IMS Third-Quarter Report Reveals Revenue & Cash Flow Increases

International Monetary Systems (OTCBB:INLM), a worldwide leader in business-to-business barter services, has filed its third-quarter report on form 10-QSB.

In the third quarter of 2007 IMS continued implementing its �Best Practices� program. As an integral part of this program, the company made substantial investments in infrastructure by acquiring new state-of-the-art equipment and hiring additional skilled employees.

Some of the events and expenditures during the first nine months of 2007 were:

�         Spending more than $500,000 on new computers, monitors, printers, servers, and other equipment to enhance the efficiency of its trade brokering staff.

�         Acquiring the source code for TradeWorks�IMS� proprietary clearing system�and migrating the entire program from its original RPGII format into a more current .NET technology.

�         Upgrading the IMSbarter.com web site in the process of creating a fully interactive online marketplace.

�         Hiring additional technicians to service the new equipment, to convert and enhance the software, and to develop the web site. The company has expanded its IT department to three employees, with plans to add a fourth. 

�         Enhancing sales and brokering departments by hiring a full-time national sales trainer and a full-time national broker trainer.

�         Doubling the size of its Columbus (OH) office for the purpose of expanding its telemarketing and telesales staff. There are now 14 people working to support the outside sales force.

�         Hiring a full-time marketing and public relations director, who has helped advance the new IMS web site and is designing a campaign to develop and strengthen the IMS brand in the marketplace. A resulting comprehensive PR program is scheduled for launch in the first quarter of 2008.

In continuing its commitment to the �Best Practices� program, the firm further expanded its outside sales force which enrolled nearly 900 new clients during the quarter.

Though these investments in infrastructure affect the bottom line, IMS management believes that it is in the company�s best interest to spend funds now on strategic initiatives that will produce significant future growth.

In the third quarter of 2007, IMS processed more than $25 million in trade transactions (measured in sales only) which generated gross revenues of $3,565,885, compared to revenues of $1,687,573 in the third quarter of 2006, an increase of 111%.

The higher revenue is a result of two acquisitions completed in September of 2006 and January of 2007, along with continuing internal growth. The company also converted $300,000 of debt to equity.

Total expenses increased 106%, from $1,803,266 in the third quarter of 2006 to $3,716,140 in the current period. The increased expenses are attributable to the costs of integrating the acquisitions described above, higher non-cash charges for amortization of membership lists, and the hiring of additional sales staff, trainers, public relations staff, and IT specialists.

In spite of the record revenues, the company had a third quarter net loss of $150,255 before the income tax benefit, compared to a net loss before taxes of $115,693 in the same period of 2006. After adding interest expense and making the adjustment for the tax benefit, the net loss for the current quarter was $47,406 compared to $120,198 last year.

The deferred tax benefit represents the adjustment to the deferred tax liability, which arises from the differences in basis of acquired membership lists for financial reporting versus tax reporting.

Year-to-date gross revenue ending September 30 totaled $10,298,396, compared to $5,240,400 for the same period in 2006, an increase of 97%. Total year-to-date expenses were $10,573,326, compared to $5,241,215 for the corresponding period in 2006, an increase of 102%.

Total year-to-date net loss, before the income tax benefit, was $522,737, compared to a before taxes loss of $181,369 for the same period in 2006. After adjustments for the tax benefit (expense), the losses were $261,594 and $192,369, respectively.

Operating profit or EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $827,295, an increase of 37% over the $602,425 reported for the same period last year.

Through September 30, 2007, the company had positive cash flow provided by operating activities of $976,872, compared to $475,863 for the same period of 2006, an increase of 105%.

International Monetary Systems� total assets increased to $18,630,615 from $15,203,887 at the end of 2006, with stockholders� equity increasing to $9,045,350 from $7,779,357.

 For more information go to www.internationalmonetary.com.

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�Tax Free Swaps� Book Now Available

Tax law professor Bradley T. Borden, Associate Professor of Law at

Washburn University School of Law, and DNA Press have announced the publication of Tax-Free Swaps: Using Section 1031 Like-Kind Exchanges to Preserve Investment Net Worth.

