"WALL STREET CORNER"
BY WALLSTREETCORNER.COM, INC.
www.WallStreetCorner.com
International Monetary Systems, Ltd.
Consolidating the Barter Industry
Revenues Growing Fast
Essentials
Business:
Listed:
Symbol:
Shares Out:
Approximate Float:
Market Cap (at 1/10/2003):
B2B Barter Services
OTC Bulletin Board
INLM
15.9 million
4.5 million shares
$4.77 million
Summary
INLM is not a start-up situation. It's been in business 17 years. It began in 1985 to acquire, manage, & operate trade
exchanges & related businesses, commonly called bartering.
Bartering is an exciting concept. It's actually a relatively new idea. It attracts national media attention. What we find
most interesting is that INLM is consolidating the bartering industry. It had 300 clients by 1989, doubled that to about
600 clients via its first acquisition that year, made it's second acquisition in 1996, & has rolled up seven more companies
since then.
By 2000, INLM had built its trade volume to $12 million. Its revenue that year was about $1.5 million. In 2001, trade
volume grew to $16 million with about $2.5 million revenue. In 2002, management expects to have trade volume of
about $22 million with about $4 million revenue. Management projects about $30 million in 2003, with about $6 million
revenue.
Trade exchanges, or barter networks, are financial service firms that permit companies to exchange goods & services
utilizing an electronic currency known as "trade dollars," which are used in lieu of cash to purchase the various offerings
of other members of the barter network.
Because trade exchanges enable companies to generate new business, conserve cash, & convert excess inventory &
capacity into needed goods or services, the barter industry continues to grow at a consistent pace.
INLM's subsidiary, Continental Trade Exchange, is one of the world's largest barter systems, serving more than 5,000
businesses & service professional clients from eight cities in the U.S. & two in Canada.
Don Mardak is the former chairman of the National Association of Trade Exchanges (NATE), & he is backed by a
management team with more than 50 years of industry experience. We asked about IRS reporting -- he indicated his
company submits 1099s to the IRS on every transaction, so the IRS likes this type of mostly business to business
bartering.
INLM is well positioned to capitalize on a highly fragmented market. By expanding its network through strategic
acquisitions, it is rapidly becoming the dominant player in the barter industry.
History
International Monetary Systems, Ltd. is one of the largest publicly traded barter companies in the world with offices in
eight cities in the U.S. & two in Canada. It began in 1985, was incorporated in 1989 in Wisconsin, had its IPO in Q2
2002, was qualified to trade on the OTC BB as INLM on 6/25/2002, & actually began actively trading the week of
12/16/2002. It acquires, owns, manages, & operates trade exchanges & related businesses. It is a holding company -- it
so far has made nine acquisitions. In the recent past, it made three of those: (1) The assets & client base of Trade
Systems Interchange in Rohnert Park in Sonoma County, CA in 4/2001 (has served the greater San Francisco area since
1983); (2) The assets & about 1,000 clients of Tradius Corp., a barter exchange in San Jose, CA in 8/2001; & (3)
Tradecorp, a private Ohio-based barter network with 1,200 clients ($6 million in barter transactions in 2001) in 9/2002.
INLM currently has two primary operating subsidiaries: Continental Trade Exchange, Ltd., the CTE barter system
which operates in the U.S.; & Continental Trade Exchange of Canada, Ltd., which services the CTE Canadian barter
clients. It also currently has two other subsidiaries: JM Graphics, Inc., a printing pre-press & web design & hosting
company in New Berlin, WI, & Colorcraft Graphics, Inc., a full-service four-color printing company.
Continental Trade Exchange Barter Network
As a leader in the barter industry, Continental Trade Exchange (CTE) has created a network of more than 5,000
businesses who regularly trade their goods & services with each other. Through their participation in the barter program,
these companies are provided with an effective revenue management tool that enables them to identify & capture
incremental income, move surplus inventories, & profitably capitalize on their excess capacity. CTE functions as a thirdparty record keeper -- a status granted by the IRS -- & also manages the barter system. In addition, it acts as a principal in
certain transactions in which it acquire products, fine art, real estate, & other commodities that are either held as
investments or sold at a profit. This allows it to fulfill one of its objectives -- long-term equity building.
To provide clients with a flexible & effective means of trading, CTE created an alternative monetary system with its
own unique currency. Upon enrolling in the program, each member is assigned a barter account (much like a traditional
bank account) through which it receives CTE trade dollars. Under the T.E.F.R.A. act of 1982, it is required to report all
barter sales to the IRS on magnetic media. For accounting & tax purposes, the IRS has ruled that trade dollars are treated
the same as cash.
