<PAGE> 1
As filed with the Securities and Exchange Commission on April 5, 2000.
Registration No. 333-94597
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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INTERNATIONAL MONETARY SYSTEMS, LTD.
(Name of small business issuer in its charter)
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<S> <C> <C>
WISCONSIN 7389 39-1924096
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
<TABLE>
<S> <C>
16901 WEST GLENDALE DRIVE
NEW BERLIN, WISCONSIN 53151 16901 WEST GLENDALE DRIVE
(262) 780-3640 - FAX (262) 780-3655 NEW BERLIN, WISCONSIN 53151
(Address and telephone number of principal executive offices) (Address of principal place of business)
</TABLE>
DONALD F. MARDAK
INTERNATIONAL MONETARY SYSTEMS, LTD.
16901 WEST GLENDALE DRIVE
NEW BERLIN, WISCONSIN 53151
(262) 780-3640 - FAX (262) 780-3655
(Name, address and telephone number of agent for service)
Copies of communications to:
ROBERT J. PHILIPP, ESQ. GERALD R. TURNER, ESQ.
KRANITZ & PHILIPP GERALD R. TURNER & ASSOCIATES, S.C.
2230 EAST BRADFORD AVENUE 411 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53211 MILWAUKEE, WISCONSIN 53202
(414) 332-2118 - FAX (414) 332-4480 (414) 278-7865 - FAX (414) 278-0064
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes
effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| If this Form is a post-effective
amendment filed pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Amount maximum maximum Amount of
Title of each class of securities to be offering price aggregate registration
to be registered registered per unit offering price fee(1)
- ------------------------------------ ------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Common Stock 1,150,000 shares $6.00 (1) $6,900,000 (1) $1,821.60 (2)
==================================== ================== ================== ================== =================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Fee initially paid for 1,000,000 shares at the assumed price of $6.50 per
share ($1,716.00); additional fee paid herewith ($105.60) equals the total
fee due for this registration statement as amended ($1,821.60) less the
amount previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
PROSPECTUS (SUBJECT TO COMPLETION)
DATED APRIL , 2000
1,000,000 SHARES
INTERNATIONAL MONETARY SYSTEMS, LTD.
COMMON STOCK
----------
International Monetary Systems, Ltd. is offering 1,000,000 shares of its
common stock. This is our initial public offering and no public market currently
exists for our shares. We expect that the initial public offering price will be
between $5.00 and $6.00 per share.
----------
We anticipate that, upon the completion of this offering, our common stock
will be quoted on the NASD's OTC Bulletin Board under the symbol "IMSX."
----------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and International
Public Commissions Monetary Systems
-------- ------------- ----------------
<S> <C> <C> <C>
Per Share................................. $ $ $
Total..................................... $ $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This is a "best-efforts" offering. Our selected placement agents are not
required to sell any specific number or dollar amount of securities, but will
use their best efforts to sell all of the securities offered. Because there is
no minimum purchase requirement for this offering, all proceeds could be paid
directly to us. However, all funds received from subscribers will be held in
escrow and disbursed by Grafton State Bank. The terms of our escrow agreement
with Grafton State Bank are described under "Underwriting." This escrow is not
required, but has been established by us voluntarily to insure the orderly and
efficient handling of purchase payments received from investors. This offering
may continue until 1,000,000 shares of common stock are sold or November 30,
2000, whichever occurs first. However, we may terminate the offering at any
earlier time if we choose to do so.
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LISS FINANCIAL SERVICES
, 2000
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary............................................................................................ 3
Risk Factors.................................................................................................. 5
Use of Proceeds............................................................................................... 8
Dividend Policy............................................................................................... 8
Dilution...................................................................................................... 9
Selected Financial Data....................................................................................... 10
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................................. 11
Business...................................................................................................... 14
Management.................................................................................................... 21
Certain Relationships and Related Transactions................................................................ 23
Principal Stockholders........................................................................................ 24
Description of Securities..................................................................................... 25
Common Stock Eligible for Future Sale......................................................................... 28
Underwriting.................................................................................................. 30
Legal Matters................................................................................................. 32
Experts....................................................................................................... 32
Where You Can Find Additional Information..................................................................... 32
Index to Consolidated Financial Statements.................................................................... 33
Exhibit A (Subscription Agreement)............................................................................ A-1
</TABLE>
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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of the
prospectus or of any sale of the common stock.
----------
UNTIL , 2000 (90 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
----------
In this prospectus, "IMS," "we," "us" and "our" refer to International
Monetary Systems, Ltd., a Wisconsin corporation, and its subsidiaries, and not
to the selected placement agents.
2
<PAGE> 4
PROSPECTUS SUMMARY
You should read the following summary in conjunction with the more detailed
information appearing elsewhere in this prospectus concerning our company and
the common stock being offered, including our consolidated financial statements
and related notes.
OUR COMPANY
IMS was incorporated in 1988 under the laws of the State of Wisconsin. We
acquire, own, manage and operate trade exchanges and related businesses. Trade
exchanges or barter networks are financial service firms which permit companies
and individuals to exchange goods and services utilizing an electronic currency
known as "trade dollars." In the typical barter transaction, a member offers to
sell products or services in return for the exchange's trade dollars, typically
referenced as "T$", which are paid to the member by the purchaser in the
transaction. For example, T$100 refers to $100 worth of trade dollars that are
used to acquire a product or service priced at $100 in U.S. currency. If the
purchase price is greater than the amount of earned trade dollars in the buyer's
account, the exchange may grant a trade dollar line of credit to the buyer.
Periodically, each member has to account for any deficit in its trade account.
We service over 2,400 barter customers who last year generated over
$1,396,000 of consolidated revenues on more than $11,150,000 of trade volume. We
have increased our revenues and trade volume by over 20% per year for ten years
by increasing the number of our customers and acquiring other firms. We
currently conduct our business operations only in the United States. However,
we may in the future begin to operate internationally, particularly in the areas
of business-to-business and consumer barter on the Internet.
Our mailing address is 16901 W. Glendale Drive, P.O. Box 510305, New
Berlin, Wisconsin 53151, and our telephone numbers are (800) 236-8104 and (262)
780-3640; the telephone number for our facsimile line is (262) 780-3655. Our
Internet address is www.ctebarter.com.
THE OFFERING
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<S> <C>
Common Stock offered............................................... 1,000,000 shares
Common Stock outstanding before the offering....................... 2,136,704 shares
Common Stock to be outstanding after the offering.................. 3,136,704 shares
Proposed OTC Bulletin Board trading symbol......................... IMSX
</TABLE>
We are offering our common stock through selected placement agents,
including the managing placement agent, Liss Financial Services, who are
broker-dealer members of the NASD. See "Risk Factors" and "Underwriting" for
additional information concerning the underwriting terms of this "best-efforts"
offering.
USE OF PROCEEDS
We will use the net proceeds of this offering to develop our Web site and
increase marketing efforts, which will involve the hiring of additional
personnel. We also propose to acquire other trade exchanges in order to expand
the geographic scope of our business and make more extensive use of our
facilities and personnel. We may on a selective basis acquire partial or
complete ownership of firms in unrelated fields which utilize barter services or
offer other operating synergies with our barter business.
3
<PAGE> 5
RISK FACTORS
An investment in our common stock involves substantial risks, including
those described in this prospectus under "Risk Factors," beginning on page 5.
SUMMARY FINANCIAL DATA
You should read the following summary financial data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements, and the related notes,
which are included in this prospectus. The information shown below as of
December 31, 1999 and 1998, and for the years which ended on those dates, has
been taken from our consolidated financial statements, which have been audited
by Smith & Gesteland, LLP., independent certified public accountants.
<TABLE>
<CAPTION>
Year Ended
---------------------------
December 31, December 31,
1999 1998
------------ ------------
STATEMENT OF INCOME DATA:
Revenues:
<S> <C> <C>
Gross revenues.......................................................... $1,396,851 $ 1,181,540
---------- -----------
Total revenues................................................ 1,396,851 1,181,540
Expenses:
Payroll, related taxes and employee
benefits........................................................ 788,717 649,446
General and administrative......................................... 284,927 266,229
Occupancy.......................................................... 166,361 115,769
Selling............................................................ 142,310 99,514
Other.............................................................. 33,524 31,930
---------- -----------
Total expenses................................................ 1,415,839 1,162,888
Income (loss) before income taxes....................................... (18,988) 18,652
Income tax expense (benefit)............................................ (4,583) 9,278
---------- -----------
Net income (loss)....................................................... (14,405) 9,374
Retained earnings (deficit) beginning
of period ........................................................... (32,382) (41,756)
---------- -----------
Retained earnings (deficit) end
of period ........................................................... $ (46,787) $ (32,382)
========== ===========
Net income (loss) per common share...................................... $ (0.01) $ 0.01
========== ===========
Weighted average common
shares outstanding................................................... 1,992,198 1,834,118
<CAPTION>
BALANCE SHEET DATA: December 31, 1999
-----------------
<S> <C>
Cash and cash equivalents....................................................... $ 101,505
Total assets.................................................................... $ 621,286
Long-term debt, less current portion............................................ $ 49,049
Stockholders' equity............................................................ $ 491,732
</TABLE>
4
<PAGE> 6
RISK FACTORS
This offering and an investment in our common stock involve a high degree
of risk. You should carefully consider the following risk factors and the other
information in this prospectus, including our financial statements and the
related notes, before investing in our common stock. If any of the following
risks actually occurs, our business, operating results, prospects or financial
condition could be seriously harmed. The risks described below are not the only
ones facing our company. Additional risks not presently known to us or that we
currently believe are not material may also impair our business operations. The
trading price of our common stock could decline, and you could lose all or part
of your investment.
THIS IS A "BEST-EFFORTS" OFFERING, AND WE MAY NOT RAISE ENOUGH CAPITAL FROM THE
SALE OF OUR COMMON STOCK TO ADEQUATELY FUND OUR PLANNED GROWTH AND EXPANSION.
The managing placement agent, Liss Financial Services, and the other
selected placement agents are not obligated to sell or purchase any specific
number of shares or dollar amount of our common stock. While these agents have
agreed to use their best efforts to sell on our behalf all of the common stock
offered, we have no guarantee as to how much stock, if any, will actually be
sold in this offering.
We plan to use up to approximately $100,000 of net offering proceeds to
enhance our existing business, whether or not we are also able to acquire
additional exchanges or other complementary businesses. However, we believe that
the most cost-effective and rapid growth of our company can be achieved through
one or more acquisitions. We anticipate that we will be able to acquire
additional barter exchanges for prices ranging from approximately $100,000 to $1
million per exchange. If the proceeds of this offering, after deduction of
selling commissions and other expenses, are not sufficient to meet our cash
requirements for such acquisitions, we will expend all the proceeds we receive
to grow and expand our existing business, principally by expanding our Internet
site and otherwise increasing our marketing. Our inability to obtain adequate
financing may impede our growth and thus negatively affect the return on your
investment in our common stock.
WE FACE RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY, INCLUDING COMPETITION
FOR SUITABLE CANDIDATES.
We expect our growth to continue, in large part, through the acquisition of
additional barter exchanges and other complementary businesses. The success of
this strategy depends upon several factors, including:
- the availability of financing;
- our ability to identify and acquire exchanges and related businesses on
a cost-effective basis;
- our ability to integrate acquired personnel, operations, products and
technologies into our organization effectively; and
- our ability to retain and motivate key personnel and to retain the
clients of acquired firms.
The competition to find and acquire suitable barter exchanges is intense,
and we will compete for these exchanges with other companies that have
substantially greater financial and other resources than our company.
We cannot assure you that financing for acquisitions will be available on
terms we find acceptable, or that we will be able to identify or consummate new
acquisitions, or manage and integrate our expansions successfully. Any inability
to do so would materially adversely affect our business, financial condition and
operating results. We also cannot assure you that we will be able to sustain the
rates of growth that we have experienced in the past.
Furthermore, we may issue equity securities to pay for future acquisitions,
which could be dilutive to our existing stockholders. We may also incur debt or
assume contingent liabilities in connection with acquisitions, which could harm
our operating results.
5
<PAGE> 7
INCREASED REGULATION OF THE BARTER INDUSTRY COULD NEGATIVELY AFFECT OUR
BUSINESS.
The barter industry is in large part currently self-regulated. We have
obtained all federal, state and local licenses, permits and bonds necessary to
operate our business and facilities. However, we cannot assure you that the
barter industry in general, and our company in particular, will not in the
future be subject to increased and more restrictive governmental regulation. If
such regulation restricts or limits our ability to conduct our business, or if
we are required to pay substantial compliance costs, our business, financial
condition and operating results could be harmed and the return on your
investment in our common stock might be negatively affected.
PURCHASERS OF COMMON STOCK IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL DILUTION.
The initial public offering price of our common stock is substantially
higher than the book value of our common stock immediately after the offering.
As a result, if you purchase common stock in this offering, you will incur
immediate dilution of at least $ per share in the book value of the shares you
buy from the price you pay for your stock. You will incur this dilution in
large part because our earlier investors paid substantially less than the
initial public offering price when they purchased their shares of common stock.
Further, investors in this offering will own 31.9% of our outstanding common
stock, if the entire offering is sold, but will have paid % of the total
consideration received by us for that stock. See the discussion under
"Dilution" for a calculation of the dilution you will experience, assuming
various levels of sales in this offering, as well as the relative amounts paid,
and number of shares owned, by existing shareholders and purchasers in this
offering.
OUR MANAGEMENT MAY NOT BE SUCCESSFUL IN APPLYING THE PROCEEDS OF THIS OFFERING
IN A MANNER THAT INCREASES THE VALUE OF YOUR INVESTMENT.
The net proceeds of this offering have not been allocated for specific
purposes, and we will have broad discretion in determining how the proceeds will
be used. You will be entrusting your funds to our management, upon whose
judgment you must depend, with limited information concerning acquisitions, if
any, or other purposes to which the funds will ultimately be applied. We may not
be successful in spending the proceeds from this offering, whether in our
existing operations or for external investments, in ways which increase our
profitability or our market value, or otherwise yield favorable returns. See
"Use of Proceeds" for information concerning how we plan to use the proceeds
from this offering.
PROVISIONS IN OUR CHARTER DOCUMENTS AND WISCONSIN LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL OF OUR COMPANY AND POSSIBLY REDUCE THE AMOUNT PAID FOR OUR
COMMON STOCK IN THE FUTURE.
Provisions of our articles of incorporation, bylaws and Wisconsin law
could, separately or together:
- discourage potential acquisition proposals;
- delay or prevent a change in control; and
- limit the price that investors might be willing to pay in the future
for shares of our common stock.
The application of these provisions could make it more difficult for a
third party to acquire us, even if doing so would be beneficial to our
stockholders. See "Description of Securities - Anti-Takeover Provisions" for a
further discussion of statutory and other anti-takeover provisions which may
affect us. Also, our board of directors has the authority to issue up to
5,000,000 shares of preferred stock and to determine the price, voting rights,
restrictions, preferences and privileges of those shares without the approval of
our stockholders. The rights of holders of common stock will be subject to, and
may be impaired by, the rights of the holders of any shares of preferred stock
that may be issued in the future. The issuance of preferred stock may delay,
defer or prevent a change in control by making it more difficult for a third
party to acquire a majority of our stock. In addition, the issuance of preferred
stock could have a dilutive effect on our stockholders. We have no present plans
to issue shares of preferred stock. However, even the potential issuance of
preferred stock could reduce the price that investors are willing to pay for our
common stock.
6
<PAGE> 8
WE DEPEND ON OUR KEY PERSONNEL.
Our future success depends upon the continued services of our senior
management, particularly our president, Donald F. Mardak, and other key sales,
marketing and support personnel. The loss of the services of Mr. Mardak or of
one or more key employees could have a material adverse effect on our business,
financial condition and operating results. In addition, if one or more key
employees join a competitor firm or form a competing company, the resulting loss
of existing or potential clients and business relationships, including merger or
acquisition candidates, could have a serious adverse effect upon our business.
Neither Mr. Mardak nor any other key employee is bound by an employment
agreement, and these personnel may terminate their employment at any time. In
addition, we do not have "key person" life insurance policies covering any of
our employees. If we were to lose a key employee, we may be unable to prevent
the unauthorized disclosure of our strategic planning, procedures, practices or
client lists.
BECAUSE EXISTING STOCKHOLDERS WILL CONTINUE TO OWN A CONTROLLING PERCENTAGE OF
OUR COMMON STOCK, THE VOTING POWER OF OTHER STOCKHOLDERS WILL BE LIMITED.
We anticipate that our directors, executive officers and their affiliates
will beneficially own, in the aggregate, more than 57% of our outstanding common
stock after this offering. As a result, if these persons act together, they will
have the ability to control all matters submitted to our stockholders for
approval and to exercise controlling influence over our business and affairs.
This includes any determination as to the election and removal of directors and
the approval of any merger or other business combination, the acquisition or
disposition of our assets, whether or not we incur indebtedness, the issuance of
any additional common stock or other equity securities and the payment of
dividends on our common stock. These stockholders may make decisions that are
adverse to your interests. See "Principal Stockholders" for more information
about the ownership of our outstanding common stock.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
The officers and directors of our company and their affiliates currently
own, in the aggregate, 1,772,000 shares, or 82.9%, of our outstanding common
stock. These persons have agreed to enter into lock-up agreements that prevent
them from selling, pledging or otherwise disposing of their common stock for a
period of 120 days after the commencement of this offering, without the prior
written approval of Liss Financial Services, the managing placement agent. Upon
the expiration of the 120-day lock-up period, these 1,772,000 shares held by our
affiliates will become eligible for sale in the public market, subject only to
the volume, manner of sale and notice requirements of Rule 144 under the
Securities Act. An additional 364,704 shares, or 17.1% of our currently
outstanding common stock, which is held by non-affiliates and not subject to
lock-up agreements, will become eligible for sale at approximately the same
time. Of these shares, approximately 334,704 may be sold subject to the same
Rule 144 requirements as sales by officers, directors and their affiliates, and
approximately 30,000 shares may be sold publicly without Rule 144 restrictions.
Sales of substantial amounts of our common stock in the public market, or
conceivably only the perception that such sales may occur, could create the
impression in the public of difficulties or problems with our business. This
might adversely affect the market price of our common stock and could impair our
ability to sell additional common stock or other equity securities on terms that
we consider satisfactory. For a more detailed discussion of potential future
sales by existing stockholders, see "Shares Eligible for Future Sale."
WE DO NOT INTEND TO DECLARE OR PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
We currently intend to retain earnings, if any, to support our growth
strategy. Consequently, a prospective investor who needs to receive periodic
dividend income should probably not invest in this offering.
7
<PAGE> 9
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the 1,000,000 shares of
common stock we are offering, after deducting underwriting discounts and
commissions and other offering expenses payable by us, will be approximately
$ . The primary purposes of this offering are to obtain additional
equity capital, create a public market for our common stock and facilitate
future access to public markets.