Following in the wake of extensive press coverage of section 1031, this timely publication details the potential benefits, requirements, and scope of tax-free like-kind exchanges of the Internal Revenue Code. Using diagrams, practical examples and an easy narrative style, Borden�s book demystifies like-kind exchanges, making them accessible to all taxpayers.

Many property owners understand that section 1031 provides that no gain or loss is recognized when a property owner exchanges business-use or investment property (the �relinquished property�) for like-kind business-use or investment property (the �replacement property�). They are not, however, aware of section 1031's scope.

A simple example (typical of those in the book) illustrates the benefits of section 1031. Tim owns Redstone Apartments, which he purchased for $100,000, and are now worth $500,000. Ben owns Quarry Warehouse, which he purchased for $150,000, and now is worth $500,000.

If Tim were to sell Redstone for cash, he would recognize gain equal to (and would have to pay tax on) the $400,000 of appreciation. Similarly, if Ben were to sell Quarry for cash, he would recognize gain equal to (and would have to pay tax on) the $350,000 of appreciation. If, however, Tim and Ben both hold their respective properties for business or investment, they can �swap� properties, under section1031 and avoid gain recognition.

Consequently, neither would owe any tax on the exchange. Each of them would take a carry-over basis in his replacement property: Tim would take Quarry with a $100,000 basis, and Ben would take Redstone�s $150,000 basis. If either person were to sell his replacement property at a later date, he would recognize gain equal to�and would pay tax on�the appreciation.

Either Tim or Ben could, however, dispose of their replacement properties through future exchanges. By engaging in serial exchanges, thus deferring gain recognition and tax indefinitely.

Of course, taxpayers who are candidates for this type of direct trade rarely find one another in the marketplace. More commonly, Tim would want to sell Redstone to a third party and acquire Quarry from Ben. Fortunately, in this situation, section 1031 permits Tim to sell Redstone and to deposit the sale proceeds (often referred to as exchange funds) with a qualified intermediary.

So long as Tim meets certain time limits and other restrictions, he could use the exchange funds to purchase replacement property. This type of transaction is commonly referred to as a multi-party exchange. If the transfer and acquisition do not occur simultaneously, the transaction would be a deferred exchange.

In certain situations, a property owner may not be able to sell relinquished property before acquiring the replacement property, the property owner may then benefit from a reverse exchange. If a person doing an exchange wants to use proceeds from the sale of the relinquished property to construct improvements on replacement property, an improvements exchange may be appropriate. The broad scope of section 1031 depicted by these numerous exchange structures is beneficial to property owners who are aware of their availability.

�Tax-Free Swaps� explains the various exchange transactions and identifies their potential benefits and risks. More importantly, says Christian Johnson, tax law professor and CPA, �Borden is able to translate such technical terms as improvements exchange, exchange accommodation titleholder, and non-safe harbor reverse exchange into understandable and readable prose.�

For more information on the publication see www.dnapress.com.

Zillow Expands Classifieds Through Newspaper Alliances

In their latest bid to counter shrinking print revenues, a group of eleven major U.S. newspaper companies (representing 282 newspapers) have formed an alliance with Zillow.com, extending their classified ads to the popular real estate site.

Under the agreement, local advertisers who run print and online �for sale� and open-house ads with the newspapers will also have the option to share listings on Zillow, which has 1.5 million registered users. Newspapers will also be able to incorporate Zillow features into their own sites, including the company�s �Zestimates,� or estimated valuations of homes nationwide.

Participating publishers so far include Hearst Newspapers, Journal Register Company, Lee Enterprises, and MediaNews Group. Newspapers owned by these companies include the San Francisco Chronicle, the Houston Chronicle, and the San Jose Mercury News. More newspaper publishers are expected to join the group before it launches in the first half of 2008.

Financial terms of the deal were not disclosed, but it�s expected to include an ad revenue-sharing arrangement between Zillow and its newspaper partners.

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