434  |   |   | $      | 79,831 |   |
| Unrealized      gain                                     |   |   | 27,946  |   |   |   | 25,499 |   |
| Marketable      equity securities                        |   |   |    |   |   |   |   |   |
|      classified      as current |   | $      | 118,380 |   |   | $      | 105,330 |   |

|                        | 2007                                                         |   | 2006                                              |
|-----------------------------|--------------------------------------------------------------|--------|---------------------------------------------------|
| Unrealized      gain (loss) |  $        2,447 |   |  $      10,349 |

| A.   | On      March 31, 2006, IMS purchased selected assets of Master Trade of Los      Gatos, CA for $75,000. Terms of the acquisition included a down payment of      $40,000. IMS issued 70,000 shares of its common stock guaranteed at      $35,000 ($.50 per share). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Purchase      price          |   | $      | 75,000 |   |
|------------------------------|--------|--------|--------|--------|
| Accounts      receivable     |   | $      | 10,000 |   |
| Furniture      and equipment |   |   | 2,000  |   |
| Member      list             |   |   | 63,000 |   |
| Total      assets acquired   |   | $      | 75,000 |   |

----

| Purchase      price        |   | $      | 5,000  |   |
|----------------------------|--------|--------|--------|--------|
| Accounts      receivable   |   | $      | 1,200  |   |
| Member      list           |   |   | 23,800 |   |
| Total      assets acquired |   | $      | 25,000 |   |

| C.   | On      April 7, 2006, IMS purchased selected assets of Trade Exchange of the      Rockies of Golden, CO for $720,000. Terms of the acquisition included a      down payment of $500,000 and a note payable for $100,000. The note was      paid in full. IMS issued 240,000 shares of common stock guaranteed at      $120,000 ($.50 per share). The purchase price included scrip and showroom      merchandise that was sold to themembership. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Purchase      price          |   | $      | 720,000 |   |
|------------------------------|--------|--------|---------|--------|
| Accounts      receivable     |   | $      | 11,000  |   |
| Inventory                    |   |   | 135,000 |   |
| Furniture      and equipment |   |   | 60,000  |   |
| Member      list             |   |   | 514,000 |   |
| Total      assets acquired   |   | $      | 720,000 |   |

| D.   | On      June 1, 2006, IMS purchased selected assets of Barter Indiana Group of      Indianapolis, IN for $103,000. Terms of the acquisition included a down      payment of $75,000 and $15,000 in trade dollars. IMS issued 20,000 shares      of common stock at $13,000 based on the bid price on the transaction      date. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Purchase      price          |   | $      | 103,000 |   |
|------------------------------|--------|--------|---------|--------|
| Accounts      receivable     |   | $      | 3,000   |   |
| Furniture      and equipment |   |   | 3,000   |   |
| Member      list             |   |   | 97,000  |   |
| Net      assets acquired     |   | $      | 103,000 |   |

----

| E.   | On      September 29, 2006, IMS entered into a Share-Exchange Agreement for the      acquisition of all outstanding shares of National Trade Association, Inc.      (d.b.a. Illinois Trade Association), an Illinois Corporation. The cash      purchase price was $4,600,000. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Purchase      price            |   | $      | 4      ,600,000 |   |
|--------------------------------|--------|--------|-----------------|--------|
| Cash                           |   | $      | 8,595           |   |
| Accounts      receivable       |   |   | 519,261         |   |
| Prepaid      expenses          |   |   | 20,000          |   |
| Furniture      and equipment   |   |   | 150,000         |   |
| Member      list               |   |   | 4,524,000       |   |
| Goodwill                       |   |   | 1,500,000       |   |
| Investment      in real estate |   |   | 3,445           |   |
| Liabilities      assumed       |   |   | (625,301        | )      |
| Deferred      tax liability    |   |   | 1,500,000       | )      |
| Net      assets acquired       |   | $      | 4,600,000       |   |

| F.   | On      August 9, 2006 IMS acquired an option to purchase the assets of New York      Commerce Group (formerly Barter Advantage). During the option period, the      companies will operate under a revenue-sharing arrangement. The term of      the option is 2 years. Initial payment was $112,500 of which $100,000 was      paid in cash. The remaining $12,500 will be paid in the form of 16,667      shares of IMS common stock guaranteed at $.75 per share. The balance of      the payment is due in two years and will be based on the gross revenue      generated at that time. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