We intend to use the net proceeds we receive from the offering for working
capital and general corporate purposes, including
- developing our Internet World Wide Web site, including an on-line
consumer barter auction;
- expanding and improving our marketing; and
- improving and promoting our services and facilities.
The amount that we expend for these purposes will depend on a number of
factors, including the amount which is raised in this offering, our future
revenue growth, if any, and the amount of cash we generate from operations. As a
result, we will retain broad discretion in the allocation of the net proceeds of
this offering. However, we currently estimate that up to approximately $100,000
will be used for these purposes.
If we receive sufficient net offering proceeds in excess of the amount
needed for the above purposes, we intend to use a portion of such proceeds to
acquire one or more barter exchanges or other businesses, or to make strategic
investments in barter exchanges or other businesses, that are complementary to
our business. We currently anticipate that we will be able to acquire additional
barter exchanges for prices ranging from approximately $100,000 to $1 million
per exchange. We continually evaluate and discuss potential acquisitions and
strategic investments. However, we have no present understandings, commitments
or agreements, nor are we currently engaged in any negotiations, with respect to
any acquisition or investment.
Because this is a "best-efforts" offering, we can give you no definite
assurance as to how much of our common stock, if any, will actually be sold. See
"Risk Factors" and "Underwriting" for additional information concerning this
type of offering.
Pending their use, net proceeds from this offering will be invested in bank
certificates of deposit, interest-bearing savings accounts, prime commercial
paper, United States Government obligations, money market funds or similar
short-term investments. Any income derived from these short-term investments is
expected to be used for working capital.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to pay cash
dividends will be made at the discretion of our board of directors and will
depend on our financial condition, results of operations, capital requirements,
general business condition and other factors that our board of directors may
deem relevant.
8
<PAGE> 10
DILUTION
Our net tangible book value as of December 31, 1999 was approximately
$438,425, or $0.21 per share of common stock. Net tangible book value per share
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of common stock then outstanding. The following table
illustrates the dilution to purchasers of common stock in this offering if
certain arbitrarily determined numbers of shares (ie., 250,000, 500,000, 750,000
and 1,000,000) are sold, after deduction of estimated underwriting commissions
and other offering expenses payable by us. At the sales levels indicated, our
pro forma net tangible book value at December 31, 1999 would have been $ ,
$ , $ or $ , respectively, or $ , $ , $ or $ , respectively, per
share of common stock, representing an immediate increase in net tangible book
value of $ , $ , $ or $ , respectively, per share to existing
stockholders and immediate dilution of $ , $ , $ or $ , respectively,
per share to new investors.
<TABLE>
<CAPTION>
Assumed number of shares of Common Stock sold in the offering (1)
-----------------------------------------------------------------
250,000 500,000 750,000 1,000,000
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Initial public offering
price per share............................ $ $ $ $
Net tangible book value
before the offering........................ $ $ $ $
Increase in net tangible book value
attributable to new investors..............
--- --- --- ---
Pro forma net tangible book value
per share after the offering................
--- --- --- ---
Dilution per share to new public investors....... $ $ $ $
=== === === ===
</TABLE>
- ----------
(1) The numbers of shares of common stock shown as sold in the above table have
been arbitrarily selected by us for purposes of illustration only. We can
provide no assurance that all or any part of the common stock offered by
this prospectus will be sold. See "Risk Factors" and "Underwriting" for
additional information concerning "best-efforts" offerings.
The following table summarizes, on a pro forma basis, after giving effect
to the sale of all of the common stock offered by this prospectus, as of
December 31, 1999, the difference between the number of shares of common stock
purchased from IMS, the total consideration paid and the average price per share
paid by the existing stockholders and by new public investors purchasing shares
in this offering at the initial public offering price of $ per share and
before deduction of estimated underwriting discounts and commissions and
offering expenses payable by us:
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration Average
------------------------ ------------------------ Consideration
Amount Percent Amount Percent Paid Per Share
--------- ------- -------- ------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 2,136,704 68.1% $ % $0.65
New public investors (1)......... 1,000,000 31.9% % $
--------- ----- ------- -----
Total....................... 3,136,704 100.0% $ 100.0%
========= ===== ======= =====
</TABLE>
(1) The number of shares of common stock shown in the above table as sold to
new public investors (1,000,000) has been arbitrarily selected by us for
purposes of illustration only. If sales levels of 250,000 shares, 500,000
shares and 750,000 shares are assumed, the percent of total shares sold
which are purchased by new investors would be 41.9%, 37.9% and 34.6%,
respectively; and the aggregate consideration paid by new investors would
be $ , $ or $ , respectively, or %, % or %, respectively,
of all consideration paid for shares of common stock sold in this offering.
The average consideration paid per share, by both existing stockholders and
new investors, remains the same at all levels of sales. There can be no
assurance that all or any part of the common stock offered by this
prospectus will be sold. See "Risk Factors" and "Underwriting " for
additional information concerning "best-efforts" offerings.
9
<PAGE> 11
SELECTED FINANCIAL DATA
You should read the following selected financial data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements, and the related notes,
which are included in this prospectus. The information shown below as of
December 31, 1999 and 1998, and for the years which ended on those dates, has
been taken from our consolidated financial statements, which have been audited
by Smith & Gesteland, LLP., independent certified public accountants.
<TABLE>
<CAPTION>
Year Ended
---------------------------
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Gross revenues..................................................... $1,396,851 $ 1,181,540
---------- -----------
Total revenues................................................ 1,396,851 1,181,540
Expenses:
Payroll, related taxes and employee
benefits........................................................ 788,717 649,446
General and administrative......................................... 284,927 266,229
Occupancy.......................................................... 166,361 115,769
Selling............................................................ 142,310 99,514
Other.............................................................. 33,524 31,930
---------- -----------
Total expenses................................................ 1,415,839 1,162,888
Income (loss) before income taxes....................................... (18,988) 18,652
Income tax expense (benefit)............................................ (4,583) 9,278
---------- -----------
Net income (loss)....................................................... (14,405) 9,374
Retained earnings (deficit) beginning
of period ........................................................... (32,382) (41,756)
---------- -----------
Retained earnings (deficit) end
of period ........................................................... $ (46,787) $ (32,382)
========== ===========
Net income (loss) per common share...................................... $ (0.01) $ 0.01
========== ===========
Weighted average common
shares outstanding................................................... 1,992,198 1,834,118
<CAPTION>
BALANCE SHEET DATA: December 31, 1999
-----------------
<S> <C>
Cash and cash equivalents....................................................... $ 101,505
Total assets.................................................................... $ 621,286
Long-term debt, less current portion............................................ $ 49,049
Stockholders' equity............................................................ $ 491,732
</TABLE>
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<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following commentary in conjunction with the financial
statements and related notes contained elsewhere in this prospectus.
RESULTS OF OPERATIONS
Gross Revenue. Our principal sources of revenue continue to be transaction
fees and maintenance fees. For fiscal 1999 and 1998, transaction fees accounted
for 64.5% and 63.6%, respectively, of our gross revenues. Maintenance fees
represented 27.7% and 24.1%, respectively, of gross revenues for the same years.
Please see "Business - Cash and Trade Dollar Income" for information concerning
these sources of revenue. We bill our clients monthly for transaction fees and
we have an excellent record of collections on our receivables, with most
collected within 30 days after the transaction. We generate additional revenue
when we purchase merchandise at wholesale or from manufacturers and distributors
who are liquidating, and then we resell these products to our exchange members
at a markup. We sometimes purchase merchandise for cash and other times purchase
by issuing barter credit. We generate trade dollar revenue when we purchase and
then resell through our barter network (1) prepaid blocks of media time or space
from radio and television stations, newspapers or magazines and (2) rooms,
tickets, tours and other travel-related products and services from hotels, ocean
cruise lines, airlines and travel tour operators. We also generate trading
revenue when we issue dining and gift scrip (certificates that are sold to
clients to represent trade credit), if, as is periodically the case, the scrip
is never redeemed by the holder.
In fiscal 1998, we processed over $9,689,000 in total barter transactions,
which generated consolidated gross revenues of $1,181,540. In fiscal 1999, we
processed over $11,150,000 in barter transactions which generated consolidated
gross revenues of $1,396,851, representing an increase of 15.1% over the prior
year.
These increases in consolidated gross revenues continue a general pattern
of gains that IMS has experienced throughout most of its existence. Over the
five-year period from January 1995 through December 1999, total revenue from all
sources increased from $480,380 in 1995 to $1,396,851 in 1999, an average gain
of over 23.8% per year, compounded annually. Over the ten-year period from
January 1990 through December 1999, total revenue from all sources increased
from $154,658 to $1,396,851, an average gain of 24.6% per year, compounded
annually.
Operating Expenses. We have learned that the incremental cost of
transaction processing and travel booking does not generally increase
proportionate to the growth of revenue. We attribute this result largely to the
effect of computerization, which allows a small number of clerks to record a
large number of transactions quickly and efficiently. As a result, when we add
revenue through the acquisition of trade exchanges, we generally do not add
overhead at the same rate, thereby increasing the efficiency of the acquired
firms and potentially increasing overall profitability of our business.
During 1999, however, several factors caused an increase in operating
expenses of $252,951 or 21.8% over 1998. These included our hiring of additional
personnel to handle increased trade activity and travel booking, more emphasis
on marketing activities, and changes in our office facilities.
For 1999, payroll and related taxes and benefits increased by $139,271, or
21.4%, over 1998. General and administrative expenses increased $18,698, or 7%,
from 1998 to 1999. Occupancy expenses increased by $50,592, or 43.7, for 1999,
due principally to lease changes and our move to a new building to house our
executive offices and principal operating facilities. Selling expenses increased
by $42,796, or 43%, from 1998 to 1999, including significant increases in most
costs of sales, such as commissions, travel, telephone and convention expenses.
During December 1999, we moved into a building owned by a limited liability
company whose owners are officers and directors of our company, principally
including Donald F. Mardak, our President. These new facilities offer room for
expansion and are more conducive to our planned future growth. The rent payable
under our lease is at a competitive rate for the area in which we are located
and is not expected to materially impact earnings.
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<PAGE> 13
Net Income. For 1999 as compared to 1998, our expenses rose more rapidly
than our revenues, and our net income decreased from a profit of $9,374 in 1998
to a loss of $14,405 in 1999 as a result.
Effects of Acquisitions. During fiscal 1998, we incurred extraordinary
charges associated with the acquisition of Commercial Barter of Illinois and
Wisconsin Barter Exchange, and the integration of the operations of those firms
into our business. These extraordinary charges were not separately itemized. In
the future, as we acquire additional trade exchanges or other businesses, we
expect to incur extraordinary charges in connection with the integration of
acquired operations.
While we have not acquired businesses other than barter exchanges in the
past, in the future we may seek to acquire other types of businesses which make
significant use of barter in their operations, provided that we either have or
can acquire the expertise necessary to run them. When acquiring unrelated
businesses, we may incur costs associated with hiring and training personnel, as
well as "learning costs" associated with entering new lines of business. While
these types of charges may depress earnings in the period following the
acquisition, we intend to make acquisitions and incur charges only when these
have the projected effect of enhancing our ability to earn and retain profits in
the long run.
FINANCIAL CONDITION
Liquidity; Commitments for Capital Resources; and Sources of Funds
Our principal sources of liquidity from operations have been cash earnings
from monthly service fees, transaction processing charges, and profits from our
own trading activity. In addition, we have improved liquidity by utilizing the
proceeds of a private placement of investment units consisting of common stock
and warrants. We anticipate that our principal source of liquidity during the
next year will consist of cash from operations and cash received in connection
with this offering.
We do not currently have any major capital commitments. For example, we are
not currently obligated to purchase any trade exchanges; however, we intend to
seek opportunities to acquire exchanges on completion of the current Offering.
We intend to seek acquisitions which can be purchased upon payment of a
combination of cash, trade dollars and stock. Generally, we will seek
acquisitions of exchanges which we believe have, or within two years can
achieve, at least 50% or greater share volume relative to competing trade
exchanges within their market areas, and whose transaction processing and travel
bookings can be conducted by IMS, thereby reducing the overhead of the acquired
firm following the acquisition. Assuming that we are successful in locating,
negotiating and acquiring other trade exchanges, we intend to utilize at least
half of the offering proceeds for acquisitions. During 1998, we obtained funds
to support expansion from operating profits, the proceeds of a certain private
placement of our securities, and from using our common stock as payment to the
seller for a part of the purchase price of an acquisition. During 1999, we
concluded the private placement of our securities and converted certain notes
and warrants issued in prior years. In fiscal 2000, we expect to obtain funds to
support expansion from operating profits, the proceeds of this offering, and the
issuance of common stock in connection with acquiring barter exchanges and other
businesses.
From June 10, 1998 to September 30, 1999, we conducted a private placement
of investment units, each unit consisting of two shares of common stock plus a
warrant to purchase one additional share. We raised a total of $246,719 net of
expenses in the placement. Investors received warrants which entitled them to
purchase up to 56,076 shares of common stock at the price of $4.00 per share.
Subsequently, we split our shares two for one. Adjusted for the stock split,
outstanding warrants provide the right to purchase 112,152 shares at $2.00 per
share, and, if exercised, will increase our equity by $224,304. The exercise
price of the warrants was determined arbitrarily through negotiations with our
placement agent for the units offering.
During December 1999, several holders of notes previously issued by IMS or
by our affiliates converted their notes into common stock at the price of $2.00
per share, which reduced our outstanding debt by $55,000 and increased capital
by the same amount.
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<PAGE> 14
Changes in Assets and Liabilities
During 1999, we substantially increased our cash on hand, from $8,789 at
December 31, 1998 to $101,505 at the end of 1999, primarily due to the private
offering of common stock and warrants referred to below.
Accounts receivable and inventory also increased from 1998 to 1999, by
$26,191 and $29,005, respectively. Our earned trade dollar account decreased by
$62,493 from 1998 to 1999, due primarily to our increased use of trade dollars
rather than cash to purchase assets and pay expenses. As a result of these
changes, our total current assets increased by $85,419, or 24.3%, for 1999 as
compared to 1998.
Fixed assets increased by $22,458, or 35.2%, from 1998 to 1999, primarily
as a result of furnishings and equipment purchased for use in our new offices by
newly-hired personnel. From 1998 to 1999, our total assets increased $114,154,
or 22.5%, from $507,132 at December 31, 1998 to $621,286 at December 31, 1999.
Current liabilities declined $7,274, or 8.3%, from 1998 to 1999. Long-term
debt was reduced by 52.6%, from $103,519 at December 31, 1998 to $49,049 at the
end of 1999, due to the conversion of debentures to stock referred to above.
Total liabilities in turn declined by 32.3% over the same period, from $191,298
at the end of 1998 to $129,554 at December 31, 1999. As a result, overall
liquidity improved substantially.
Common stock and paid in capital increased 54.7% from 1998 to 1999, from
$348,216 at the end of 1998 to $538,519 at the end of 1999, principally as a
result of our private offering of common stock and warrants, and the conversion
of debentures into common stock referred to above.
Our retained earnings deficit increased by 44.5% from $32,382 at December
31,1998 to $46,787 at the end of 1999, chiefly as a result of the net loss of
$14,405 for fiscal 1999.
INFLATION AND OTHER FACTORS THAT MAY AFFECT FUTURE RESULTS.
We have not been affected by inflation in the past, and do not expect
inflation to have a significant effect on operations in the foreseeable future.
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<PAGE> 15
BUSINESS
INTRODUCTION
Barter has been used by individuals since earliest times, pre-dating the
creation of money. In its simplest form, two persons meet and trade whatever
items each has in surplus. In barter's modern form, trade exchanges operating
like banks use a special form of "currency," consisting of credits issued by the
exchanges and generally known as "trade dollars," to facilitate and effect
multiple trades made among participating exchange members. The following
background information is taken principally from Roger Langrick, Barter Systems:
A Business Guide for Trade Exchanges (Longmeadow Press 1994).
THE MODERN BARTER INDUSTRY
The modern barter industry took shape in its current, systematic form in
1969 with the creation of the first barter exchange. By 1993, an estimated 270
barter system firms, including several with multiple licensees, were in
operation. These exchanges provide services that involve an estimated 2 million
persons, including some 200,000 member companies. Commercial trade exchanges are
the most numerous, outnumbering corporate barter companies by almost eight to
one and catering to the largest number of members. The differences between
commercial trade exchanges and other types of barter firms are described below.
Trade exchanges range in size from those operated by a single person from a
small office to large firms operating out of multiple offices located over a
wide area. The 35 largest commercial exchange firms handle approximately 50% of
the estimated $700 million in transactions that flow through the barter system
annually. Most trade exchanges are private companies, that make extensive use of
computers to track their members, match transactions, and provide necessary
accounting.
The National Association of Trade Exchanges and the International
Reciprocal Trade Association are the two professional associations most active
in the industry. Trade exchanges have also joined in regional associations
through which they recognize one another's trade dollars to allow members to
exchange goods and services with members located in another exchange's service
area.
TYPES OF BARTER SYSTEMS
The most common type of modern barter system is the commercial trade
exchange. These exchanges, which account for 80% of the firms in the industry,
typically serve clients ranging in size from one-man service firms to large
manufacturing businesses. The commercial trade exchange keeps track of
transactions of its clients expressed in trade dollar credits and debits,
handles complaints, publishes a member directory and provides statements for the
Internal Revenue Service at year end. These exchanges generate most of their
income from a service charge for each transaction, through monthly service
charges and through membership fees.
The corporate barter company or trading company has a different format and
set of goals. It specializes in helping businesses to maximize their return on
distressed inventory or other unwanted assets. On this type of exchange,
companies trade products and services that they do not want or need for products
and services that they do want and need. Corporate barter companies usually
specialize in large transactions, typically involving at least $1 million, using
trade dollars as a bookkeeping device. Unlike the trade dollars of a commercial
barter exchange, which are backed by the goods and services of exchange members,
the trade dollars of a corporate barter company essentially represent a promise
to perform. Corporate barter companies do not ordinarily offer memberships or
ongoing services, but act as brokers, taking their profits as a percentage of
the transaction.
The full service exchanges are a hybrid business which, although operating
in the general field of inventory clearance, offer brokerage services in
transactions involving smaller firms with excess inventory. These are often
organized as divisions of companies whose principal business is something other
than barter. For example, the television show Wheel of Fortune barters
television advertising for gifts awarded to its contestants.
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<PAGE> 16
Countertrade is the generic name for international barter. A number of
firms have been established to specialize in this field. Frequently,
countertrade is required by a developing country which by law requires firms
that wish to import products for sale to its citizens to take goods and services
produced in that country, rather than cash, in return. In effect, this
arrangement forces the trading company to assist the developing country to
develop its export businesses.