The Modern Barter Industry
The modern barter industry took shape in its current form in 1969 with the creation of the first retail barter exchange.
Currently there are an estimated 250 barter system firms -- including several with multiple licensees -- operating in the
U.S. & Canada. They provide services that involve an estimated 200,000 member companies.
Retail trade exchanges range in size from those operated by a single person from a small office to large firms operating
out of multiple offices located over a wide area. The 35 largest commercial exchange firms handle about 50% of the over
$700 million in transactions that flow through the barter system annually. Most trade exchanges are private companies
that make extensive use of computers to track their members, match transactions, & provide necessary accounting. The
National Association of Trade Exchanges and the International Reciprocal Trade Association are the two professional
associations most active in the industry.
How Barter Works
In a typical barter transaction, a member offers to sell products or services in return for the exchange's trade dollars,
typically referred to as "T$," which are paid to the member by the purchaser in the transaction. For example, T$100
refers to $100 worth of trade dollars that are used to acquire a product or service priced at $100 in U.S. currency. If the
purchase price is greater than the amount of earned trade dollars in the buyer's account, the exchange may grant a trade
dollar line of credit to the buyer. Periodically, each member has to account for any deficit in its trade account just as it
would with a conventional loan or other credit facility.
As compensation for providing its services, the trade exchange generally charges a one-time membership fee, monthly
maintenance fees, &/or a percentage of the price of each transaction (usually 10% to 12%). These fees are typically paid
by the member to the trade exchange in cash.
Barter transactions that represent sales revenue are taxable as ordinary income to the recipient of the trade dollars in
the conventional dollar amount of the trade dollars received, & conversely are deductible as ordinary expense by a
purchaser in the conventional dollar amount of the trade dollars paid. Members' barter income is reportable by the trade
exchange to the IRS on Form 1099B.
Management
Donald F. Mardak is CEO, president, chairman, & a director. In 1985, he founded the Continental Trade Exchange
barter network under the name "Continental Trading Company," a sole proprietorship. Continental Trading Company was
incorporated in 1988 as Continental Trade Exchange, Ltd. He is a two-term president of NATE, the National Association
of Trade Exchanges (1995-96 & 1999-2000), & served on the board of directors of the organization for seven years.
NATE is the principal barter industry trade association for independent barter networks.
John E. Strabley, Jr., CTB is executive VP & a director. He joined Continental Trade Exchange, Ltd. as a trade
broker in 1991. In 1992, he was promoted to general manager, & in 8/1992 was appointed VP. In 1995, he passed the
barter industry certification examination & was awarded with the industry's highest designation of CTB -- Certified Trade
broker. In 1997, he became a director of both Continental Trade Exchange, Ltd. & INLM.
Dale L. Mardak, CTB is VP & a director. He joined Continental Trade Exchange, Ltd. in 1993 as a trade
broker & was appointed trade director in 1995. In 1997, he was appointed treasurer & a director of both Continental
Trade Exchange, Ltd. and INLM. In 1999, he was awarded the designation of CTB.
Danny W. Weibling is treasurer, CFO, & a director. He is a CPA, & with his wife Lisa, was the former owner of
Trade Systems Interchange, the Rohnert Park, CA barter network that INLM acquired in 4/2001. He is also the developer
& programmer of TradeWorks, the barter industry's finest software program, & he served six years as treasurer of the
National Association of Trade Exchanges.
Patricia A. Katisch is secretary. She is the owner of Katisch & Associates, a marketing consulting & public relations
firm. From 1998 - 2001, she was an associate dean in the College of Professional Studies at Marquette University.
Previous to that, she founded & published the Women's Yellow Pages of Greater Milwaukee & was the producer of the
Wisconsin World of Women Show.
Richard A. Kranitz is counsel to the board of directors. He is an attorney in private practice, with specialization in
securities, banking, & business law. He is a director of Grafton State Bank, Harp & Eagle, Ltd., & Mentor Capital
Consultants, Inc.
Other Directors
Wayne Emmer is president of Illinois Cement Co., & former member of the Parkview Christian Academy School
Board.
Gerald Van Dyn Hoven is president of the Van Dyn Hoven Automotive Group, director of American National Bank,
Fox Cities, & a member of the Board of Trustees of Equitable Reserve Association.
Financial Status
Current Assets:*
Total Assets:*
Current Liabilities:*
Long-Term Debt:*
Accumulated Deficit:*
Shareholders Equity:*
$1,129,327
$3,322,533
$590,464
$658,288
($204,611)
$2,073,781
Gross Revenue (Q3 ended 9/30/2002):** ***
Net Loss: (Q3 ended 9/30/2002):** ***
$855,221
($69,854)
Gross Revenue (9 Mos. ended 9/30/2002):** ***
Net Loss: (9 Mos. ended 9/30/2002):** ***
$2,387,380
($181,343)
* At 9/30/2002
** The company acquired Tradecard/Tradecorp of Columbus, OH on 8/30/2002, a leader in the
barter industry, which serves the Columbus, Cincinnati, & Dayton areas of southwest Ohio,
adding more than 1,000 clients to the Continental Trade Exchange member roster.