----

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

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

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

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

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

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

|                                |   | 2007   |        |   | 2006   |   |
|-------------------------------------|--------|--------|-------------|--------|--------|--------|
| Gross      revenue                  |   | $      | 15,341,572  |   |   | $      | 13,241,854 |   |
| Total      expenses                 |   |   | (15,361,959 | )      |   |   | (13,157,345 | ) |
| Net      income (loss) before taxes |   | $      | (20,387     | )      |   | $      | 84,509 |   |
| Earnings      per share             |   | $      | (0.00       | )      |   | $      | 0.00 |   |

----

|   | Intangible      assets consist of membership lists, goodwill and a covenant not to      compete, and for the years ended December 31, 2007 and 2006 are as      follows: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                              |   | 2007   |       |   | 2006   |   |
|-----------------------------------|--------|--------|------------|--------|--------|--------|
| Membership      lists             |   | $      | 12,517,176 |   |   | $      | 10,074,573 |   |
| Impairment                        |   |   | (36,676    | )      |   |   | (243,439 | ) |
| Accumulated      amortization     |   |   | (2,518,346 | )      |   |   | (1,326,075 | ) |
|      Net |   | $      | 9,962,154  |   |   | $      | 8,505,059 |   |
|                              |   |   |       |   |   |   |   |   |
| Covenant      not to compete      |   | $      | 89,300     |   |   | $      | 89,300 |   |
| Accumulated      amortization     |   |   | (74,417    | )      |   |   | (44,650 | ) |
|      Net |   | $      | 14,883     |   |   | $      | 44,650 |   |
|                              |   |   |       |   |   |   |   |   |
| Goodwill                          |   | $      | 3,448,602  |   |   | $      | 2,798,601 |   |
| Accumulated      amortization     |   |   | (13,123    | )      |   |   | (13,123 | ) |
|      Net |   | $      | 3,435,479  |   |   | $      | 2,785,478 |   |

|   | Aggregate      amortization expense on intangible assets was $1,222,041 and $696,371 for      the years ended December 31, 2007 and 2006, respectively. In 2007 the      Company recorded an impairment loss of $36,676 on membership lists related      to its Virginia, Memphis, TN and Indiana operations. In 2006 the Company      recognized a $243,439 impairment loss of the membership list related to      its California and Nevada operations. Estimated future amortization      expense is as follows: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2008       |   | $      | 1,274,210 |   |
|------------|--------|--------|-----------|--------|
| 2009       |   |   | 1,259,326 |   |
| 2010       |   |   | 1,259,326 |   |
| 2011       |   |   | 1,244,798 |   |
| 2012       |   |   | 1,201,274 |   |
| thereafter |   |   | 3,723,220 |   |
|       |   | $      | 9,962,154 |   |

----

|   | Property      and equipment consist of the following as of December 31, 2007 and      2006: |
|--------|---------------------------------------------------------------------------------------------|

|                                          |   | 2007   |      |   | 2006   |   |
|-----------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Office      furniture, equipment,             |   |   |      |   |   |   |
|    computers      and software |   | $      | 1,724,643 |   |   | $      | 937,218 |   |
| Leasehold      improvements                   |   |   | 211,202   |   |   |   | 135,548 |   |
|                                          |   |   | 1,935,845 |   |   |   | 1,072,766 |   |
| Accumulated      depreciation                 |   |   | (666,582  | )      |   |   | (424,882 | ) |
|                                          |   | $      | 1,269,263 |   |   | $      | 647,884 |   |

|   | CTE      has an unsecured revolving credit line of $100,000 with a financial      institution, with no maturity date and an interest rate of prime plus      1.25%. The balance was paid in full as of December 31,    2006. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | CTE      has an unsecured business credit line of $122,000 with a financial      institution, with no maturity date and an interest rate of prime plus 6%.      The balance was paid in full as of December 31,  2006. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      connection with its acquisition of Trade Systems Interchange, CTE had an      unsecured loan payable to an individual in the amount of $60,000, due      December 2008, with interest at 9%. The balance was paid in full as of      December 31, 2006. The owner of DWW Software is also a shareholder in the      Company. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | A      former subsidiary of the Company had an unsecured $100,000 loan payable to      an individual arising from the Company's purchase of JMG during      April 2001. IMS assumed the outstanding balance when operations of      the subsidiary were discontinued. The balance was paid in full as of      December 31, 2006. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | CTE      had an unsecured business loan with a partnership. The balance was paid in      full as of December 31, 2006. |
|--------|------------------------------------------------------------------------------------------------------------------------|