Finally, there is informal, one-on-one barter which has existed since the
dawn of history. In certain industries, it is used as a routine marketing
technique. Common applications today are the bartering of advertising time by
radio stations for goods and services of the advertisers, game show swaps for
prizes, exchanges of real estate for other real estate or for goods, services or
even gemstones, and special event bartering, such as the holding of annual
barter conferences by participating barter firms or by non-barter firms, such as
resorts, hotels and lodges.
HOW BARTER WORKS
In the typical barter transaction, a member offers to sell products or
services in return for the exchange's trade dollars, typically referenced as
"T$", which are paid to the member by the purchaser in the transaction. For
example, T$100 refers to $100 worth of trade dollars that are used to acquire a
product or service priced at $100 in U.S. currency. If the purchase price is
greater than the amount of earned trade dollars in the buyer's account, the
exchange may grant a trade dollar line of credit to the buyer. Periodically,
each member has to account for any deficit in its trade account just as it would
with a conventional loan or other credit facility.
As compensation for providing its services, the trade exchange generally
charges a one-time membership fee, monthly maintenance fees and/or a percentage
of the price of each transaction. In addition, the exchange typically charges an
annual percentage of any trade credit that it extends to a member, just as a
bank would charge for a loan. The annual fees and transaction fees are typically
paid by the member to the trade exchange in cash, and loan fees are usually
payable in trade dollars.
Barter transactions which represent sales revenue are taxable as ordinary
income to the recipient of the trade dollars in the conventional dollar amount
of the trade dollars received, and conversely are deductible as ordinary expense
by a purchaser in the conventional dollar amount of the trade dollars paid.
Members' barter income is reportable by the trade exchange to the Internal
Revenue Service on Form 1099B.
ADVANTAGES AND DISADVANTAGES
Barter offers a number of advantages to those who utilize it. A principle
advantage to trade exchange members is referred to as "barter leverage." This
refers to the fact that the typical barter exchange member is purchasing a
product or service in exchange for its own product or service. Consequently,
each purchase results in a probable sale. Since the actual cash cost of
producing the product or service is typically less than its retail sale price, a
person utilizing barter is in effect 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 good or service at
retail. Frequently, the member will charge a higher price for barter than for
cash to cover the charges due to the barter 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 barter
exchange member may incur a $1,000 cash cost to produce a product. If the member
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 through barter. Barter leverage works most effectively when trading for
something that is perishable, such as, for example, hotel rooms or airplane
tickets. Once the hotel room lies vacant or the airline seat is unfilled for a
flight, its value is lost forever. In those cases, exchange of the room or seat
in barter offers an effective way to gain value from something that would
otherwise have been rendered worthless. Due to barter leverage, the value of
barter to exchange members will often offset the fees charged by the barter
exchange, and may even offset the effect of any increased price charged by
exchange members for products and services which they barter.
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<PAGE> 17
Barter also provides an effective means by which a member may enter new
markets, gain trial usage by potential customers, or increase market share. The
member may well find that he can reach a customer who would not otherwise have
tried his product or service if the full price had to be paid in cash, but who
will try his goods or services, sometimes in large amounts or on extended terms,
when the price is being paid in goods or services of the purchaser in the form
of trade dollars. Because of the need to clear trade dollars over time, barter
exchanges become affinity marketing networks, in which members regularly seek
out opportunities to do business with one another.
The principal disdvantage of barter is that, in comparison to the general
cash-based economy, a more limited supply of products and services is available.
Also, most items are priced at or near full retail and discounting is relatively
rare.
INFLATION OF CURRENCY
Every barter exchange, including ours, must be careful not to over-extend
credit in the form of trade dollars. Any such over-extension is likely to
"depreciate" the value of the exchange's trade dollars through a form of trade
credit inflation. To avoid this potential problem, members who receive an
extension of trade credit when they open their accounts must over time supply
goods and services equal to the credits they receive, and in turn they must
spend the credits that they have received through the purchase of the goods and
services of other members.
INTERNATIONAL MONETARY SYSTEMS, LTD.
IMS is a holding company that currently has two operating subsidiaries.
These companies together comprise our Continental Trade Exchange Barter Network,
or "CTE". Our first operating subsidiary, Continental Trade Exchange, Ltd.,
commenced operations in 1985 and serves eastern Wisconsin, including the greater
Milwaukee, Madison, Green Bay and Fox River Valley areas. Our second operating
subsidiary, Continental Trade Exchange of Illinois, Inc. commenced operations in
1997 and serves northeastern Illinois, including the greater Chicago area. CTE
now has more than 2,400 active member clients in Wisconsin and Illinois and has
experienced steady growth in its client enrollment and trading revenue over the
last 10 years. We currently conduct our business operations only in the United
States. However, we may in the future begin to operate internationally,
particularly in the areas of business-to-business and consumer barter on the
Internet.
In 1989, we acquired Mid-American Exchange Corp., a barter exchange located
in Green Bay, Wisconsin. Mid-American Exchange had been operating since 1984 and
had a client enrollment of more than 300 members, located throughout the Fox
River Valley and north into Door County, Wisconsin. In 1996, we acquired Midwest
Trade Exchange, a North Chicago, Illinois-based barter exchange that was founded
in 1983. Midwest Trade Exchange had a client enrollment of approximately 700
members. During 1998, we purchased two barter exchanges: Commercial Barter of
Illinois, located in Joliet, Illinois, for consideration totaling $20,000, and
Wisconsin Barter Exchange, located in Madison, Wisconsin, for a total cost of
$105,000. As a result of these acquisitions, our operations now cover the
eastern portions of Wisconsin and northern Illinois. Our trade volume for 1999
and 1998 was $11,150,000 and $9,689,000, respectively, producing consolidated
gross revenues of $1,396,851 for 1999 and $1,181,540 for 1998. Our consolidated
pre-tax income for 1999 and 1998 was $(18,988) and $18,652, respectively.
NATURE OF BUSINESS
Our CTE barter network is currently comprised of more than 2,400 businesses
that regularly trade their products and services with each other. Through their
participation in the CTE barter program, these companies are provided with an
effective revenue management tool which enables them to identify and capture
incremental income, liquidate surplus inventories and profitably capitalize on
their excess capacity. CTE functions as a third-party record-keeper and also
manages our barter network system. In addition, we act as a principal in certain
transactions where we acquire various products, including fine art, real estate
and other commodities which we either hold as investment or sell at a profit.
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<PAGE> 18
To provide our clients with a flexible and effective means of trading, we
have created an alternative monetary system which utilizes its own unique
currency. Upon enrolling in the CTE program, each member is assigned a barter
account, much like a traditional bank account, through which it receives "CTE
trade dollars", the medium of exchange for our barter system. Under the tax laws
and regulations, we are required to report all barter sales to the Internal
Revenue Service. For accounting and tax purposes, the Internal Revenue Service
has ruled that trade dollars must be treated in the same manner as cash.
Accordingly, we may in any period report revenue, profits and increases in net
assets from transactions denominated in CTE trade dollars or other non-cash
consideration.
Barter exchanges like ours have a unique characteristic: they not only
operate with traditional cash currency, but they also can issue trade dollars,
which constitute their own unique currency. Using trade dollars, barter
exchanges are able to acquire products, services, and even other businesses. In
the everyday operation of their businesses, trade exchanges permit member
clients to barter their goods and services with other clients. The clients do
this in several ways. Some sell their products to the barter network directly;
others issue trade certificates that are redeemable for their goods or services;
and the balance transact their barter business through our trade brokers or on
our Internet Web site. In return, the selling clients receive trade dollars,
sometimes also referred to as "trade credits," from the exchange, and they may
then use these dollars to purchase services or products that are available in
the program.
The trade dollars issued by the exchange are identical in function to
traditional government-issued currency. As our barter exchanges have expanded
their client base, they have achieved acceptance of their trade dollars among
their members throughout much of Wisconsin and northern Illinois. We anticipate
that the trade currency issued by our exchanges will continue to gain
recognition throughout an increasingly wider area as our barter network is
further expanded into other cities and states. We intend to seek nationwide and
possibly international acceptance over time.
CASH AND TRADE DOLLAR INCOME
Just as our barter exchange members conduct transactions in both
traditional currency and in trade dollars, we also generate revenues in both
traditional dollars and in trade dollars.
Our revenue is principally generated through (1) transaction fees earned
when clients spend their trade dollars to purchase merchandise from other
members or from our product inventory, typically 10% to 12% of the purchase
price and (2) monthly maintenance fees, currently an amount of $10.00 to $15.00
in cash and $10.00 to $15.00 in trade dollars per month. These sources usually
account for approximately 90% of our revenues. The balance is generally received
in relatively nominal amounts from other sources, including membership set-up
fees assessed upon acceptance for membership in our exchange, presently $395.00
to $595.00 in cash.
We generate trade profits in various ways. Typically, we barter at retail
prices. However, in some situations, usually when dealing with manufacturers, we
are able to purchase products for trade dollars at wholesale prices. These
products can then be liquidated at retail prices through the barter exchange
program. Some specific clients, such as radio and television stations, hotels,
and restaurants, are not accustomed to paying cash fees because they already are
involved in many direct barter transactions for their services. In dealing with
these businesses, our exchange will occasionally accept a favorable trade ratio
(usually $3.00 of air time, room or food certificates, etc. for $2.00 of trade
credit) in lieu of a cash service fee, and such situations can produce a
substantial trade dollar surplus. In addition, we also have an opportunity to
create considerable trade profits by purchasing wholesale, closeout and
liquidation merchandise for cash, and then liquidating such products at retail
on our barter exchange.
USES OF TRADE DOLLARS
We use earned trade dollars to purchase goods and services necessary to our
operations, such as office supplies, office furniture and equipment,
advertising, printing and janitorial services, to name some common uses. We can
also convert trade profits to cash whenever we use our trade dollars to buy
products or services which we then liquidate for cash.
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<PAGE> 19
LIQUIDATION AND CLOSEOUT SALES
As a basic element of our barter operations, we help businesses to
liquidate their under-utilized assets and to realize value from their excess
capacity. There is currently a large amount of liquidation merchandise available
in America. This merchandise can take the form of manufacturers' overruns,
returned merchandise, factory seconds, last year's obsolete models, government
surplus, bankrupt stock, etc. In light of all these opportunities, we intend to
develop a liquidation and closeout division through which we will first attempt
to purchase the available products with our own trade dollars. If quality
merchandise can be obtained for trade dollars, some of it can be sold at
considerable markups on our barter exchange, and the balance can then be
converted to cash.
However, many companies are willing to liquidate such merchandise at
bargain prices only because of an urgent need for hard cash. To take advantage
of those situations, we plan to set aside a portion of our working capital,
which may include a portion of the proceeds from this offering, for the purchase
of desirable merchandise that we are unable to acquire with trade dollars. We
expect to be able to purchase such merchandise in many cases for as little as
ten to twenty cents on the dollar, based upon retail prices, and then to
liquidate the items through our barter system, selling to our own members as
individual sales, or in quantity to other barter networks, at or near the
original list price. If these transactions are successful, we expect to earn
substantial trade profits and service fees. Since we will have a low cost basis
in the remaining merchandise, goods which do not move through the barter system
can then be liquidated in bulk for cash at no loss to us.
EXPANDING BARTER NETWORK
Much of our growth to date is a direct result of our earlier acquisitions,
and, based upon our knowledge of recent merger and acquisition activity in the
barter industry, we believe that our industry as a whole is experiencing an
increasing trend toward consolidation. We intend to utilize a substantial
portion of the proceeds of this offering to acquire other barter exchanges that
will complement our existing network.
Our prior acquisitions have demonstrated that these mergers, if managed
properly, can result in important reductions in overhead expense. For example,
in the case of our North Chicago office, the previous operation, Midwest Trade
Exchange, had twelve employees. The new Continental Trade Exchange of Illinois
is generating the same revenue as Midwest Trade Exchange, but is doing so with
five employees. This is possible because overlapping jobs have been eliminated.
We cannot guarantee that future acquisitions, if any, will result in similar
reductions in our consolidated overhead expense.
In addition to expanding our barter network through acquisitions, we will
also seek to grow by expanding our existing markets. To accomplish this, we
intend to hire additional salespeople and trade brokers. We are currently
enrolling approximately 40 to 50 new clients per month. We believe that an
expanded sales force could substantially increase member recruitment and
correspondingly increase our gross revenues and net income.
COMPETITION
Competition in the barter industry is somewhat different from the type of
competition which exists in many other areas of business. Many businesses are
members of several trade exchanges. For example, there are five exchanges
currently operating in the Chicago area, and a number of businesses belong to
all five. The fact that a client of ours is also a member of another exchange
does not necessarily harm us. For the most part, businesses which belong to
several exchanges have shown themselves to be the more active traders that
generate increased transaction fees for all the exchanges to which they belong.
In our experience, businesses do not resign from one exchange upon joining
another, and these clients enjoy a wider selection of products and services as
the result of multiple exchange membership.
We expect to compete in our industry principally with respect to
acquisitions. We intend to provide for the growth of our company largely through
the acquisition of barter firms and other businesses that are complementary to
ours, and our inability to successfully compete for such acquisitions could
seriously impair our efforts to grow
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<PAGE> 20
and expand as planned. The competition to find and acquire suitable barter
exchanges is intense, and we will compete for these exchanges with other
companies that have substantially greater financial and other resources than our
company. This and other risks associated with our acquisition strategy are
discussed under "Risk Factors."
OUR GROWTH STRATEGY
The CTE barter system began operations in July of 1985 and has had a record
of consistent and steady growth. This growth has been generated both internally
and through the acquisition of other barter exchanges. During the past several
years, we have acquired four independent trade exchange operations.
In 1997, we acquired the client list and other assets of Midwest Trade
Exchange, North Chicago, Illinois. The purchase of this operation allowed us to
establish a significant presence in the Greater Chicago marketplace and to
increase our revenues by more than 40%. During 1998, we acquired the
Joliet-based Commercial Barter of Illinois, thereby increasing our penetration
into the Chicago area. We also purchased the client list and other assets of
Wisconsin Barter Exchange, providing us with an office in Madison, Wisconsin.
These two acquisitions added more than 400 clients to our roster and increased
revenues by more than 20%.
A major factor in the success of our growth-through-acquisitions strategy
has been and will be our ability to achieve unique synergies with the client
base of the acquired exchange and to take advantage of profit-enhancing
economies of scale. Generally, we can improve the operating performance of
acquired firms because processing a larger volume of trade transactions can
still be handled effectively with existing personnel. We cannot guarantee that
future acquisitions, if any, will result in similar reductions in our
consolidated overhead expense.
We intend to continue our growth-through-acquisition strategy by
concentrating on identifying and purchasing trade exchanges in areas where we
can develop or maintain a dominant market position. We believe that a dominant
position within a market gives us increased visibility within that market,
allows us to offer a wider range of customer products and services for the
benefit of our clients, and enhances our efforts to achieve greater economies of
scale.
We also expect future internal growth from our present base of operations
as we regularly add new members to our barter exchange. To accomplish this, we
intend to allocate a portion of the proceeds from this offering to the hiring of
new sales and marketing personnel. We also hope to acquire trade exchanges in
strategic target markets or, where this is not possible, to open new
company-owned branch offices in those areas.
ACQUISITION OF OTHER BUSINESSES
We believe that trade exchange activity and cash revenues can be further
enhanced through the acquisition of other businesses that utilize barter
heavily. For example, Continental Trade Exchange has a very active travel
department that each month books hundreds of lodging packages for its clients.
After we reserve the lodging, these clients have in the past been required to
contact an outside travel agency or an airline directly for their flight
tickets. To take advantage of this situation, we have recently created CTE
Travel, our own full-service travel agency.
Because we already have an identified, and therefore targetable, group of
members that are interested in procuring travel-related products and services,
we expect to generate new revenues in the form of travel agency commissions from
airlines. We will also earn commission income for cruises, rental car
reservations and special tour group packages. To further enhance our travel
division, we have acquired the customer list of a recently closed travel agency,
giving us additional access to this market. But most important, our expansion
into the travel business is being accomplished at minimal cost because we
already have an office, a staff of workers and a computer system in place.
Examples of other businesses that we believe have exploitable synergies
with our barter network include advertising and media firms, such as magazines,
coupon mailers and direct mail marketers; printing companies and related
businesses; plus hotels, resorts and other participants in the travel industry.
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<PAGE> 21
BARTERING ON THE INTERNET
We believe that the core business of our CTE barter network will continue
to generate a steady stream of revenue. However, we realize that our greatest
potential for growth is likely to come from the Internet. We are therefore
currently in the process of developing a dynamic e-commerce Web site that we
hope will expand our previous business-to-business network into a comprehensive,
worldwide barter system that will also allow consumers (i.e. the general public)
to trade their personal possessions and other products on-line. A special
feature of the Internet operation will be the on-line barter auction where
members will have the opportunity to bid in trade dollars on items being offered
by others, or submit their own merchandise for sale. To maintain a steady flow
of products available for the on-line auction, we will also offer merchandise
from our own inventory as well as appropriate items from the existing CTE barter
system. In preparing for this auction program, we have registered the Internet
domain name www.barterinternet.com. As discussed under "Use of Proceeds," we
intend to use a portion of the proceeds from this offering to enhance our Web
site and to promote our planned on-line consumer barter network.
Our Internet World Wide Web site is being designed to provide potential
barter participants with ready access to the services provided by us that meet
their individual needs. Upon entry to our site at www.barterinternet.com, a
potential or existing customer will be routed to one of our three major areas of
operation:
- Continental Trade Exchange, our business-to-business barter network.
- Corporate barter services, our division devoted to the barter needs and
requirements of larger business organizations with respect to products
and services such as hotel accommodations, airline tickets, car rentals
and liquidation services.
- On-line consumer barter network, our planned consumer auction program
described above.
By linking to these specific areas, our clients and prospective clients
will be aided in their attempts to seek out only those products and services
that are relevant to their particular needs. For example, a major corporate
account located in Phoenix or Los Angeles is not likely to be interested in
haircuts or other local services in Chicago. By checking our corporate barter
Web page, these businesses will find a list of only those products and services
which would be useful to them.
EMPLOYEES AND FACILITIES
We currently have twenty-two full-time employees: thirteen at our principal
place of business in New Berlin, Wisconsin; two in Green Bay, Wisconsin; two in
Madison, Wisconsin; and five in North Chicago, Illinois. None of our employees
are represented by a union or covered by a collective bargaining agreement. We
believe that our relationships with our employees are excellent.
Our company's executive offices and principal operating facilities occupy
6,300 square feet of leased space located at 16901 W. Glendale Drive, New
Berlin, Wisconsin, under a lease from Glendale Investments, LLC., a Wisconsin
limited liability company owned by Donald F. Mardak, Dale L. Mardak and John E.