*** In Q3, the Continental Trade Exchange U.S. barter business had a profit of $83,814, while the
CTE Canadian barter network had a profit of $2,539.
While the company had a net profit of $33,323 in the year ended 12/31/2001, the overall loss
during the periods in 2002 was due to: (1) The JM Graphics, Inc. pre-press division loss of
$53,844 during Q3, partially from a $26,000 write-off of an uncollectible receivable -management believes this division will show a profit in Q4; & (2) The company's Colorcraft
Graphics, Inc. four-color printing firm had a loss of $66,939 in Q3, partially due to start-up
costs of integrating the new division into the company's operations.
Advantages -- to the Investor
We like what CEO Don Mardak says: "Barter is good in good times, but it's great in bad times." That's refreshing to
us. We like the fact that barter is a relatively new idea -- it appeals to people. We never did it before, but since accepting
trade dollars for our participation service at WallStreetCorner recently, we have already used some of those dollars for
goods & services we would have otherwise had to pay cash for.
We always like to find situations that are consolidating a fragmented industry. INLM is a very good example of such
a situation. We feel it will prosper over the long term, & suggest you call the company or its IR firm to satisfy yourself
regarding its appreciation potential.
Advantages -- to Trade Members
Barter offers a number of advantages to those who utilize it. A principle advantage to trade exchange members is
referred to as "barter leverage." This refers to the fact that the typical barter exchange member is purchasing a product or
service in exchange for its own product or service. Consequently, each purchase results in a probable sale. Since the
actual cash cost of producing the product or service is typically less than its retail sale price, a person utilizing barter is
actually purchasing for a real cash cost that is only a fraction of the price of the product or service purchased. In effect,
the barter exchange member buys at wholesale, but sells its own goods or services at retail.
Another way to look at it -- trading goods or services allows one to acquire other products at the wholesale cost of
one's own products. This special purchasing power, achieved exclusively by trade exchange members, is often referred to
as "barter leverage." For example, if you sell clothing, furniture, jewelry, or any other products that have a keystone
markup - a pricing structure in which your wholesale cost is half of the retail selling price - you will be acquiring each
of your trade dollars for a cash outlay of just $0.50. Then, when you make a purchase using those trade dollars, you are
paying half price for everything you buy. That is barter leverage!
Frequently, the member will charge a higher price for barter than for cash to cover the charges due to the trade
exchange. However, the benefit to the person bartering for the product or service is still significant as a result of the
purchase being accomplished through barter.
For example, a trade exchange member may incur a $1,000 cash cost to produce a product or to purchase it at
wholesale. If the member then barters this product for a good or service priced at $1,500, representing the retail price at
which it is normally sold, the member has effectively bought the good or service for a cost of only $1,000 in cash. Barter
leverage is particularly effective in the case of products that have become hard to sell. Rather than write down their
value, the producer may be able to secure full value by bartering them through the trade exchange.
Barter leverage works most effectively when trading for something that is perishable, such as hotel rooms or airline
tickets. Once the hotel room lies vacant or the airline seat is unfilled for a flight, its value is lost forever. In those cases,
exchange of the room or seat in barter offers an effective way to gain value from something that would otherwise have
been rendered worthless.
Barter also provides an effective means by which a member may enter new markets, gain trial usage by potential
customers, or increase market share. The member may well find that he can reach a customer who would not otherwise
have tried his product or service if the full price had to be paid in cash, but who will try his goods or services, sometimes
in large amounts or on extended terms, when the price is being paid in goods or services of the purchaser in trade dollars.
Because of the need to clear trade dollars over time, barter exchanges become affinity marketing networks, in which
members seek out opportunities to do business with one another.
Location
Call Don Mardak @ 262-780-3640 or 800-236-8104, fax 262-780-3655, or write 16901 West Glendale Drive, P.O.
Box 510305, New Berlin, WI 53151-0305. INLM has branch offices in Greenbay & Madison, WI; North Chicago, IL;
Orangeville, Ontario (CTE of Canada); San Jose, CA in Silicon Valley; Rohnert Park, CA in Sonoma County, &
Columbus & Cincinnati in OH.
You may also call Phil DuBois at INLM's IR firm @ 757-229-0666, or email duboisconsultgp@cox.net
www.internationalmonetary.com
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