|   | A      former subsidiary of the Company carried an unsecured business loan with a      financial institution which IMS assumed when operations of the subsidiary      were discontinued. The balance was paid in full as of December 31,      2006. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | CTE      has an unsecured $50,000 business credit line with a financial      institution. The balance was paid in full as of December 31,      2006. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | CTE      has an unsecured $48,000 business credit line with a credit card company.      The balance was paid in full as of December 31,  2006. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | CTE      had an unsecured note payable to the former owner of Barternet, a      California company purchased in 2003. The face value of the original note      was $69,300, discounted at 7.5% to $62,444. The balance was paid in full      as of December 31, 2006. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | In      conjunction with the acquisition of International Barter Network of New      York, CTE assumed an unsecured note payable of $19,500 to a financial      institution, with interest of 6.25%. The balance was paid in full as of      December 31, 2006. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | IMS      purchased an automobile through a financial institution in April of 2003.      Monthly payments included interest at 8.75%. The balance was paid in full      as of December 31, 2006. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      connection with the acquisition of Barter Network, Inc., CTE issued a note      payable secured by shares of common stock, guaranteed at $.50 per share.      Monthly payments of $6,754 included interest at 6%. On December 31, 2006      the remaining balance of $145,329 was satisfied with the redemption of      310,846 shares of common stock, at $.50 per  share. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      connection with the acquisition of California Barter Exchange, CTE assumed      an unsecured note payable to a financial institution. The balance was paid      in full as of December 31, 2006. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                   |   | Balance      as of     |      |   | Current |   |      | Long-term |   |
|------------------------|--------|------------------------|-----------|--------|---------|--------|-----------|-----------|--------|
|                   |   | December      31, 2007 |      |   | Portion |   |      | Portion   |   |
| Private      investors |   | $                      | 2,143,371 |   |    | $      | 1,666,667 |      |   | $ | 476,704 |   |
| Individual             |   |                   | 57,076    |   |    |   | 57,076    |      |   |   | - |   |
| Individual             |   |                   | 59,821    |   |    |   | 26,410    |      |   |   | 33,411 |   |
| Individual             |   |                   | 16,308    |   |    |   | 16,308    |      |   |   | - |   |
| Individual             |   |                   | 300,000   |   |    |   | 94,078    |      |   |   | 205,922 |   |
| Individuals            |   |                   | 124,921   |   |    |   | 124,921   |      |   |   | - |   |
|                   |   |                   | 2,701,497 |   |    |   | 1,985,460 |      |   |   | 716,037 |   |
| Discounts              |   |                   | (4,723    | )      |    |   | (4,723    | )         |   |   | - |   |
|                   |   | $                      | 2,696,774 |   |    | $      | 1,980,737 |      |   | $ | 716,037 |   |

| 2008   |   | $      | 1,985,460 |   |
|--------|--------|--------|-----------|--------|
| 2009   |   |   | 605,042   |   |
| 2010   |   |   | 106,272   |   |
| 2011   |   |   | -         |   |
|   |   | $      | 2,696,774 |   |

|   | From      time to time officers and stockholders of the Company have loaned funds to      IMS. Aggregate monthly payments are $7,000 including interest at 10% in      2007 and 10%  to 12% in2006. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            |   | 2007   |     |   | 2006   |   |
|---------------------------------|--------|--------|----------|--------|--------|--------|
| Balance      January 1          |   | $      | 110,024  |   |   | $      | 291,677 |   |
| New      loans during the year  |   |   | -        |   |   |   | 20,000 |   |
| Repayments      during the year |   |   | (110,024 | )      |   |   | (201,653 | ) |
| Balance      December 31        |   | $      | -        |   |   | $      | 110,024 |   |

|   | These      loans were paid in full during the year ended December 31,      2007. |
|--------|----------------------------------------------------------------------------------|