Strabley, Jr., officers and directors of IMS. Rent and other terms of our lease,
which expires September 30, 2002, are believed by us to be comparable to those
available for similar space from unaffiliated, third-party lessors in the same
area. See "Certain Relationships and Related Transactions" for additional
information concerning this lease. We also lease (1) 500 square feet of office
space at 1012 South Broadway, Green Bay, Wisconsin; (2) 400 square feet of
office space at 2814 Syene Road, Madison, Wisconsin; and (3) 1,600 square feet
of office space at 2300 Green Bay Road, North Chicago, Illinois. The Green Bay
and Madison, Wisconsin offices and the North Chicago, Illinois offices are
leased from unaffiliated parties. The lease agreement covering the Madison,
Wisconsin office expires June 30, 2000. The leases covering the Green Bay,
Wisconsin and the North Chicago, Illinois office are both on a month-to-month
basis. Upon the expiration of our current leases, we expect that, in each case,
we will be able to obtain either a renewal lease, if desired, or a new lease at
an equivalent or better location.
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<PAGE> 22
MANAGEMENT
DIRECTORS AND OFFICERS
The following table shows the names and ages of our directors and officers
and the positions they hold with our company.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Donald F. Mardak 63 Chief Executive Officer, President and Director
John E. Strabley, Jr. 36 Executive Vice President and Director
Dale L. Mardak 39 Vice President, Treasurer and Director
Judy E. Mardak 60 Secretary
</TABLE>
DONALD F. MARDAK has been the Chief Executive Officer, President and a
director of IMS since our inception in 1988. From 1970 to 1974, Mr. Mardak was a
partner in Learning Unlimited, a division of Hal Leonard Publishing Corp. In
1974, he founded Don Mardak Piano & Organ Centers, Ltd., a chain of retail piano
and organ stores in the Greater Milwaukee area. In 1985, Mr. Mardak founded the
CTE Barter Network under the name "Continental Trading Company," a sole
proprietorship. Continental Trading Company was incorporated in 1988 as
Continental Trade Exchange, Ltd. and is now our primary operating subsidiary.
Currently, Mr. Mardak is the Chairman of the Board of Directors of the National
Association of Trade Exchanges, the principal barter industry trade association,
having served as its President during 1999.
JOHN E. STRABLEY, JR. has been the Executive Vice President and a director
of IMS since 1997. Mr. Strabley joined Continental Trade Exchange, Ltd. as a
trade broker in 1991. In 1992, he was promoted to General Manager, and, in
August of that year, was appointed as Vice President of Continental Trade
Exchange and IMS. In 1995, Mr. Strabley passed the barter industry certification
examination and was awarded with the industry's highest designation of CTB -
Certified Trade Broker. In 1997, Mr. Strabley was named Executive Vice President
of our company and became a director of both Continental Trade Exchange, Ltd.
and IMS.
DALE L. MARDAK has been Vice President and a director of IMS since 1997.
He joined Continental Trade Exchange, Ltd. in 1993 as a trade broker and was
appointed trade director in 1995. In 1997, he was appointed Vice President,
Treasurer and a director of both Continental Trade Exchange, Ltd. and our
company.
JUDY E. MARDAK has been Secretary of IMS since our inception in 1988. In
1988, she joined Continental Trade Exchange, Ltd. as Office Manager and head
bookkeeper. In 1990, she became the first Continental Trade Exchange, Ltd. trade
broker, and in 1991 she was named to the position of Trade Director, a position
she held until 1995. Mrs. Mardak continues to serve as our Office Manager.
Donald F. and Judy E. Mardak are husband and wife. John E. Strabley, Jr.
is their son-in-law, and Dale L. Mardak is their son. Kimberly A. Strabley, the
daughter of Donald F. and Judy E. Mardak and the wife of John E. Strabley, Jr.,
is also employed by us as travel director and reciprocal accounts manager.
All of our directors hold office until the next annual meeting of
stockholders and the election and qualification of their successors. Officers
are elected annually by our board of directors and serve at the discretion of
the board.
See "Principal Stockholders" for information concerning ownership of our
common stock by our directors and officers.
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<PAGE> 23
Summary Compensation Table. The following table provides information
concerning compensation earned by our Chief Executive Officer for services
rendered to us in all capacities during the fiscal years ended December 31,
1997, 1998 and 1999, respectively. We are required to disclose in the table the
compensation we paid to our Chief Executive Officer and to any other executive
officer of our company who was paid in excess of $100,000. These persons are
referred to in this prospectus as "named executive officers." Because no
executive officer of our company was paid more than $100,000 for any of our last
three fiscal years, only the compensation paid by us to our Chief Executive
Officer is included in the table.
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------
All Other
Name and Principal Positions Year Salary($) Bonus($) Compensation($)
- ----------------------------------------------------------- ---- -------- -------- --------------
<S> <C> <C> <C> <C>
Donald F. Mardak........................................... 1999 90,000 -- --
Chief Executive Officer and President 1998 88,000 -- --
1997 52,000 -- --
</TABLE>
Option Grants in the Last Fiscal Year. No options were granted to our Chief
Executive Officer, our only named executive officer, for our fiscal year ended
December 31, 1999.
Option Exercises in 1999 and Aggregate Option Values at December 31, 1999.
No options were exercised by our Chief Executive Officer, our only named
executive officer, during fiscal 1999, and, as of December 31, 1999, no
unexercised options were held by our Chief Executive Officer.
DIRECTORS' COMPENSATION
Our directors are not compensated for acting as directors, nor are they
reimbursed for expenses related to their service as directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our bylaws provide for the elimination, to the fullest extent permissible
under Wisconsin law, of the liability of our directors to us for monetary
damages. This limitation of liability does not affect the availability of
equitable remedies such as injunctive relief. Our bylaws also provide that we
shall indemnify our directors and officers against liabilities that may arise by
reason of their status or service as directors or officers, other than
liabilities arising from certain specified misconduct. We are required to
advance their expenses incurred as a result of any proceeding against them for
which they could be indemnified, including in circumstances in which
indemnification is otherwise discretionary under Wisconsin law. At the present
time, there is no pending litigation or proceeding involving a director,
officer, employee or other agent of our company in which indemnification would
be required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.
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<PAGE> 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
We currently lease our executive offices and principal operating
facilities, consisting of 3,800 square feet of space located at 16901 West
Glendale Drive, New Berlin, Wisconsin, from Glendale Investments, LLC., a
Wisconsin limited liability company owned by Donald F. Mardak, Dale L. Mardak
and John E. Strabley, Jr., officers and directors of our company, under a triple
net lease which commenced in October, 1999 and expires September 30, 2002. For
the fiscal year ended December 31, 1999, we made rental payments aggregating
$15,000 to Glendale Investments, LLC. We believe that rent and other terms of
our lease are comparable to those available for similar space from unaffiliated,
third-party lessors in the area.
On July 20, 1999, we sold an aggregate of 10,000 shares of our common stock
to Dale L. Mardak, a director and officer of our company, pursuant to the
exercise of options granted in 1996, at the price of $1.00 per share.
During the fiscal year ended December 31, 1999, we effected 2 for 1 splits
of our outstanding common stock, effective as of July 28 and December 28, 1999,
respectively. Also effective as of July 28, 1999, the par value of our common
stock was changed from $0.01 per share to $0.0001 per share.
We have no loans outstanding to any of our directors or officers.
CONFLICTS OF INTEREST
Certain potential conflicts of interest are inherent in the relationships
between our affiliates and us.
From time to time, one or more of our affiliates may form or hold an
ownership interest in and/or manage other businesses both related and unrelated
to the type of business that we own and operate. These persons expect to
continue to form, hold an ownership interest in and/or manage additional other
businesses which may compete with ours with respect to operations, including
financing and marketing, management time and services and potential customers.
These activities may give rise to conflicts between or among the interests of
IMS and other businesses with which our affiliates are associated. Our
affiliates are in no way prohibited from undertaking such activities, and
neither we or our shareholders will have any right to require participation in
such other activities.
Further, because we intend to transact business with some of our officers,
directors and affiliates, as well as with firms in which some of our officers,
directors or affiliates have a material interest, including for example the
lease agreement described above under "Certain Relationships and Related
Transactions - Certain Transactions", potential conflicts may arise between the
respective interests of IMS and these related persons or entities. We believe
that such transactions will be effected on terms at least as favorable to us as
those available from unrelated third parties.
With respect to transactions involving real or apparent conflicts of
interest, we have adopted policies and procedures which require that (1) the
fact of the relationship or interest giving rise to the potential conflict be
disclosed or known to the directors who authorize or approve the transaction
prior to such authorization or approval, (2) the transaction be approved by a
majority of our disinterested outside directors and (3) the transaction be fair
and reasonable to IMS at the time it is authorized or approved by our directors.
Kranitz & Philipp, our securities counsel, are also counsel to Liss
Financial Services, the managing placement agent. We will be represented by
other independent counsel in all instances, including securities law matters,
where our interests are deemed to conflict with those of the managing placement
agent.
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<PAGE> 25
PRINCIPAL STOCKHOLDERS
The following table sets forth as of December 31, 1999, and as adjusted to
reflect the sale of the 1,000,000 shares of common stock offered by this
prospectus, certain information with respect to the beneficial ownership of our
common stock by:
- each person known by us to beneficially own more than 5% of our common
stock;
- each of our directors;
- our sole named executive officer; and
- all of our directors and executive officers as a group.
We believe that, subject to applicable community and marital property laws,
the beneficial owners of our common stock listed below have sole voting and
dispositive power with respect to such shares.
<TABLE>
<CAPTION>
Shares beneficially Shares beneficially
owned prior to offering owned after offering (1)
----------------------- ------------------------
Name and Address of Beneficial Owner Number Percent Number Percent
- ------------------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Donald F. Mardak (2).................................. 1,440,000 67.4% 1,440,000 45.9%
13470 W. Fountain Drive
New Berlin, WI 53151
Dale L. Mardak ....................................... 128,000 6.0% 128,000 4.1%
5815 S. Vista Drive
New Berlin, WI 53151
John E. Strabley, Jr. (3)............................. 64,000 3.0% 64,000 2.0%
28440 Joanie Lane
Waterford, WI 53185
All directors and executive officers
as a group (3 persons)............................. 1,632,000 76.4% 1,632,000 52.0%
</TABLE>
- -----------------------
(1) Assumes the sale of all of the 1,000,000 shares of our common stock offered
by this prospectus. However, because this is a best-efforts offering, we
cannot guarantee that all or any part of the common stock offered by this
prospectus will be sold. See "Risk Factors" and "Underwriting" for
information concerning this type of offering.
(2) Does not include 40,000 shares held by his wife, Judy E. Mardak, as to
which Mr. Mardak disclaims beneficial ownership.
(3) Does not include 100,000 shares held by his wife, Kimberly A. Strabley, as
to which Mr. Strabley disclaims beneficial ownership.
24
<PAGE> 26
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 20,000,000 shares of common stock,
par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value
$0.0001 per share. As of the date of this prospectus, 2,136,704 shares of common
stock (beneficially owned by approximately 42 persons) and no shares of
preferred stock were outstanding.
COMMON STOCK
Holders of our common stock are entitled to one vote per share of common
stock beneficially owned on each matter submitted to a vote at a meeting of
shareholders, subject to Section 180.1150 of the Wisconsin Business Corporation
Law. Our common stock does not have cumulative voting rights, which means that
the holders of a majority of voting shares voting for the election of directors
can elect all of the members of our board of directors.
Our common stock has no preemptive rights and no redemption or conversion
privileges.
The holders of our common stock are entitled to receive dividends out of
assets legally available at such times and in such amounts as our board of
directors may, from time to time, determine, and upon liquidation and
dissolution are entitled to receive all assets available for distribution to the
shareholders. Under the Wisconsin Business Corporation Law, a majority vote of
shares represented at a meeting at which a quorum is present is generally
sufficient for all actions that require the vote of shareholders, However,
certain actions require approval by either a super-majority of two-thirds of all
the outstanding shares entitled to vote, and certain actions require a majority
of all outstanding shares entitled to vote. See "Description of Securities -
Anti-Takeover Provisions" for additional information concerning some of these
actions. All of the outstanding shares of our common stock are, and the shares
to be sold by us as part of this offering when legally issued and paid for will
be, fully paid and nonassessable, except for certain statutory liabilities which
may be imposed by Section 180.0622(2)(b) of the Wisconsin Business Corporation
Law for unpaid employee wages.
LIMITATION OF DIRECTOR LIABILITY
Section 180.0828 of the Wisconsin Business Corporation Law provides that
our directors can be held personally liable only for intentional breaches of
fiduciary duties, criminal acts, transactions from which the director derived an
improper personal profit and wilful misconduct. These provisions may have the
effect of reducing the likelihood of derivative litigation against directors and
may discourage or deter shareholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefitted IMS and its shareholders.
INDEMNIFICATION
Under the Wisconsin Business Corporation Law, our directors and officers
are entitled to mandatory indemnification from us against liabilities and
expenses incurred by reason of their status or service as directors or officers
(1) if the officer or director is successful in the defense of an action brought
against him or her and (2) if the officer or director is not successful in the
defense of an action brought against him or her, unless, in the latter case
only, it is determined that the director or officer breached or failed to
perform his or her duties to IMS and such breach or failure constituted: (a) a
wilful failure to deal fairly with us or our shareholders in connection with a
matter in which the director or officer had a material conflict of interest; (b)
a violation of the criminal law unless the director or officer had reasonable
cause to believe his or her conduct was lawful or had no reasonable cause to
believe his or her conduct was unlawful; (c) a transaction from which the
director or officer derived an improper personal profit; or (d) wilful
misconduct. While the Wisconsin Business Corporation Law allows us to limit our
obligation to indemnify officers and directors by so providing in our articles
of incorporation, to date we have not done so. Our bylaws provide for the
indemnification of our directors and officers by us to the fullest extent
permitted by Wisconsin law.
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<PAGE> 27
ANTI-TAKEOVER PROVISIONS
Provisions of our bylaws and the Wisconsin Business Corporation Law
described in this section may delay or make more difficult acquisitions or
changes in control of IMS which are not approved by our board of directors. We
believe that these provisions will enhance our ability to develop our business
in a manner which will foster our long-term growth without the disruption caused
by the threat of a takeover that our board of directors does not consider to be
in the best interests of IMS and its shareholders, particularly, but not
exclusively, in the initial years of our existence as a publicly-traded company.
These provisions could have the effect of discouraging third parties from making
proposals involving an acquisition or change in control of IMS, although such
proposals, if made, might be considered desirable by a majority of our
shareholders. These provisions may also have the effect of making it more
difficult for third parties to cause the replacement of our current management
without the concurrence of our board of directors.
Number of Directors; Removal; Vacancies. Our bylaws currently provide that
we may have up to seven directors. The authorized number of directors may be
changed by amendment of the bylaws. The bylaws also provide that the our board
of directors shall have the exclusive right to fill vacancies on the board,
including vacancies created by expansion of the board or removal of a director,
and that any director elected to fill a vacancy shall serve until the next
annual meeting of our shareholders. The bylaws further provide that directors
may be removed by the shareholders only by the affirmative vote of the holders
of at least a majority of the votes then entitled to be cast in an election of
directors. This provision, in conjunction with the provisions of the bylaws
authorizing the board to fill vacant directorships, could prevent shareholders
from removing incumbent directors and filling the resulting vacancies with their
own nominees.
Amendments to the Articles of Incorporation. The Wisconsin Business
Corporation Law provides authority to IMS to amend its articles of incorporation
at any time to add or change a provision that is required or permitted to be
included in the articles or to delete a provision that is not required to be
included in such articles. Our board of directors may propose one or more
amendments to our articles of incorporation for submission to a shareholder
vote. The board may condition its submission of the proposed amendment on any
basis it chooses if the board notifies each shareholder, whether or not entitled
to vote, of the shareholders' meeting at which the proposed amendment will be
voted upon.
Constituency or Stakeholder Provision. Section 180.0827 of the Wisconsin
Business Corporation Law provides that, in discharging his or her duties to IMS
and in determining what he or she believes to be in our best interests, a
director or officer may, in addition to considering the effects of any action on
shareholders, consider the effects of the action on employees, suppliers,
customers, the communities in which we operate, so-called "stakeholders," and
any other factors that the director or officer considers pertinent.
Wisconsin Anti-Takeover Statutes. Sections 180.1140 to 180.1144 of the
Wisconsin Business Corporation Law regulate the broad range of "business
combinations" between a "resident domestic corporation," such as IMS, and an
"interested stockholder." The law defines a "business combination" to include a
merger or share exchange, or a sale, lease, exchange, mortgage, pledge, transfer
or other disposition of assets equal to at least 5% of the market value of our
stock or assets, 10% of our earning power, or the issuance of stock or rights to
purchase stock with a market value equal to at least 5% of our outstanding
stock, the adoption of a plan of liquidation or dissolution and certain other
transactions involving an "interested stockholder," defined as a person who
beneficially owns 10% of the voting power of our outstanding voting stock or who
is an affiliate or associate of IMS and beneficially owned 10% of the voting
power of our then outstanding voting stock within the last three years.
Section 180.1141 of the Wisconsin Business Corporation Law prohibits us
from engaging in a business combination, other than a business combination of a
type specifically excluded from the coverage of the statute, with an interested
stockholder for a period of three years following the date such person becomes
an interested stockholder, unless our board of directors approved the business
combination or the acquisition of the stock that resulted in a person becoming
an interested stockholder before such acquisition. Accordingly, the statutory
prohibition against business combinations cannot be avoided during the
three-year period by subsequent action of
26
<PAGE> 28
the board of directors or shareholders. Business combinations after the
three-year period following the stock acquisition date are permitted only if (1)
our board of directors approved the acquisition of the stock by the interested
stockholder prior to the acquisition date, (2) the business combination is
approved by a majority of our outstanding voting stock that is not beneficially
owned by the interested stockholder, or (3) the consideration to be received by
our shareholders meets certain requirements of the statute with respect to form
and amount.
In addition, the Wisconsin Business Corporation Law provides in Sections
180.1130 to 180.1133 that business combinations involving a "significant
shareholder," as defined below, and a "resident domestic corporation," such as
IMS, are subject to a two-thirds supermajority vote of shareholders. Compliance
with this "fair price" provision is in addition to any approval otherwise
required. A "significant shareholder," with respect to a resident domestic
corporation, is defined as a person who beneficially owns, directly or
indirectly, 10% or more of the voting stock of the corporation, or an affiliate
of the corporation which beneficially owned, directly or indirectly, 10% or more
of the voting stock of the corporation within the last two years. We anticipate
that after this offering we will be an "issuing public corporation" for purposes
of the defensive action restrictions discussed below.
Under the Wisconsin Business Corporation Law, the business combinations
described above must be approved by 80% of the voting power of our stock and at
least two-thirds of the voting power of our stock that is not beneficially held
by the significant shareholder who is a party to the relevant transaction or any
of its affiliates or associates, in each case voting together as a single group,
unless the following fair price standards have been met: (1) the aggregate value
of the per share consideration is equal to the higher of (a) the highest price
paid for any of our common stock by the significant shareholder in the
transaction in which it became a significant shareholder within two years before
the date of the business combination, (b) the market value of our shares on the
date of commencement of any tender offer by the significant shareholder, the
date on which the person became a significant shareholder or the date of the
first public announcement of the proposed business combination, whichever is
highest, or (c) the highest liquidation or dissolution distribution to which
holders of the shares would be entitled, and (2) either cash, or the form of
consideration used by the significant shareholder to acquire the largest number
of shares, is offered.
Section 180.1134 of the Wisconsin Business Corporation Law contains
defensive action restrictions and provides that, in addition to the vote
otherwise required by law or the articles of incorporation of an issuing public
corporation, the approval of the holders of a majority of the shares entitled to
vote is required before we can take certain action while a takeover offer is
being made or after a takeover offer has been publicly announced and before it
is concluded. Under these defensive action restrictions, shareholder approval is
required for us to (1) acquire more than 5% of our outstanding voting shares at
a price above the market price from any individual who or organization which
owns more than 3% of our outstanding voting shares and has held such shares for
less than two years, unless a similar offer is made to acquire all of our voting
shares, or (2) sell or option assets of IMS which amount to at least 10% of our
market value, unless we have at least three directors who are not officers or
employees and a majority of these independent directors vote not to have this
provision apply to us.
The restrictions described in clause (1) of the preceding paragraph may
have the effect of deterring a shareholder from acquiring shares of our common
stock with the goal of seeking to have us repurchase such shares at a premium
over the market price.
Under Section 180.1150 of the Wisconsin Business Corporation Law, the
voting power of our common stock, held by any person or persons acting as a
group, which is in excess of 20% of the voting power in the election of
directors is limited to 10% of the full voting power of such common stock. This
statutory voting restriction does not apply to shares acquired directly from us
or in certain specified transactions or shares for which full voting power has
been restored pursuant to a vote of our shareholders.
Anti-Takeover Consequences. Certain provisions of our articles of
incorporation and bylaws may have significant anti-takeover affects, including
the inability of our shareholders to remove directors without cause, and the
ability of the remaining directors to fill vacancies.
27
<PAGE> 29
The explicit grant of discretion to directors to consider non-shareholder
constituencies could, in the context of an "auction" of the Company, have
antitakeover effects in situations where the interests of "stakeholders" of our
company, including employees, suppliers, customers and communities in which we
do business, conflict with the short-term maximization of shareholder value.
The fair price provision may discourage any attempt by a shareholder to
squeeze out other shareholders without offering an appropriate premium purchase
price. In addition, the defensive action restrictions may have the effect of
deterring a shareholder from acquiring our common stock with the goal of seeking
to have us repurchase the common stock at a premium. The statutory and bylaw
provisions referenced above are intended to encourage persons seeking to acquire
control of IMS to initiate such an acquisition through arms-length negotiations
with our board of directors, and to ensure that sufficient time for
consideration of such a proposal, and any alternatives, is available. These
measures are also designed to discourage investors from attempting to accumulate
a significant minority position in our company and then using the threat of a
proxy contest as a means to pressure us to repurchase shares of our common stock
at a premium over the market value. To the extent that such measures lessen the
likelihood of a proxy contest or the assumption of control by a holder of a
substantial block of our common stock, they could increase the likelihood that
incumbent directors will retain their positions, and may also have the effect of
discouraging a tender offer or other attempt to obtain control of IMS, even
though such attempt might be beneficial to us and to our shareholders.
TRANSFER AGENT AND REGISTRAR
We are currently the transfer agent and registrar for our common stock.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock, and sales of substantial amounts of common stock in the public market
after this offering could adversely affect market prices prevailing from time to
time and could impair our ability to raise capital through the sale of equity
securities.
SALES OF RESTRICTED SHARES
Upon completion of this offering, assuming that the entire offering is
sold, 3,136,704 shares of our common stock will be outstanding. All of the
shares we sell in this offering will be freely tradable without restriction or
further registration under the Securities Act, except that any shares purchased
by our affiliates, as that term is defined in Rule 144 under the Securities Act,
may generally only be sold in compliance with Rule 144 below.
The remaining 2,136,704 shares of common stock outstanding following this
offering will be restricted securities under the terms of the Securities Act.
Sales of a large portion of the restricted shares to be outstanding upon
completion of this offering will be limited by Rule 144 and by lock-up
agreements. Under these agreements, we, our officers, directors and respective
affiliates have agreed, subject to limited exceptions, not to sell, transfer or
otherwise dispose of, directly or indirectly, any shares of common stock, or any
securities convertible or exchangeable for shares of common stock, for a period
of 120 days after the date of this prospectus without the prior written consent
of Liss Financial Services, the managing placement agent. Liss Financial
Services, however, may in its sole discretion, at any time without notice,
release all or any portion of the shares of common stock subject to lock-up
agreements.
Upon the expiration of the 120-day lock-up period, or earlier with the
written consent of Liss Financial Services, 1,772,000 restricted shares held by
our affiliates will become eligible for sale in the public market, subject only
to the volume, manner of sale and notice requirements of Rule 144. An additional
364,704 restricted shares held by non-affiliates and not subject to lock-up
agreements will become eligible for sale at approximately the same time. Of
these shares, approximately 334,704 may be sold subject to the same Rule 144
requirements as sales by officers, directors and their affiliates, and
approximately 30,000 shares may be sold publicly without Rule 144 restrictions.
28
<PAGE> 30
RULE 144
In general, under Securities Act Rule 144, a stockholder who owns
restricted shares that have been outstanding for at least one year is entitled
to sell, within any three-month period, a number of these restricted shares that
does not exceed the greater of:
- 1% of the then outstanding shares of common stock, or approximately
31,367 shares immediately after this offering, assuming the entire offering is
sold, or
- the average weekly reported trading volume in the common stock during
the four calendar weeks preceding filing of a notice on Form 144 with
respect to the sale.
In addition, our affiliates must comply with the restrictions and
requirements of Rule 144, other than the one-year holding period requirement, to
sell shares of common stock that are not restricted securities. Sales under Rule
144 are also governed by manner of sale provisions and notice requirements, and
current public information about us must be available.
Under Rule 144(k), a stockholder who is not currently, and who has not been
for at least three months before the sale, an affiliate of ours and who owns
restricted shares that have been outstanding for at least two years may resell
these restricted shares without compliance with the above requirements. The one-
and two-year holding periods described above do not begin to run until the full
purchase price is paid by the person acquiring the restricted shares from us or
an affiliate of ours.
29
<PAGE> 31
UNDERWRITING
We have entered into a managing placement agent agreement with Liss
Financial Services, providing for the sale of this offering. The principal
offices of the managing placement agent are located at 424 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, and its telephone number is (414) 225-3555.
Liss Financial Services, as managing placement agent, may engage other
broker-dealer members of the NASD to participate as selected placement agents in
the offering of our common stock.
This is a "best-efforts" offering. Our selected placement agents, including
the managing placement agent, are not obligated to sell or to purchase any
specific number or dollar amount of our common stock. These agents have agreed
to use their best efforts to sell on our behalf all of the common stock offered
by this prospectus. However, we have no guarantee as to how much stock, if any,
will actually be sold in this offering. See "Risk Factors" for additional
information concerning this type of offering. This offering will commence on the
date of this prospectus and may continue until 1,000,000 shares of common stock
are sold or November 30, 2000, whichever occurs first.
All funds received from subscribers for our common stock will be held in
escrow by Grafton State Bank, Grafton, Wisconsin, as escrow agent, pursuant to
an agreement among us, the managing placement agent and the escrow agent.
Because there is no minimum sale requirement for this offering, this escrow is
not required, but has been established voluntarily to insure the orderly and
efficient handling of purchase payments received from investors. Pending
disbursement, subscription proceeds will be deposited in a segregated account
and invested in short-term United States government securities, securities
guaranteed by the United States government, certificates of deposit or time or
demand deposits in commercial banks located in the United States. Funds will be
disbursed by the escrow agent to us and to the managing placement agent at one
or more closings. The time and place of each closing, and the amount of cleared
funds to be disbursed, will be mutually determined by us and the managing
placement agent. A closing will not take place unless and until the escrow agent
has received written joint confirmation from us and the managing placement agent
that we are both in compliance with the provisions of the managing placement
agent agreement, the escrow agreement, the registration statement and, as
applicable, certain requirements under the Securities Exchange Act of 1934 and
NASD rules.
We will determine, in our sole discretion, to accept or reject
subscriptions within five days following their receipt. Funds of an investor
whose subscription is rejected will be promptly returned directly to such person
by the escrow agent, without interest or deduction, pursuant to the terms of the
escrow agreement. The preferred minimum purchase per investor is 100 shares of
common stock. However, we may sell fewer shares to any investor if we choose to
do so. No subscription may be withdrawn, revoked or terminated by the purchaser.
We reserve the right to refuse to sell our common stock to any person and, in
our sole discretion, may terminate the offering at any time.
We propose to offer our common stock to the public at the public offering
price set forth on cover page of this prospectus, and will pay to Liss Financial
Services, the managing placement agent, commissions in an amount equal to 8% of
the aggregate purchase price of the common stock sold. The managing placement
agent may reallow all or any part of such commissions to any other selected
placement agent, up to an amount equal to 8% of the aggregate purchase price of
the common stock sold in this offering by that selected placement agent. We have
also agreed to pay to the managing placement agent a non-accountable expense
allowance equal to 2% of the aggregate purchase price of the common stock sold
in this offering. The managing placement agent may reallow all or any part of
such expense allowance to any other selected placement agent, up to an amount
equal to 2% of the aggregate purchase price of the common stock sold in this
offering by that selected placement agent.
To purchase common stock in this offering, a prospective investor must (1)
complete and sign a subscription agreement, in the form attached to this
prospectus as Exhibit A, and any other documents that we or the managing
placement agent may require and (2) deliver such documents, together with
payment in an amount equal to the full purchase price the shares of common stock
being purchased, to the selling selected placement agent. Checks should be made
payable to "Grafton State Bank, Escrow Agent." Each subscription payment must be
transmitted to the escrow agent by 12:00 noon on the business day next following
its receipt by a selected placement agent.
30
<PAGE> 32
Liss Financial Services has informed us that the selected placement agents,
including the managing placement agent, will not confirm sales of common stock
offered by this prospectus to accounts over which they exercise discretionary
authority.
We, our officers, directors and respective affiliates have agreed, subject
to limited exceptions, not to sell, transfer or otherwise dispose of, directly
or indirectly, any shares of common stock or any securities convertible or
exchangeable for shares of common stock for a period of 120 days after the date
of this prospectus without the prior written consent of Liss Financial Services,
the managing placement agent. Liss Financial Services, however, may in its sole
discretion, at any time without notice, release all or any portion of the shares
of common stock subject to lock-up agreements.
In connection with this offering, we have agreed to sell to the managing
placement agent or its designee, which designee must be another selected
placement agent or a bona fide officer or partner of a selected placement agent,
at a purchase price of $.01 each, warrants to purchase from us shares of common
stock in an amount equal to 10% of the number of shares of common stock sold in
this offering. These underwriter's warrants are exercisable for a period of four
years, commencing one year after the date of this prospectus, at an exercise
price equal to 120% of the price per share set forth on the cover page of this
prospectus. The underwriter's warrants will not be transferable, except to
officers of Liss Financial Services. The underwriter's warrants contain
provisions for adjustment of the exercise price upon the occurrence of certain
events, including stock dividends, stock splits, recapitalizations and the
issuance of our common stock for consideration less than the exercise price. The
holders of underwriter's warrants have no voting, dividend or other rights as
stockholders of IMS with respect to shares underlying their warrants, unless and
until the underwriter's warrants have been exercised.
A new registration statement or post-effective amendment to the
registration statement of which this prospectus is a part will be required to be
filed and declared effective before distribution to the public of shares of our
common stock issuable upon exercise of the underwriter's warrants. We have
agreed, on one occasion when requested, to make necessary filings, at our
expense, in order to permit a public offering of the shares underlying the
underwriter's warrants during the period beginning one year and ending five
years after the date of this prospectus, and to use our best efforts to cause
that registration statement or post-effective amendment to become effective and
remain effective for a period of at least one year. In addition, we have agreed
that, during the same four-year period, we will give advance notice to holders
of underwriter's warrants and shares issued upon the exercise of underwriter's
warrants, if any, of our intention to file a registration statement. In any such
case, the warrantholders so notified shall have the right to require us to
include any shares of common stock issued upon the exercise of their
underwriter's warrants in that registration statement, at our expense, and to
maintain the effectiveness of such registration statement for a period of at
least one year.
For the period during which the underwriter's warrants are exercisable, the
managing placement agent and any transferee will have the opportunity to profit
from a rise in the market price of our common stock, with a resulting dilution
in the interest of our other stockholders. In addition, the terms on which we
will be able to obtain additional capital during the exercise period may be
adversely affected in that the managing placement agent or its transferee is
likely to exercise the underwriter's warrants at a time when we would, in all
likelihood, be able to obtain capital by a new offering of securities on terms
more favorable than those provided by the terms of the underwriter's warrants.
For the three-year period commencing on the date of this prospectus, we
have granted to the managing placement agent the right of first refusal to act
as lead manager, placement agent or investment banker with respect to any
proposed underwritten public distribution or private placement of our securities
or any merger, acquisition or disposition of our assets, if we use a lead
manager, placement agent or investment banker or person performing such function
for a fee.
We and the selected placement agents have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
31
<PAGE> 33
Prior to this offering, there has been no public market for our common
stock. The initial public offering price has been determined by negotiations
between us and the managing placement agent and is not necessarily related to
our asset value, net worth, results of operations or other established criteria
of value. The factors considered in determining the initial offering price
include the history of and the prospects for IMS and the industry in which we
operate, our past and present operating results and the trends of such results,
our financial condition, the experience of our management, the market price of
publicly traded stock of comparable companies in recent periods and the general
condition of the securities markets at the time of this offering.
LEGAL MATTERS
The validity of the shares of common stock offered through this prospectus
will be passed upon for us by Gerald R. Turner & Associates, S.C., Milwaukee,
Wisconsin. Legal matters relating to this offering will be passed upon for the
managing placement agent by Kranitz & Philipp, Milwaukee, Wisconsin.
EXPERTS
Smith & Gesteland, LLP, independent accountants, have audited our
consolidated financial statements as of December 31, 1999 and 1998, and for each
of the two years in the period ended December 31, 1999, as set forth in their
report. We have included our financial statements in this prospectus and
elsewhere in the registration statement in reliance upon the report of Smith &
Gesteland, LLP, given on their authority as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. For further information with respect to us and the common stock to be
sold in this offering, we refer you to the registration statement and the
exhibits and schedules filed as part of the registration statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document are not necessarily complete. If a contract or document has been
filed as an exhibit to the registration statement, we refer you to the copy of
the contract or document that has been filed. Each statement in this prospectus
relating to a contract or document filed as an exhibit is qualified in all
respects by the filed exhibit. The registration statement, including exhibits
and schedules filed with it, may be inspected without charge at the SEC's public
reference rooms at:
- Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549;
- Seven World Trade Center, 13th Floor, New York, New York 10048; or
- Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661.
Copies of all or any part of the registration statement may be obtained
from such office after payment of fees prescribed by the SEC. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. The SEC also maintains a Web site that contains registration
statements, reports, proxy and information statements and other information
regarding registrants, including us, that file electronically with the SEC at
http://www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act of 1934 and,
accordingly, will file annual reports containing consolidated financial
statements audited by an independent public accounting firm, quarterly reports
containing unaudited consolidated financial data, current reports, proxy
statements and other information with the SEC. You will be able to inspect and
copy such periodic reports, proxy statements and other information at the SEC's
public reference room, and the Web site of the SEC referred to above.
32
<PAGE> 34
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants............................................................................ F-1
Financial Statements:
Consolidated Balance Sheets at December 31, 1999 and 1998.................................................... F-2
Consolidated Statements of Income for the years ended
December 31, 1999 and 1998.......................................................................... F-4
Consolidated Statements of Changes in Stockholder Equity
for the years ended December 31, 1999 and 1998...................................................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998.......................................................................... F-6
Notes to Consolidated Financial Statements................................................................... F-7
</TABLE>
33
<PAGE> 35
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
International Monetary Systems, Ltd.
New Berlin, Wisconsin
We have audited the accompanying consolidated balance sheets of International
Monetary Systems, Ltd., and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of income, changes in stockholder equity,
and cash flows for each of the two years in the period ended December 31, 1999.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly the
consolidated financial position of International Monetary Systems, Ltd., and
subsidiaries at December 31, 1999 and 1998, and the results of its operations
and cash flows for each of the two years in the period ended December 31, 1999,
in conformity with generally accepted accounting principles.
Madison, Wisconsin /s/ Smith & Gesteland, LLP
March 10, 2000 SMITH & GESTELAND, LLP
F - 1
<PAGE> 36
INTERNATIONAL MONETARY SYSTEMS, LTD.
New Berlin, Wisconsin
CONSOLIDATED BALANCE SHEETS
December 31
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 101,505 $ 8,789
Accounts receivable, net of allowance for doubtful
accounts of $27,275 in 1999 and $15,308 in 1998 173,550 147,359
Earned trade account 72,472 134,965
Inventory 89,685 60,680
-------------- -------------
Total current assets 437,212 351,793
-------------- -------------
Furniture and equipment
Furniture and equipment 225,764 174,806
Less accumulated depreciation (139,440) (110,940)
-------------- -------------
Net furniture and equipment 86,324 63,866
-------------- -------------
Other assets
Goodwill 50,616 54,365
Investment in real estate 26,000 26,000
Deferred income taxes 9,534 4,951
Other 11,600 6,157
-------------- -------------
Total other assets 97,750 91,473
-------------- -------------
Total assets $ 621,286 $ 507,132
============== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F - 2
<PAGE> 37
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
LIABILITIES
Current liabilities
Accounts payable $ 20,619 $ 21,944
Payroll and payroll taxes 42,607 46,608
Sales taxes 1,947 4,284
Accrued income taxes 594 593
Notes payable 5,437 6,444
Current portion of long-term debt 9,301 7,906
-------------- -------------
Total current liabilities 80,505 87,779
-------------- -------------
Long-term liabilities
Notes payable to banks 40,814 31,653
Notes payable to stockholder 8,235 16,866
Debentures payable 55,000
-------------- -------------
Total long-term liabilities 49,049 103,519
-------------- -------------
Total liabilities 129,554 191,298
-------------- -------------
STOCKHOLDER EQUITY
Common stock, $.01 par value for 1998, $.0001 par
value for 1999 214 5,108
Paid in capital 538,305 343,108
Retained earnings (deficit) (46,787) (32,382)
-------------- -------------
Total stockholder equity 491,732 315,834
-------------- -------------
Total liabilities and stockholder equity $ 621,286 $ 507,132
============== =============
</TABLE>
F - 3
<PAGE> 38
INTERNATIONAL MONETARY SYSTEMS, LTD.