----

|   | 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 herretirement. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | Assets      intended to fund this liability include an investment in marketable      securities (Note 2) with a balance of $118,380 and $105,331 as of      December 31, 2007 and 2006, respectively, and a life insurance policy      with a $300,000 death benefit and a cash surrender value as of      December 31, 2007 and 2006, of $37,056 and $33,058, 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 deferredcompensation. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Income      tax expense for the years ended December 31, 2007 and 2006 reflect a      higher or lower effective tax rate due to certain expenses that are not      deductible for tax purposes, such as the impairment loss of the membership      list and 50% of meals and entertainment. The difference between actual and      expected tax liability also includes the effects of timing differences in      deducting certain expenses such as charitable contributions and      depreciation, as well as the effects of different financial accounting and      tax bases of certain assets.  In addition, proceeds from the      liquidation of the cash surrender value of a life insurance policy are      included as income for tax purposes, but not in the financial      statements. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                                                           |   | Years      Ended December 31 |     |
|----------------------------------------------------------------|--------|------------------------------|----------|
|                                                           |   | 2007                         |     |   | 2006 |   |
|      Currently      payable - state   |   | $                            | 27,000   |   |   | $ | 8,500 |   |
|      Currently      payable - Federal |   |                         | 122,000  |   |   |   | - |   |
|      Deferred      - state            |   |                         | (36,669  | ) |   |   | 21,000 |   |
|      Deferred      - federal          |   |                         | (167,100 | ) |   |   | 31,061 |   |
|                                                           |   | $                            | (54,769  | ) |   | $ | 60,561 |   |

----

|   | The      following table reconciles the reported income taxes and the income taxes      that would be computed by applying the Company’s normal tax rate to income      before taxes for the periods ended December31: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                  |   | Years      Ended December 31 |     |
|-----------------------------------------------------------------------|--------|------------------------------|----------|
|                                                                  |   | 2007                         |     |   | 2006 |   |
| Federal      income tax                                               |   | $                            | (170,650 | ) |   | $ | (122,800 | ) |
| State      income tax                                                 |   |                         | (32,850  | ) |   |   | 29,500 |   |
| Tax      effects of:                                                  |   |                         |     |   |   |   |   |   |
|    Nondeductible      impairment loss                  |   |                         | 15,050   |   |   |   | 82,800 |   |
|    Disallowed      meals                               |   |                         | 10,300   |   |   |   | 9,370 |   |
|    Disallowed      charitable                          |   |                         |     |   |   |   |   |   |
|       contributions                     |   |                         | -        |   |   |   | 2,400 |   |
| Charitable      contributions carryover                               |   |                         | (1,800   | ) |   |   |   |   |
|    Proceeds      from liquidation of                   |   |                         |     |   |   |   |   |   |
|       insurance      policy             |   |                         | -        |   |   |   | 48,600 |   |
|    Depreciation      and amortization                  |   |                         |     |   |   |   |   |   |
|       variances      due to tax basis   |   |                         |     |   |   |   |   |   |
|       and      useful life differences  |   |                         | 142,581  |   |   |   | 168,300 |   |
|    Consolidation      of National                      |   |                         |     |   |   |   |   |   |
|       Trade      Association (January 1 |   |                         |     |   |   |   |   |   |
|       through      September 30, 2006)  |   |                         | -        |   |   |   | (68,000 | ) |
|    Net      operating loss carryover                   |   |                         | (17,400  | ) |   |   | (89,609 | ) |
|                                                                  |   | $                            | (54,769  | ) |   | $ | 60,561 |   |
|                                                                  |   |                         |     |   |   |   |   |   |

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

|                                                                   |   | 2007   |      |   | 2006   |   |
|------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Deferred      income tax liabilities:                                  |   |   |      |   |   |   |
|    Difference      in tax basis of                      |   |   |      |   |   |   |
|       membership      lists and goodwill |   | $      | 2,550,000 |   |   | $      | 2,065,000 |   |
| Deferred      income taxes                                             |   | $      | 2,550,000 |   |   | $      | 2,065,000 |   |

|   | On      February 21, 2006 the Company completed a private placement of 236,635      shares of common stock, par value $0.001 per share, with a private      investor. Gross proceeds were $50,000. On April 11, 2006 the Company      completed a private placement of 2,700,000 shares of common stock, par      value $0.001 per share, with an institutional investor. Gross proceeds      were $1,000,000. After legal fees of $15,000 the net proceeds were      $985,000. On May 11, 2006 the Company completed a private placement of      7,000,000 shares of common stock, par value $0.001 per share, with an      institutional investor. In addition the Company issued warrants to      purchase 3,500,000 shares at $.55 per share. The warrants are valid until      May 31, 2011. Gross proceeds were $3,000,000. After legal fees of $12,000      net proceeds |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | were      $2,988,000. On May 25, 2006 the Company completed a private placement of      100,000 shares of common stock, par value $0.001 per share, with an      institutional investor. Gross proceeds were $45,000. These transactions      totaled 10,036,365 shares and netted$4,068,000. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 960,750      shares of IMS treasury stock were purchased by the Company in 2006 for      $462,700. |
|--------|----------------------------------------------------------------------------------------------------|