New Berlin, Wisconsin
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31
<TABLE>
<CAPTION>
1999 1998
---------------- ---------------
<S> <C> <C>
Income
Gross revenue $ 1,396,851 $ 1,181,540
---------------- ---------------
Expenses
Payroll, related taxes and employee benefits 788,717 649,446
General and administrative 284,927 266,229
Occupancy 166,361 115,769
Selling 142,310 99,514
Other 33,524 31,930
---------------- ---------------
Total expenses 1,415,839 1,162,888
---------------- ---------------
Income (loss) before income taxes (18,988) 18,652
Income tax expense (benefit) (4,583) 9,278
---------------- ---------------
Net income (loss) $ (14,405) $ 9,374
================ ===============
Net income (loss) per common share $ (0.01) $ 0.01
</TABLE>
The accompanying notes are an integral part of the financial statements.
F - 4
<PAGE> 39
INTERNATIONAL MONETARY SYSTEMS, LTD.
New Berlin, Wisconsin
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER EQUITY
For the Years Ended December 31
<TABLE>
<CAPTION>
Common Stock Retained Total
-------------------------- Paid in Earnings Stockholder
Shares Amount Capital (Deficit) Equity
------------ ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1998
- ------------------------------------------
Balance January 1, 1998 443,850 $ 4,438 $ 173,836 $ (41,756) $ 136,518
Net income for 1998 9,374 9,374
Stock issued
Private placement proceeds 52,000 520 124,422 124,942
Purchase of assets of
Wisconsin Barter Exchange 15,000 150 44,850 45,000
------------ ---------- ------------- ----------- ------------
Balance December 31, 1998 510,850 5,108 343,108 (32,382) 315,834
1999
- ------------------------------------------
Net income (loss) for 1999 (14,405) (14,405)
Stock issued
Private placement proceeds 60,152 6 122,297 122,303
Stock options 13,000 1 12,999 13,000
Debentures exchanged for stock 27,500 3 54,997 55,000
Par value changed to $.0001 in
July 1999 (5,057) 5,057
Two for one stock splits:
July 1999 456,850 46 (46)
December 1999 1,068,352 107 (107)
------------ ---------- ------------- ----------- ------------
Balance December 1999 2,136,704 $ 214 $ 538,305 $ (46,787) $ 491,732
============ ========== ============= =========== ============
</TABLE>
Common stock authorized was 560,000 shares at December 31, 1998 and 20,000,000
shares at December 31, 1999.
The accompanying notes are an integral part of the financial statements.
F - 5
<PAGE> 40
INTERNATIONAL MONETARY SYSTEMS, LTD.
New Berlin, Wisconsin
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (14,405) $ 9,374
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 32,249 27,634
Deferred income taxes (4,583) 9,278
(Gain) loss on investment in partnership (743) (135)
Loss on disposition of real estate
Changes in assets and liabilities:
Accounts receivable (26,191) (35,657)
Earned trade account 62,493 302
Inventory (29,005) (60,680)
Prepaid expenses 400 (400)
Security deposits (10,100)
Accounts payable (1,325) 333
Payroll and payroll taxes (4,001) (12,572)
Sales taxes (2,337) 4,284
------------- ------------
Net cash provided by (used in) operating activities 2,452 (58,239)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (50,958) (36,353)
Goodwill (11,240)
Sale of partnership interest 5,000
------------- ------------
Net cash used in investing activities (45,958) (47,593)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayment) of debt 9,550 35,437
Prepayment of shareholder note (8,631) (56,141)
Proceeds from issuance of stock 135,303 124,942
------------- ------------
Net cash provided by financing activities 136,222 104,238
------------- ------------
Net increase (decrease) in cash 92,716 (1,594)
Cash at beginning of period 8,789 10,383
------------- ------------
Cash at end of period $ 101,505 $ 8,789
============= ============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 14,729 $ 15,889
SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of business for stock $ $ 45,000
Debentures exchanged for stock 55,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
F - 6
<PAGE> 41
INTERNATIONAL MONETARY SYSTEMS, LTD.
New Berlin, Wisconsin
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTE 1 - INFORMATION ABOUT THE COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
A.. ORGANIZATION
International Monetary Systems, Ltd. (IMS - the company), is a
holding company located in New Berlin, Wisconsin with two
wholly-owned operating subsidiaries which comprise the
Continental Trade Exchange Barter Network: Continental Trade
Exchange, Ltd. (CTEL), and Continental Trade Exchange of
Illinois, Inc. (CTEILL). CTEL, a barter industry trade
exchange business was acquired in January 1989. CTEILL, also a
barter trade exchange business, was acquired in December 1996.
B. ACQUISITIONS
On July 15, 1998, CTEILL acquired the assets and barter trade
accounts of Commercial Barter of Illinois, Inc., located in
Joliet, Illinois for $20,000. On July 29, 1998, CTEL acquired
the assets and barter trade accounts of Wisconsin Barter
Exchange (WBE) located in Madison, Wisconsin for $60,000 cash
and $45,000 in stock of IMS. Goodwill in the amount of $56,240
was recognized as a result of the WBE purchase.
As a result of these acquisitions, the combined operations of
Continental Trade Exchange now cover the eastern portion of
Wisconsin and northern Illinois. Total clients numbered over
2,400 as of December 1999. Trade volume totaled $9,689,000 and
$11,150,000 for 1998 and 1999, respectively, producing
consolidated revenues for the company of $1,182,000 and
$1,397,000 for 1998 and 1999, respectively.
C. OPERATIONS OF BARTER EXCHANGES
Barter exchanges not only operate with traditional cash
currency, but they can also issue trade credits, which
constitute their own unique currency. Trade exchanges permit
members/clients to barter their goods and services with other
clients in several ways. Many sell their products to the
barter network directly, others issue trade certificates that
are redeemable for their goods or services, and the balance
transact their barter business by issuing trade vouchers. In
return, the selling clients receive trade credits from the
exchange, which may be used to purchase services or products
from other members in the exchange.
F - 7
<PAGE> 42
INTERNATIONAL MONETARY SYSTEMS, LTD.
New Berlin, Wisconsin
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTE 1 - INFORMATION ABOUT THE COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
D. REVENUE SOURCES
The company and its subsidiaries earn revenues in both
traditional dollars (cash income) and in trade dollars. Cash
income is earned through membership set-up fees assessed when
a member joins, through service fees generated when clients
spend their trade dollars to purchase goods and services
through the exchange from other members, through monthly
maintenance fees, and through sales for cash of products
originally purchased by IMS with its own trade dollars.
Trade profits are generated in various ways. Monthly
maintenance fees are assessed in trade dollars as well as in
cash. Transaction fees are assessed in trade dollars rather
than cash for clients in certain industries such as radio and
TV stations, hotels, and restaurants and others not accustomed
to paying cash fees because they already are involved in many
direct barter transactions for their services. Occasionally
the company will accept a favorable trade ratio in lieu of a
cash service fee. The company also has an opportunity to
create additional trade profits by purchasing wholesale,
closeout, and liquidation merchandise for cash, and the
liquidating of such products through the trade program.
Earned trade dollars are used by the company to purchase
various goods and services required in its operations. All
barter transactions are reported at the estimated fair value
of the products or services received.
E. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the company and its subsidiaries. Significant intercompany
accounts and transactions have been eliminated in
consolidation.
F. USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
G. INVENTORY
Inventory consists primarily of fine art and other merchandise
which the company intends to sell. Inventory is carried at the
lower of actual cost of acquisition or fair value.
F - 8
<PAGE> 43
INTERNATIONAL MONETARY SYSTEMS, LTD.
New Berlin, Wisconsin
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTE 1 - INFORMATION ABOUT THE COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
H. EARNED TRADE ACCOUNT
As part of the operations of the subsidiaries, trade dollars
are earned which can be and are used to purchase goods and
services. This account is increased principally for service,
membership and transaction fees, and is decreased by the
company's purchase of goods and services for trade dollars. An
impairment loss is recognized if it becomes apparent that the
fair value of the trade dollars in the account is less than
the carrying amount or if it is probable that the company will
not use all of its trade dollars.
I. FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using accelerated
methods over the estimated useful lives of five to seven
years.
J. GOODWILL
Goodwill represents the excess of the cost over fair value of
the assets acquired in the purchase of Wisconsin Barter
Exchange, Madison, Wisconsin. The transaction was accounted
for as a purchase and the goodwill is being amortized on a
straight-line basis over a fifteen year period.
K. INCOME TAXES
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes related to differences
between the financial and income tax basis of assets and
liabilities, and to the tax benefit of net operating loss
carryovers.
The deferred tax assets and liabilities represent the future
tax return consequences of those differences, which will
either be taxable or deductible when the assets and
liabilities are recovered or settled.
L. CONCENTRATIONS OF CREDIT RISK
The company grants credit to its customers, substantially all
of whom are members of the Continental Trade Exchange barter
network located in eastern Wisconsin and northern Illinois.
The company routinely assesses the financial strength of its
customers and, as a consequence, believes that its trade
accounts receivable credit risk exposure is limited.
F - 9
<PAGE> 44
INTERNATIONAL MONETARY SYSTEMS, LTD.
New Berlin, Wisconsin
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTE 1 - INFORMATION ABOUT THE COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
M. ADVERTISING
Advertising costs, which are principally included in selling
expenses, are expensed as incurred. Advertising expense was
$8,417 and $8,593 for the years ended December 31, 1999 and
1998, respectively.
NOTE 2 - FURNITURE AND EQUIPMENT
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------- ----------------
<S> <C> <C>
Balance January 1, 1998 $ 138,453 $ 85,181
Additions during 1998 36,353
Depreciation expense for 1998 25,759
------------- -------------
Balance December 31, 1998 174,806 110,940
Additions during 1999 50,958
Depreciation expense for 1999 28,500
------------- -------------
Balance December 31, 1999 $ 225,764 $ 139,440
============= =============
</TABLE>
NOTE 3 - NOTES PAYABLE TO BANKS
A subsidiary of the company (CTEL) has a revolving line of credit
with Bank One in the amount of $50,000, with a final maturity of
May 5, 2005. Amounts drawn and outstanding were $29,073 and $29,244
as of December 31, 1999 and 1998, respectively. Monthly payments
are due based on the greatest of accrued interest, $250 or 3% of
the total amount outstanding. Interest is computed at prime plus 3%
(11.75% as of December 31, 1999).
CTEL obtained an additional business line of credit with Wells
Fargo Bank in the amount of $50,000, during November 1998. The line
has no maturity date. The balance outstanding was $21,042 and
$10,315 as of December 31, 1999 and 1998, respectively. Monthly
payments are based on 2% of the outstanding balance. Interest is
computed at prime plus 1.75% (10.5% as of December 31, 1999).
<TABLE>
<CAPTION>
Balance
as of
December 31, Current Long-Term
1999 Position Portion
----------------- ------------ -------------
<S> <C> <C> <C>
Bank One $ 29,073 $6,491 $ 22,582
Wells Fargo 21,042 2,810 18,232
------------ ---------- ------------
Total $ 50,115 $9,301 $ 40,814
============ ========== ============
</TABLE>
F-10
<PAGE> 45
INTERNATIONAL MONETARY SYSTEMS, LTD.
New Berlin, Wisconsin
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTE 3 - NOTES PAYABLE TO BANKS (CONTINUED)
The aggregate amount of maturities of long-term debt for each of
the next five years is as follows:
<TABLE>
<S> <C>
2000 $ 9,301
2001 7,476
2002 6,026
2003 4,870
2004 3,947
Thereafter 18,495
------------
$ 50,115
============
</TABLE>
NOTE 4 - NOTES PAYABLE TO STOCKHOLDER
From time to time, the president and major shareholder of the
company has loaned funds to the subsidiaries. There is no definite
repayment schedule. Interest is payable quarterly based on a 12%
annual rate.
NOTE 5 - DEBENTURES PAYABLE
Debentures had been issued under the following terms:
<TABLE>
<CAPTION>
Original
Number Rate Date Amount Maturity
----------- ------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
104 10% 06/08/94 $ 10,000 06/01/97
105 10% 06/01/94 10,000 06/30/96
106 10% 07/01/94 10,000 12/31/96
107 13% 04/01/95 10,000 03/31/98
108 13% 04/01/95 10,000 03/31/96
10% 12/22/93 5,000 12/31/99
</TABLE>
Those debentures with original maturity dates prior to 1999 had
been renewed for indefinite periods at the same interest rates,
with the exception of #106 which increased to 12%.
The $10,000 debentures had attached warrants to purchase 5,000
shares of IMS stock at $2.00 per share. The $5,000 debenture
allowed the holder to purchase 2,500 shares at $2.00 per share. The
president and major shareholder of the company had personally
guaranteed the debentures. Interest was paid quarterly.
All debentures were exchanged for stock during December 1999
F-11
<PAGE> 46
INTERNATIONAL MONETARY SYSTEMS, LTD.
New Berlin, Wisconsin
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
.NOTE 6 - INCOME TAXES
Income tax expense consists of the following components:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Currently payable - federal $ $
Currently payable - state
Deferred
Federal 6,010
State 3,268
Tax benefit of net operating loss (4,583)
=========== ===========
Total expense (benefit) $ (4,583) $ 9,278
=========== ===========
Deferred income tax assets are attributable to the tax benefits of
net operating loss carryforwards as follows:
Classified as a long-term asset $ 9,534 $ 4,951
=========== ===========
</TABLE>
NOTE 7 - STOCK OPTIONS
Two employees of the company were granted stock options in 1996 to
acquire 10,000 and 3,000 shares respectively of the $.01 par value
common stock of the corporation for $1.00 per share. Both options
were exercised in 1999.
NOTE 8 - RELATED PARTY TRANSACTIONS
The company currently leases its executive offices and principal
operating facilities in New Berlin, Wisconsin from Glendale
Investments, LLC, a Wisconsin limited liability company which is
100% owned by officers and stockholders of the company. The lease
commenced October 1, 1999, and expires September 30, 2002. Lease
payments are $5,000 per month plus 50% of certain operating costs
including insurance, utilities, maintenance and
other-than-structural repairs, and 50% of increased real estate
taxes over the 1999 taxes.
F-12
<PAGE> 47
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The company has various leases for office facilities and vehicles
which are classified as operating leases. Total rent expense for
all operating leases for 1999 and 1998 is summarized below:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Office facilities on month-to-month leases $ 106,367 $ 89,793
Related party lease (see Note 8) 15,000
Madison, Wisconsin office lease expiring
June 30, 2000, at $375 per month 2,250
Vehicle leases 30,578 29,361
-------------- --------------
$ 154,195 $ 119,154
============== ==============
</TABLE>
Minimum future lease commitments as of December 31, 1999, are summarized
as follows:
<TABLE>
<CAPTION>
Office
Facilities Vehicles
------------ ------------
Year ended December 31
<S> <C> <C>
2000 $ 62,250 $ 20,515
2001 60,000 14,346
2002 45,000
</TABLE>
NOTE 10 - EARNINGS PER SHARE
Earnings per share are based on the weighted average number of
shares outstanding for the year, restated for the two stock splits
in 1999. Weighted average shares outstanding were 1,992,198 and
1,834,118 for 1999 and 1998, respectively.
F-13
<PAGE> 48
EXHIBIT A
1,000,000 SHARES
INTERNATIONAL MONETARY SYSTEMS LTD.
COMMON STOCK
SUBSCRIPTION AGREEMENT
International Monetary Systems, Ltd.
16901 West Glendale Drive
New Berlin, Wisconsin 53151
Gentlemen:
The undersigned irrevocably subscribe(s) for and agree(s) to purchase
_______shares of common stock, par value $0.0001 per share ("Common Stock"), of
International Monetary Systems, Ltd. ("Company"), to be registered in the
name(s) of the undersigned at the address appearing below. Delivered
concurrently herewith is payment in full for the Common Stock subscribed for, at
the price of $____ per share (checks made payable to "Grafton State Bank, Escrow
Agent"). The undersigned agree(s) that the Company has the right to reject this
subscription for any reason and that, in the event of rejection, all funds
delivered herewith will be promptly returned, without interest or deduction.
WITHHOLDING CERTIFICATION
Each of the undersigned certifies under penalty of perjury that:
(1) The Social Security Number or other Federal Tax I.D. Number entered
below is correct.
(2) The undersigned is not subject to backup withholding because:
(a) The IRS has not informed the undersigned that he/she/it is subject
to backup withholding.
(b) The IRS has notified the undersigned that he/she/it is no longer
subject to backup withholding.
NOTE: If this statement is not true and you are subject to backup
withholding, strike out section (2).
REGISTRATION OF SECURITIES
Common Stock is to be registered as indicated below. (Please type or
print.)
- --------------------------------
-----------------------------------
Social Security or Federal Tax I.D.
- -------------------------------- Number
Name(s)
- --------------------------------
Street Address Telephone Number ( ) --------------
- --------------------------------
City, State, Zip Code
OWNERSHIP: [ ] Individual [ ] Marital Property
[ ] Joint Tenants with Right of Survivorship [ ] Tenants in Common
[ ] Corporation [ ] Partnership [ ] Trust [ ] IRA/Qualified Plan
[ ] Other
If Common Stock is to be registered jointly, all owners must sign. For
IRAs/Qualified Plans, the trustee must sign. Any registration in the names of
two or more co-owners will, unless otherwise specified, be as joint tenants with
rights of survivorship and not as tenants in common. Each subscriber certifies
that he/she/it has full capacity to enter into this Agreement. This subscription
is subject to acceptance by the Company and will not be accepted unless
accompanied by payment in full.
A-1
<PAGE> 49
SUBSCRIBER SIGNATURES
INDIVIDUALS (All proposed record holders must sign.)
Dated:
-------------------
- ---------------------------------- ------------------------------------------
(Signature) (Signature)
- ---------------------------------- ------------------------------------------
(Print or Type Name) (Print or Type Name)
CORPORATIONS, PARTNERSHIPS, TRUSTS AND IRAS/QUALIFIED PLANS (Certificate of
Signatory must be completed.)
Dated:
--------------------------- ------------------------------------------
(Print or Type Name of Entity)
By:
------------------------------------------
(Signature of Authorided Representative)
CERTIFICATE OF SIGNATORY
I, , am the
------------------------------- ---------------------------------------
(Print or Type Name of Authorized (Print or Type Title or Position)
Representative)
of
---------------------------------(Entity").
(Print or Type Name of Subscribing Entity)
I certify that I am fully authorized and empowered by the Entity to execute
this Subscription Agreement and to purchase Common Stock, and that this
Subscription Agreement has been duly executed by me on behalf of the Entity and
constitutes a valid and binding obligation of the Entity in accordance with its
terms.
- --------------------------------------------------------------------------------
(Signature of Authorized Representative)
SALES AGENT
Name of Selected Placement Agent:
------------------------------------------
Name of Registered Representative:
----------------------------------------
ACCEPTANCE
Subscription [ ] accepted [ ] rejected as of ,2000.
----------------
INTERNATIONAL MONETARY SYSTEMS, LTD.
By:
------------------------------------
(Signature of Authorized Officer)
A-2
<PAGE> 50
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 11.01 through 11.03 of the Bylaws of the Registrant authorize such
corporation to indemnify its directors, officers, employees or agents to the
fullest extent permitted by Wisconsin law, as follows:
ARTICLE XI
INDEMNIFICATION
SECTION 11.01. INDEMNIFICATION. The corporation shall, to the fullest
extent authorized by ch. 180, indemnify a director or officer against liability
and reasonable expenses incurred by the director or officer in a proceeding in
which the director or officer was a party because he or she is or was a director
or officer of the corporation. These indemnification rights shall not be deemed
to exclude any other rights to which the director or officer may otherwise be
entitled. The corporation may, to the fullest extent authorized by ch. 180,
indemnify, reimburse or advance expenses of directors or officers.
A director or officer who seeks indemnification under this Section shall
make a written request to the corporation. Indemnification under this Section is
not required to the extent limited by the articles of incorporation under
Section 11.02. Indemnification under this Section is not required if the
director or officer has previously received indemnification or allowance of
expenses from any person, including the corporation, in connection with the same
proceeding.
SECTION 11.02. LIMITED INDEMNIFICATION. The corporation's articles of
incorporation may limit its obligation to indemnify under Section 11.01. A
limitation under this Section applies if the first alleged act or omission of a
director or officer for which indemnification is sought occurred while the
limitation was in effect.
SECTION 11.03. INDEMNIFICATION AND ALLOWANCE OF EXPENSES OF EMPLOYEES AND
AGENT. The corporation shall, to the fullest extent authorized by ch. 180,
indemnify an employee who is not a director or officer of the corporation, to
the extent that he or she has been successful on the merits or otherwise in
defense of a proceeding, for all reasonable expenses incurred in the proceeding
if the employee was a party because he or she was an employee of the
corporation. In addition to the indemnification required by the preceding
sentence, the corporation may indemnify and allow reasonable expenses of an
employee or agent who is not a director or officer of the corporation to the
extent provided by the articles of incorporation or by-laws, by general or
specific action of the board of directors or by contract.
Sections 180.0850 through 180.0859 of the Wisconsin Business Corporation Law
provide for the indemnification of directors, officers and other employees of
the Registrant, as follows:
180.0850 DEFINITIONS APPLICABLE TO INDEMNIFICATION AND INSURANCE
PROVISIONS. In ss. 180.0850 to 180.0859:
(1) "Corporation" means a domestic corporation and any domestic or
foreign predecessor of a domestic corporation where the predecessor
corporation's existence ceased upon the consummation of a merger or other
transaction.
(2) "Director or officer" of a corporation means any of the following:
(a) An individual who is or was a director or officer of the
corporation.
(b) An individual who, while a director or officer of the
corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, member of any governing or
decision-making committee, employee or agent of another corporation or
foreign corporation, partnership, joint venture, trust or other
enterprise.
II - 1
<PAGE> 51
(c) An individual who, while a director or officer of the
corporation, is or was serving an employee benefit plan because his or
her duties to the corporation also impose duties on, or otherwise involve
services by, the person to the plan or to participants in or
beneficiaries of the plan.
(d) Unless the context requires otherwise, the estate or personal
representative of a director or officer.
(3) "Expenses" include fees, costs, charges. disbursements, attorney
fees and any other expenses incurred in connection with a proceeding.
(4) "Liability" includes the obligation to pay a judgment, settlement,
penalty, assessment, forfeiture or fine, including an excise tax assessed with
respect to an employee benefit plan, and reasonable expenses.
(5) "Party" includes an individual who was or is, or who is threatened to
be made, a named defendant or respondent in a proceeding.
(6) "Proceeding" means any threatened, pending or completed civil,
criminal, administrative or investigative action, suit, arbitration or other
proceeding, whether formal or informal, which involves foreign, federal, state
or local law and which is brought by or in the right of the corporation or by
any other person.
180.0851 MANDATORY INDEMNIFICATION. (1) A corporation shall indemnify a director
or officer, to the extent that he or she has been successful on the merits or
otherwise in the defense of a proceeding, for all reasonable expenses incurred
in the proceeding if the director or officer was a party because he or she is a
director or officer of the corporation.
(2)(a) In cases not included under sub. (1), a corporation shall
indemnify a director or officer against liability incurred by the
director or officer in a proceeding to which the director or officer was
a party because he or she is a director or officer of the corporation,
unless liability was incurred because the director or officer breached or
failed to perform a duty that he or she owes to the corporation and the
breach or failure to perform constitutes any of the following:
1. A wilful failure to deal fairly with the corporation or its
shareholders in connection with a matter in which the director or
officer has a material conflict of interest.
2. A violation of the criminal law, unless the director or officer had
reasonable cause to believe that his or her conduct was lawful or no
reasonable cause to believe that his or her conduct was unlawful.
3. A transaction from which the director or officer derived an improper
personal profit.
4. Wilful misconduct.
(b) Determination of whether indemnification is required under this
subsection shall be made under s. 180.0855.
(c) The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of no contest or an equivalent plea, does not, by
itself, create a presumption that indemnification of the director or officer is
not required under this subsection.
(3) A director or officer who seeks indemnification under this section
shall make a written request to the corporation.
(4) (a) Indemnification under this section is not required to the
extent limited by the articles of incorporation under s. 180.0852.
(b) Indemnification under this section is not required if the director
or officer has previously received indemnification or allowance of expenses from
any person, including the corporation, in connection with the same proceeding.
180.0952 CORPORATION MAY LIMIT INDEMNIFICATION. A corporation's articles of
incorporation may limit its obligation to indemnify under s. 180.0851. Any
provision of the articles of incorporation relating to a corporation's power or
obligation to indemnify that was in existence on June 13, 1987, does not
constitute a limitation on the corporation's obligation to indemnify under s.
180.0851. A limitation under this section applies if the first alleged act or
omission of a director or officer for which indemnification is sought occurred
while the limitation was in effect.
180.0853 ALLOWANCE OF EXPENSES AS INCURRED. Upon written request by a director
or officer who is a party to a proceeding, a corporation may pay or reimburse
his or her reasonable expenses as incurred if the director or officer provides
the corporation with all of the following:
II - 2
<PAGE> 52
(1) A written affirmation of his or her good faith belief that he or she
has not breached or failed to perform his or her duties to the corporation.
(2) A written undertaking, executed personally or on his or her behalf,
to repay the allowance and, if required by the corporation, to pay reasonable
interest on the allowance to the extent that it is ultimately determined under
s. 180.0855 that indemnification under s. 180.0851(2) is not required and that
indemnification is not ordered by a court under s. 180.0854(2)(b). The
undertaking under this subsection shall be an unlimited general obligation of
the director or officer and may be accepted without reference to his or her
ability to repay the allowance. The undertaking may be secured or unsecured.
180.0854 COURT-ORDERED INDEMNIFICATION. (1) Except as provided otherwise by
written agreement between the director or officer and the corporation, a
director or officer who is a party to a proceeding may apply for indemnification
to the court conducting the proceeding or to another court of competent
jurisdiction. Application shall be made for an initial determination by the
court under s. 180.0855(5) or for review by the court of an adverse
determination under s. 180.0855(1), (2), (3), (4) or (6). After receipt of an
application, the court shall give any notice that it considers necessary.
(2) The court shall order indemnification if it determines any of the
following:
(a) That the director or officer is entitled to indemnification under
s. 180-0851 (1) or (2). If the court also determines that the corporation
unreasonably refused the director's or officer's request for indemnification,
the court shall order the corporation to pay the director's or officer's
reasonable expenses incurred to obtain the court-ordered indemnification.
(b) That the director or officer is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, regardless of whether
indemnification is required under s.180.0851(2).
180.0955 DETERMINATION OF RIGHT TO INDEMNIFICATION. Unless otherwise provided by
the articles of incorporation or bylaws or by written agreement between the
director or officer and the corporation, the director or officer seeking
indemnification under s. 180.0851(2) shall select one of the following means for
determining his or her right to indemnification:
(1) By a majority vote of a quorum of the board of directors consisting
of directors who are not at the time parties to the same or related proceedings.
If a quorum of disinterested directors cannot be obtained, by majority vote of a
committee duly appointed by the board of directors and consisting solely of 2 or
more directors who are not at the time parties to the same or related
proceedings. Directors who are parties to the same or related proceedings may
participate in the designation of members of the committee.
(2) By independent legal counsel selected by a quorum of the board of
directors or its committee in the manner prescribed in sub. (1) or, if unable to
obtain such a quorum or committee, by a majority vote of the full board of
directors, including directors who are parties to the same or related
proceedings.
(3) By a panel of 3 arbitrators consisting of one arbitrator selected by
those directors entitled under sub. (2) to select independent legal counsel, one
arbitrator selected by the director or officer seeking indemnification and one
arbitrator selected by the 2 arbitrators previously selected.
(4) By an affirmative vote of shares as provided in s.180.0725. Shares
owned by, or voted under the control of, persons who are at the time parties to
the same or related proceedings, whether as plaintiffs or defendants or in any
other capacity, may not be voted in making the determination.
(5) By a court under s.180.0854.
(6) By any other method provided for in any additional right to
indemnification permitted under s.180.0858.
180.0856 INDEMNIFICATION AND ALLOWANCE OF EXPENSES OF EMPLOYEES AND AGENTS.
(1) A corporation shall indemnify an employee who is not a director or
officer of the corporation, to the extent that he or she has been successful on
the merits or otherwise in defense of a proceeding, for all expenses incurred in
the proceeding if the employee was a party because he or she was an employee of
the corporation.
(2) In addition to the indemnification required by sub. (1), a
corporation may indemnify and allow reasonable expenses of an employee or agent
who is not a director or officer of the corporation to the extent provided by
the articles of incorporation or bylaws, by general or specific action of the
board of directors or by contract.
II - 3
<PAGE> 53
180.0857 INSURANCE. A corporation may purchase and maintain insurance on behalf
of an individual who is an employee, agent, director or officer of the
corporation against liability asserted against or incurred by the individual in
his or her capacity as an employee, agent, director or officer or arising from
his or her status as an employee, agent, director or officer, regardless of
whether the corporation is required or authorized to indemnify or allow expenses
to the individual against the same liability under ss. 180.0851, 180.0853,
180.0856 and 180.0858.
180.0858 ADDITIONAL RIGHTS TO INDEMNIFICATION AND ALLOWANCE OF EXPENSES. (1)
Except as provided in sub. (2), ss. 180.0851 and 180.0853 do not preclude any
additional right to indemnification or allowance of expenses that a director or
officer may have under any of the following:
(a) The articles of incorporation or bylaws.
(b) A written agreement between the director or officer and the
corporation.
(c) A resolution of the board of directors.
(d) A resolution, after notice, by a majority vote of all of the
corporation's voting shares then issued and outstanding.
(2) Regardless of the existence of an additional right under sub. (1),
the corporation may not indemnify a director or officer, or permit a director or
officer to retain any allowance of expenses unless it is determined by or on
behalf of the corporation that the director or officer did not breach or fail to
perform a duty that he or she owes to the corporation which constitutes conduct
under s. 180.0851(2)(a)1, 2, 3 or 4. A director or officer who is a party to the
same or related proceeding for which indemnification or an allowance of expenses
is sought may not participate in a determination under this subsection.
(3) Sections 180.0850 to 180.0859 do not affect a corporation's power to
pay or reimburse expenses incurred by a director or officer in any of the
following circumstances:
(a) As a witness in a proceeding to which he or she is not a party.
(b) As a plaintiff or petitioner in a proceeding because he or she is or
was an employee, agent, director or officer of the corporation.
180.0859 INDEMNIFICATION AND INSURANCE AGAINST SECURITIES LAW CLAIMS. (1) It is
the public policy of this state to require or permit indemnification, allowance
of expenses and insurance for any liability incurred in connection with a
proceeding involving securities regulation described under sub. (2) to the
extent required or permitted under ss. 180.0850 to 180.0858.
(2) Sections 180.0850 to 180.0858 apply, to the extent applicable to any
other proceeding, to any proceeding involving a federal or state statute, rule
or regulation regulating the offer, sale or purchase of securities, securities
brokers or dealers, or investment companies or investment advisors.
The Registrant has not purchased insurance against costs which may be
incurred by it pursuant to the foregoing provisions of its Articles of
Incorporation of Incorporation and Bylaws, nor does it insure its officers and
directors against liabilities incurred by them in the discharge of their
functions as such officers and directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
All amounts below are based upon the registration of 1,150,000 shares at
$6.00 per share, of which 1,000,000 shares are assumed to be sold in the
offering at $6.00 per share:
<TABLE>
<S> <C>
SEC registration fee............................ $ 1,821.60
NASD filing fee................................. 1,190.00
Brokers' expense allowance...................... 120,000.00
Legal fees and expenses......................... 98,000.00 *
Accounting fees and expenses.................... 17,500.00 *
Blue Sky fees and expenses...................... 9,250.00 *
Printing and engraving.......................... 22,750.00 *
Other expenses.................................. 4,988.40 *
--------------
Total.................................. $ 275,500.00 *
- --------------------
</TABLE>
* Estimate
II - 4
<PAGE> 54
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On July 20, 1999, the Registrant sold an aggregate of 13,000 shares of
Common Stock to two of its employees (10,000 shares and 3,000 shares,
respectively), pursuant to the exercise of options granted in 1996, at the price
of $1.00 per share. No selling commissions or other compensation were paid in
connection with either transaction. Such sales were made in reliance upon the
exemption from registration under the Securities Act of 1933 provided by Section
4(2) of such Act.
On July 29, 1998, in connection with its acquisition of the assets and
trade accounts of Wisconsin Barter Exchange, the Registrant issued 15,000 shares
of its Common Stock to Scott Sanftleben, the seller of such assets and trade
accounts, valued at $3.00 per share ($45,000) for purposes of the sale. No
selling commissions or other compensation were paid in connection with either
transaction. Such payment was made in reliance upon the exemption from
registration under the Securities Act of 1933 provided by Section 4(2) of such
Act.
From June 10, 1998 through September 30, 1999, the Registrant sold, as
investment units, 112,152 shares of common stock and warrants to purchase an
additional 56,076 shares. Each unit consisted of two shares of common stock and
a warrant to purchase one additional share for $4.00. Units were sold to 29
individual investors, of whom 6 were accredited and 23 were nonaccredited (but
who certified that they had the level of sophistication required by Rule 506 of
Regulation D), at the price of $6.00 per unit, for an aggregate purchase price
of $336,456. Adjusted for a subsequent 2-for-1 stock split, 224,304 shares of
common stock and warrants covering 112,152 additional shares at $2.00 per share
were sold. All purchasers received and/or were given access to the information
required under Rule 502(b). The foregoing private offering was underwritten, on
a "best-efforts" basis, by Pavek Investments, Inc., Milwaukee, Wisconsin; the
Registrant paid an aggregate of $33,646 in commissions and expense allowances to
Pavek Investments, Inc. in connection with the distribution of the offering.
All sales were made in reliance upon the exemption from registration under the
Securities Act of 1933 provided by Section 4(2) of such Act and Rule 506 of
Regulation D thereunder.
ITEM 27. EXHIBITS.
Exhibit
Number Description
1.1 Underwriting Agreement *
3.1 Articles of Incorporation of the Registrant *
3.2 Articles of Amendment of the Registrant *
3.3 Bylaws of the Registrant *
4.1 Form of Underwriter's Warrant
5.1 Opinion of Gerald R. Turner & Associates, S.C.
10.1 Lease Agreement, between Glendale Investments, LLC. and the
Registrant
10.2 Escrow Agreement, among the Registrant, Liss Financial Services and
Grafton State Bank
23.1 Consent of Gerald R. Turner & Associates, S.C. (included in Exhibit
5.1)
23.2 Consent of Kranitz & Philipp
23.3 Consent of Smith & Gesteland, LLP.
24.1 Power of Attorney *
27.1 Financial Data Schedule (included in electronic filing only)
-----------------------
* Previously filed.
ITEM 28. UNDERTAKINGS.
The undersigned small business issuer will provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II - 5
<PAGE> 55
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned small business issuer will:
(1) For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act as part of
this registration statement as of the time the Commission declared it effective.
(2) For determining any liability under the Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement for
the securities offered in the registration statement, and the offering of the
securities at that time as the initial bona fide offering of those securities.
(3) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(4) For determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(5) File a post-effective amendment to remove from registration any of the
securities which remain unsold at the end of the offering.
II - 6
<PAGE> 56
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of New
Berlin, State of Wisconsin on April 3, 2000.
INTERNATIONAL MONETARY SYSTEMS, LTD.
By: /s/ DONALD F. MARDAK
--------------------------------------
Donald F. Mardak,
Chief Executive Officer and President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title
--------- -----
DONALD F. MARDAK Chief Executive Officer
(Principal Executive Officer),
President and Director
JOHN E. STRABLEY, JR. Executive Vice President
and Director
DALE L. MARDAK Vice President, Treasurer (Principal
Financial and Accounting Officer)
and Director
By: /s/ DONALD F. MARDAK
-------------------------------
Donald F. Mardak
Signing personally as Chief Executive Officer,
(Principal Executive Officer), President
and Director, and as
Attorney-in-Fact for the
directors and officers whose
names appear above, on
April 3, 2000.
Part III-Signatures
<PAGE> 57
1,000,000 SHARES
INTERNATIONAL MONETARY SYSTEMS, LTD.
COMMON STOCK
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
1.1 Underwriting Agreement *
3.1 Articles of Incorporation of the Registrant *
3.2 Articles of Amendment of the Registrant *
3.3 Bylaws of the Registrant *
4.1 Form of Underwriter's Warrant *
5.1 Opinion of Gerald R. Turner & Associates, S.C.
10.1 Lease Agreement, between Glendale Investments, LLC. and the
Registrant
10.2 Escrow Agreement, among the Registrant, Liss Financial Services and
Grafton State Bank
23.1 Consent of Gerald R. Turner & Associates, S.C. (included in Exhibit
5.1)
23.2 Consent of Kranitz & Philipp
23.3 Consent of Smith & Gesteland, LLP.
24.1 Power of Attorney *
27.1 Financial Data Schedule (included in electronic filing only)
-----------------------
* Previously filed.