|   | 15,000      shares of common stock and 30,000 shares of treasury stock were issued to      investor relation firms in 2006. 50,000 shares of treasury stock were      issued to the outside members of the Board of Directors. Total fair value      was $32,050. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 16,667      shares of IMS treasury stock were issued as part of the purchase option      for New York Commerce Exchange. 330,000 shares of treasury stock were      issued as part of the purchase of three trade exchanges. 346,667 total      shares were issued with a fair value of  $180,500. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On      July 19, 2006 a private investor exercised 200,000 warrants for IMS common      stock. IMS received cash in the amount of $50,000 ($.25 per      share). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On      December 22, 2006, 416,000 options were exercised for IMS common stock,      par value $0.001 per share. IMS received cash in the amount of $208,000      ($.50 per share). |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      2006 67,555 shares of treasury stock and 310,846 shares of common stock      were issued pursuant to the terms of the note payable issued in      conjunction with the acquisition of Barter Network, Inc. The note payable      was reduced by $145,329, relieving IMS of the  liability. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company recognized $2,043 of expense related to a deferred consulting      agreement entered into in 2005. |
|--------|---------------------------------------------------------------------------------------------------------------------|

|   | In      2006 the Company recognized a beneficial conversion on the convertible      notes payable in the amount of$39,833. |
|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | On      April 5, 2006, 80,000 shares of common stock, par value $0.0001 per share,      were returned by a private party, and were cancelled and      retired. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash      received on the subscription receivable in 2006 was    $26,605. |
|--------|---------------------------------------------------------------------------|

|   | The      stock guarantee liability was reduced by $1,981,750 during 2006 pursuant      to the terms of seven asset purchase agreements, payments made to redeem      shares, and releases from certain owners of guaranteed stock. The      liability increased by $155,000 for two acquisitions in April of 2006. The      net reduction was $1,826,750. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

----

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

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

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

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

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

|   | The      stock guarantee liability was reduced by $120,000 during 2007 pursuant to      the release from an owner of guaranteed stock. The liability increased by      $2,850,000 for three acquisitions in 2007. The net increase was      $2,730,000. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

----

|   | A      summary of the status of Company’s fixed stock option plan as of December      31, 2007 and 2006, and the changes during the years then ended is      presented below: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                         |   | December      31, 2007 |      |   | December      31, 2006 |   |
|--------------------------------------------------------------|--------|------------------------|-----------|--------|------------------------|--------|
|                                                         |   |                   |      |   | Weighted      Average  |   |   |   |   |   | Weighted      Average |   |
| Fixed      Options                                           |   | Shares                 |      |   | Exercise      Price    |   |   | Shares |   |   | Exercise      Price |   |
| Outstanding      at                                          |   |                   |      |   |                   |   |   |   |   |   |   |   |
|      beginning      of period       |   |                   | 1,050,000 |   |                   | $      | 0.16 |   |   |   | 3,282,000 |   |   | $ | 0.39 |   |
| Granted                                                      |   |                   | -         |   |                   | $      | - |   |   |   | - |   |   | $ | - |   |
| Purchased                                                    |   |                   | (190,000  | )      |                   | $      | 0.15 |   |   |   | (416,000 | ) |   | $ | 0.50 |   |
| Forfeited                                                    |   |                   | -         |   |                   | $      | - |   |   |   | - |   |   | $ | - |   |
| Expired                                                      |   |                   | (40,000   | )      |                   | $      | 0.13 |   |   |   | (1,816,000 | ) |   | $ | 0.50 |   |
| Outstanding      at end of period                            |   |                   | 820,000   |   |                   | $      | 0.16 |   |   |   | 1,050,000 |   |   | $ | 0.16 |   |
|                                                         |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Options      exercisable at                                  |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|      period      end                |   |                   | 820,000   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average fair value                             |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|      of      options granted to     |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|      employees      during the year |   | $                      | -         |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   |                   |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |

|   | As      of December 31, 2007 there were 820,000 options outstanding and      exercisable, with a weighted average remaining contractual life of 1.09      years, and a weighted average exercise price of  $.16. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      following table illustrates the effect on net income and earnings per      share if the Company had applied the fair value recognition provisions of      SFAS 123R for the years ended December 31, 2007 and  2006: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                 |   | 2007   |     |   | 2006   |   |
|--------------------------------------|--------|--------|----------|--------|--------|--------|
| Net      income (loss)               |   |   |     |   |   |   |
| As      reported                     |   | $      | (414,290 | )      |   | $      | (421,652 | ) |
| Fair      value of stock options     |   |   | -        |   |   |   | - |   |
| Pro      Forma                       |   | $      | (414,290 | )      |   | $      | (421,652 | ) |
| Basic      earnings per common share |   |   |     |   |   |   |   |   |
| As      reported                     |   | $      | (0.01    | )      |   | $      | (0.01 | ) |
| Pro      Forma                       |   | $      | (0.01    | )      |   | $      | (0.01 | ) |

----

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

|   | The      Company leases its executive offices and principal operating facilities in      New Berlin, Wisconsin from Glendale Investments, LLC, a Wisconsin limited      liability company which is owned by officers and stockholders of the      Company. The original lease commenced October 1, 2002 and extends      through September 30, 2008. Lease payments are $7,500 monthly plus certain      operating costs, including sales and use taxes, insurance, utilities,      maintenance, and non-structural repairs. Total payments in 2007 were      $90,000, and $76,500 in 2006. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | From      time to time officers and stockholders of the Company have loaned funds to      IMS. Aggregate monthly payments are $7,000 including interest at 10% in      2007 and 12% in 2006. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            |   | 2007   |     |   | 2006   |   |
|---------------------------------|--------|--------|----------|--------|--------|--------|
| Balance      January 1          |   | $      | 110,024  |   |   | $      | 291,677 |   |
| New      loans during the year  |   |   | -        |   |   |   | 20,000 |   |
| Repayments      during the year |   |   | (110,024 | )      |   |   | (201,653 | ) |
| Balance      December 31        |   | $      | -        |   |   | $      | 110,024 |   |

|   | These      loans were paid in full in the year ending December 31,    2007. |
|--------|-----------------------------------------------------------------------------|

----

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

|   | The      Company has various leases for office facilities and vehicles which are      classified as operating leases, and which expire at various times through      2013. Total rent expense for all operating leases for 2007 and 2006 is      summarized as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                     |   | 2007   |    |   | 2006   |   |
|--------------------------|--------|--------|---------|--------|--------|--------|
| Related      party lease |   | $      | 90,000  |   |   | $      | 76,500 |   |
| Office      leases       |   |   | 668,122 |   |   |   | 380,345 |   |
| Vehicle      leases      |   |   | 16,548  |   |   |   | 17,380 |   |
|                     |   | $      | 774,670 |   |   | $      | 474,225 |   |

|   | Minimum      future lease commitments as of December 31, 2007, are summarized as      follows: |
|--------|-----------------------------------------------------------------------------------------------------|

|                         |   | Office     |      |   |     |   |
|------------------------------|--------|------------|-----------|--------|----------|--------|
| Year      ending December 31 |   | Facilities |      |   | Vehicles |   |
| 2008                         |   | $          | 621,464   |   |     | $      | 18,127 |   |
| 2009                         |   |       | 479,042   |   |     |   | 8,921 |   |
| 2010                         |   |       | 474,822   |   |     |   | 5,310 |   |
| 2011                         |   |       | 179,481   |   |     |   | - |   |
| thereafter                   |   |       | 256,739   |   |     |   | - |   |
|                         |   | $          | 2,011,548 |   |     | $      | 32,358 |   |

|   | 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 2008 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | On      January 7, 2008 IMS repurchased 229,333 shares of common stock at $.75 per      share using restricted cash, thereby releasing $172,000 of the      guarantee. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Balance      Sheet                                            |   | As      Reported |      |   | As      Restated |   |
|---------------------------------------------------------------|--------|------------------|-----------|--------|------------------|--------|
|                                                          |   |             |      |   |             |   |
| LIABILITIES                                                   |   |             |      |   |             |   |
|                                                          |   |             |      |   |             |   |
| Current      liabilities                                      |   |             |      |   |             |   |
| Current      portion of common stock subject to guarantees    |   |             | 652,664   |   |             |   | 995,000 |   |
| Total      current liabilities                                |   |             | 3,636,133 |   |             |   | 3,978,469 |   |
|                                                          |   |             |      |   |             |   |   |   |
| Long-term      liabilities                                    |   |             |      |   |             |   |   |   |
| Common      stock subject to guarantees, less current portion |   |             | 2,232,336 |   |             |   | 1,890.000 |   |
| Total      long term liabilities                              |   |             | 5,634,373 |   |             |   | 5,292,037 |   |

----