Exhibit Index
<PAGE> 1
EXHIBIT 5.1
[GERALD R. TURNER & ASSOCIATES, S.C. LETTERHEAD]
April 3, 2000
International Monetary Systems, Ltd.
16901 West Glendale Drive
New Berlin, Wisconsin 53151
Ladies and Gentlemen:
We have acted as counsel to International Monetary Systems, Ltd., a
Wisconsin corporation ("Company"), in connection with the proposed public
offering by the Company of 1,000,000 shares of its common stock, par value
$0.0001 per share ("Common Stock"). In connection with such proposed public
offering of Common Stock, the Company has filed with the Securities and Exchange
Commission a registration statement ("Registration Statement") on Form SB-2
(File No. 333-94597), relating to the registration of the Common Stock under the
Securities Act of 1933, as amended ("Securities Act"). Unless otherwise defined
herein, capitalized terms used in this opinion shall have the meanings set forth
in the Accord identified in the following paragraph.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord ("Accord") of the American Bar
Association Section on Business Law (1991). As a consequence, it is subject to a
number of qualifications, exceptions, definitions, limitations on coverage and
other limitations, all as more particularly described in the Accord, and this
Opinion Letter should be read in conjunction therewith. The law covered by the
opinions expressed herein is limited to the federal laws of the United States
and the laws of the State of Wisconsin.
In preparing this Opinion Letter, we have examined the Registration
Statement, including the articles of incorporation of the Company and the
underwriting agreement ("Managing Placement Agent Agreement"), between the
Company and J.E. Liss & Company, Inc., the underwriter of the proposed offering,
in each case as filed as exhibits to the Registration Statement. We have also
examined originals or photostatic, certified or conformed copies of all such
agreements, documents, instruments, corporate records, certificates of public
officials, public records and certificates of officers of the Company as we have
deemed necessary or appropriate in the circumstances. In addition to the
assumptions set forth in Section 4 of the Accord, we have relied upon factual
representations made to us by the Company (including the representations set
forth in the Managing Placement Agent Agreement).
<PAGE> 2
International Monetary Systems, Ltd.
April 3, 2000
Page 2
Based upon such examination and review, we are of the opinion that the
shares of Common Stock proposed to be sold by the Company as provided in the
Registration Statement have been duly authorized for issuance and, subject to
the Registration Statement becoming effective under the Securities Act and to
compliance with applicable state securities laws, such shares of Common Stock,
when sold and delivered in accordance with the provisions of the Managing
Placement Agent Agreement and as described in the Registration Statement, will
be legally and validly issued, fully paid and non-assessable, except to the
extent of liability, if any, imposed under Section 180.0622(2) of the Wisconsin
Business Corporations Law for employee wages for a period not exceeding six
months in the case of any employee.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ GERALD R. TURNER & ASSOCIATES, S.C.
GERALD R. TURNER & ASSOCIATES, S.C.
<PAGE> 1
EXHIBIT 10.1
LEASE AGREEMENT
BY AND BETWEEN
GLENDALE INVESTMENTS, LLC, LESSOR
AND
CONTINENTAL TRADE EXCHANGE, LTD., LESSEE
FOR
16901 WEST GLENDALE DRIVE
NEW BERLIN, WISCONSIN 53151
<PAGE> 2
INDEX TO
GLENDALE INVESTMENTS, LLC / CONTINENTAL TRADE EXCHANGE
LEASE AGREEMENT
<TABLE>
<CAPTION>
TITLE PAGE
- ----- ----
<S> <C>
1. PARTIES TO AGREEMENT AND MAILING ADDRESSES 1
2. DESCRIPTION OF PREMISES LEASED 1
3. CONVEYANCE OF PREMISES FOR THE TERM 1
4. TERM OF LEASE 1
5. RENT 1
6. SECURITY DEPOSIT 2
7. MAINTENANCE AND REPAIR 2
8. UTILITIES 3
9. USE OF PREMISES, COMPLIANCE WITH LAW AND SIGNS 3
10. ASSIGNMENT AND SUBLETTING 3
11. TRADE FIXTURES AND REMODELING OF PREMISES 4
12. INDEMNITY AND LIABILITY INSURANCE 4
13. FIRST PARTY PERSONAL PROPERTY DAMAGE,
INSURANCE, SUBROGATION AND NONLIABILITY
FOR CONSEQUENTIAL DAMAGES 5
14. REAL ESTATE TAXES, SPECIAL ASSESSMENTS,
INSURANCE PREMIUMS, UTILITIES, AND
MAINTENANCE COSTS 5
15. DAMAGE OR INJURY AND CONDITION OF PREMISES 6
16. SURRENDER AT END OF TERM 6
17. LATE PAYMENT FEE AND RE-ENTRY UPON
DEFAULT OF LESSEE 6
18. OPTION TO EXTEND INITIAL TERM 7
19. EFFECT OF BANKRUPTCY OR INSOLVENCY 7
20. LESSOR'S ENTRY FOR INSPECTION, MAINTENANCE
AND REPAIR; FOR RENT SIGN 8
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
TITLE PAGE
- ----- ----
<S> <C>
21. DAMAGE OR DESTRUCTION OF PREMISES 8
22. CONSENT NOT TO BE UNREASONABLY WITHHELD 8
23. WAIVER OF BREACH NOT WAIVER OF SUBSEQUENT BREACH 9
24. NOTICES IN WRITING 9
25. ESTOPPEL CERTIFICATES 9
26. SUBORDINATE TO MORTGAGE AND ATTORNMENT 9
27. COVENANTS BINDING UPON ASSIGNS 9
28. LAW OF FORUM; PROVISIONS SEVERABLE 9
29. ENTIRE AGREEMENT AND MODIFICATION 10
</TABLE>
<PAGE> 4
LEASE AGREEMENT
THIS INDENTURE, made and entered into at New Berlin, Wisconsin, on the
28th day of September, 1999, but as of the 1st day of October, 1999, by and
between GLENDALE INVESTMENTS, LLC as Lessor and CONTINENTAL TRADE EXCHANGE, LTD.
as Lessee.
WITNESSETH:
1. PARTIES TO AGREEMENT AND MAILING ADDRESSES. Lessor is Glendale
Investments, LLC, a limited liability corporation whose mailing address is 16901
West Glendale Drive, New Berlin, WI, 53151. Lessee is Continental Trade
Exchange, Ltd. a Wisconsin business corporation, with its designated mailing
address at P.O. Box 510305, New Berlin, WI 53151-0305.
2. DESCRIPTION OF PREMISES LEASED. The premises leased under this lease
agreement consist of the exclusive use of the northerly part of the one-story
office and warehouse building located at 16901 West Glendale Drive, New Berlin,
Wisconsin, 53151, separated from the balance of the commercial building by an
irregular east to west dividing wall as generally illustrated in the sketch
attached hereto, together with the non-exclusive use in common with Lessor and
with other occupants of the commercial building of the open areas designated by
Lessor for common use, altogether referenced herein as the premises.
3. CONVEYANCE OF PREMISES FOR THE TERM. Lessor, for and in
consideration of the covenants hereinafter recited, does hereby lease, demise
and let the premises unto Lessee which Lessee shall have and hold and have the
quiet enjoyment thereof for the duration of the term of this lease agreement.
4. TERM OF LEASE. The term of this lease is three years commencing on
the 1st day of October, 1999, and ending on the 30th day of September, 2002.
Lessee has inspected the property and accepts the premises in their present
condition.
5. RENT. Lessee shall have, hold and peaceably enjoy the use of the
premises for the term and shall pay therefor the base rent of $180,000.00,
adjusted and supplemented as herein provided, payable at the rate of $5,000.00
($4,000.00 U. S. currency and $1,000.00 CTE Trade Dollars) on the first day of
October, 1999, through the end of the term, together with adjustments to base
rent and the other obligations particularized hereinbelow, and together with any
sales, use, occupancy or similar taxes, if any, attributable thereto.
1
<PAGE> 5
The base rent shall be paid together with any sales, use, occupancy or
similar taxes, if any, attributable thereto, absolutely without any claim of
setoff for any reason whatever against Lessor; the obligation to pay rent being
a covenant independent of the covenants herein to be performed by Lessor. No
payment by Lessee or receipt by Lessor of a lesser amount than the monthly
installments of rent herein provided shall be other than on account of the
earliest unpaid rent obligation, nor shall any endorsement or statement on or
accompanying any remittance be deemed an accord or satisfaction, and lessor
shall accept such remittance without prejudice to Lessor's right to recover
unpaid rent or to pursue any other remedy in this lease agreement.
6. SECURITY DEPOSIT. Contemporaneously with the execution and delivery
of this lease agreement, lessee has paid Lessor the sum of Eight Thousand
Dollars ($8,000.00), which shall be retained by Lessor as security for the full
and faithful performance by Lessee of its obligations under this lease
agreement, which security deposit may be used by Lessor for its own purposes,
and which shall be returned to Lessee promptly upon the expiration of the term
of this lease agreement, or any extension thereof, provided Lessee has
faithfully performed its obligations under the terms hereof and has surrendered
the premises to Lessor, otherwise to be applied to the damages sustained by
Lessor under this lease agreement.
7. MAINTENANCE AND REPAIR. Lessor shall, as required and at its cost,
perform repairs, maintenance or replacement to the structure and to the roof of
the building of the premises, except for repairs, maintenance or replacement to
the structure or to the roof which become necessary through the fault or neglect
of Lessee, its agents, employees or other persons, other than Lessor, in privity
with Lessee, in which event Lessee shall pay the cost thereof. Lessor shall
exercise reasonable effort to maintain the roof of the building of the premises
free from water leaks, but the parties recognize the roof of the building is
flat and will be susceptible to damage by the elements which may result in such
water leaks. In no event, however, shall Lessor be liable to Lessee for water
damage resulting from water leaks in the roof or from water seepage.
Lessor shall maintain the exterior common areas of the commercial
building and shall perform maintenance and repaving of the parking lot and the
driveway access thereto, including snow and ice removal and landscape
maintenance, and Lessee shall contribute to the cost thereof as provided herein.
Lessee shall give prompt notice to Lessor of any condition of the
premises requiring maintenance by Lessor.
2
<PAGE> 6
Lessee shall, at its cost, maintain the premises in good repair,
reasonable wear and tear excepted, including, but not limited to snow and ice
removal adjacent to the pedestrian and vehicular entranceways to the building of
the premises where not normally removed by plowing, and shall perform
maintenance and repair as necessary of the heating, air conditioning, hot water
and plumbing systems and window glass replacement and all other maintenance,
excepting only the said structural repairs and exterior maintenance of the roof
and of the common areas to be performed by Lessor.
In the event either party fails to timely perform the maintenance
obligations required of it, the other party may perform such obligations, and
the defaulting party shall pay the performing party the costs incurred promptly
upon receipt of the invoice therefor.
8. UTILITIES. Lessee shall directly pay for costs of gas, heat,
electricity and other utilities separately metered to the premises, and shall
contribute to the costs of water and sewer and other utilities which are not
separately metered to the premises on the pro rata basis provided herein,
altogether with any taxes or use assessments attributable thereto.
9. USE OF PREMISES, COMPLIANCE WITH LAW AND SIGNS. Lessee shall use the
premises for offices, showroom, warehousing and distribution incident to the
barter business of Lessee, and for no other purpose without the prior written
consent of Lessor, and shall comply with all requirements of law and rules and
regulations and orders of supervising governmental authorities, and shall not,
in any event, put the premises to noxious or illegal uses, or uses that may
constitute a nuisance or an irritant to the use, occupancy and unimpeded
driveway access of other tenants of the commercial building or of adjacent
properties as applicable, nor shall Lessee store vehicles not in regular use nor
equipment nor boxes nor other materials exterior to the building nor cause the
premises to become unsightly, nor paint or deface masonry or metal trim, nor
erect or display any signs visible outside of the premises without the prior
written consent of Lessor, and Lessor may remove any unauthorized signs at the
cost of Lessee. Lessee shall pay all fees for signs imposed by supervising
governmental authority.
10. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this lease nor
sublet all or any portion of the premises without first obtaining the written
consent of Lessor. Such assignment or subletting shall not relieve Lessor from
liability for payment of rent and the performance of all other obligations
hereunder, unless otherwise agreed in writing by both parties.
3
<PAGE> 7
11. TRADE FIXTURES AND REMODELING OF PREMISES. All trade fixtures and
equipment and personal property installed by or for Lessee incident to its
business, except leasehold improvements installed by Lessor at the commencement
of the term as provided herein or otherwise at its cost, shall remain the
property of Lessee and shall be removed by Lessee during or at the expiration or
sooner termination of the term of this lease agreement, and Lessee shall repair
and restore the premises to its initial condition, reasonable wear and tear
excepted. If Lessee shall fail to make such removal and repair, Lessor shall
make or cause the same to be made, and Lessee shall pay Lessor the cost thereof
promptly upon receipt of the invoice therefor. No remodeling of, or alteration
to, the premises shall be made by Lessee without the prior written consent of
Lessor.
Any personal property belonging to Lessee left on the premises when
Lessee shall surrender the premises to Lessor shall be deemed abandoned and may
be disposed of and the premises restored in the discretion of Lessor, and Lessee
shall reimburse Lessor for the cost of such disposal and restoration promptly
upon receipt of the invoice therefor.
12. INDEMNITY AND LIABILITY INSURANCE. In consideration for
commensurate reduction in rent, Lessee shall indemnify, hold harmless, and
defend Lessor from and against any and all claims, demands, damages, suits,
actions, judgments, decrees, orders and expenses including attorney fees in
favor of anyone arising out of or on account of this lease agreement or the use,
occupancy or condition of the premises for incidents occurring during the term
of this lease agreement including any extension thereof, or while holding over,
caused by any person whatever, whether the claim therefor is made during or
after the expiration of the term of this lease agreement. To additionally secure
Lessor against such claims, lessee shall, during the term of this lease
agreement, or any extension thereof, and while holding over, maintain in full
force and effect a policy or policies of comprehensive general liability
insurance against loss, liability or claims made by any person, including Lessee
and third parties, on an occurrence basis with a combined single limit of not
less than $2,000,000.00 for any one person, or for any one occurrence, naming
lessor as an additional insured. Lessee shall furnish Lessor with a certificate
of insurance showing such policy or policies to be in full force and effect
during the term of this lease agreement, or any extension thereof, or while
holding over, which shall contain a provision that the said policy or policies
are not to be cancelled except upon 30 days prior written notice of cancellation
to Lessor.
4
<PAGE> 8
13. FIRST PARTY PERSONAL PROPERTY DAMAGE, INSURANCE, SUBROGATION AND
NONLIABILITY FOR CONSEQUENTIAL DAMAGES. Neither of the parties hereto shall be
liable nor responsible to the other party for personal property damage or for
consequential damages sustained whether or not occasioned by negligence. Each of
the parties shall insure against damage by casualty or negligence to its
personal property and be limited to first party recovery from its respective
insurance carriers without subrogating the claim of either against the other to
the benefit of the insurance carriers making payment under insurance contracts.
Each party shall name the other party as an additional insured or shall take
such other action as will effectively prevent the insured party's insurance
carrier from subrogating a claim against the other party. Each party shall
furnish the other party with a certificate of insurance showing such policy or
policies to be in full force and effect during the term of this lease agreement,
or any extension thereof, and while holding over which shall contain a provision
that the said policy or policies are not to be cancelled except upon 30 days
prior written notice of cancellation to the named insureds or certificate
holders.
Lessor shall not be responsible nor liable to Lessee for any loss,
damage, injury, consequential damages or for any matter whatever that may result
through the acts or omissions of Lessor, other than for its intentional acts, or
through the acts or commissions of any other party, it being the contemplation
of the parties that Lessee may, at its election, insure against such losses or
make other provision for such loss, damage or injury.
14. REAL ESTATE TAXES, SPECIAL ASSESSMENTS, INSURANCE PREMIUMS,
UTILITIES, AND MAINTENANCE COSTS. Lessee shall pay as additional rent 50% of the
net increase in annual real estate taxes over and above the amount billed for
the 1999 real estate taxes on the property, and 50% of the following other
costs: special assessments capitalized and amortized over the useful life of
such special assessment at the rate and interest charged by the assessing
governmental authority, premiums for fire and extended coverage insurance and
owners, landlord's and tenant's liability insurance carried by Lessor upon the
entire commercial building and land in and on which the premises are situated,
costs of Lessor for utilities not separately metered to the premises and for
maintenance and repair of the premises which are to be performed by Lessor,
other than for structural and roof repair, which additional rent determined on a
calendar year or other basis shall be prorated to conform to the lease term
year, and any extension thereof, or while holding over. Lessee shall prepay
5
<PAGE> 9
one-twelfth (1/12) of the anticipated additional rent independently for the
first 3 months of the term and thereafter with each monthly payment of base
rent, and upon determination of the actual sum required, any excess payment
shall be promptly refunded by Lessor to Lessee, and any insufficient payment
shall be promptly paid by Lessee to Lessor upon receipt of the invoice and
supporting documents therefor, even if delivered after the expiration of the
lease term.
15. DAMAGE OR INJURY AND CONDITION OF PREMISES. Lessee shall use and
occupy the premises in a careful, safe and lawful manner, without waste, and
shall keep the premises and all parts thereof in good order, and will so deliver
up the same at the expiration or sooner termination of this lease agreement,
reasonable use and ordinary wear and tear thereof and damage by unavoidable
casualty to personal property against which Lessor is obligated to insure and is
or would be covered and fully compensable to lessor by such insurance excepted.
Lessee, at its sole cost and expense, shall make good any damage to the premises
or any part thereof caused by the act of Lessee or its agents and employees, or
by persons, other than Lessor, in privity with Lessee, and shall prior to the
expiration or sooner termination of the lease term repair any damage to said
premises which may be caused by its removal therefrom.
16. SURRENDER AT END OF TERM. Lessee covenants that on the last day of
the term of this lease agreement, including any extension or earlier termination
thereof, to peaceably and quietly surrender and yield up to Lessor the entire
premises, including all leasehold and other improvements and additions to the
freehold not required to be removed, broom clean and in good order and
condition, reasonable wear and tear excepted. Should lessee hold over after the
expiration of the term of this lease agreement, or any extension thereof, this
lease shall then continue on a month to month term only, subject to all of the
conditions, provisions and obligations of this lease agreement insofar as the
same are applicable to the month to month term.
17. LATE PAYMENT FEE AND RE-ENTRY UPON DEFAULT OF LESSEE. If Lessee
shall default in the payment of rent for fifteen (15) days after the due date
thereof, then Lessee shall, in addition to the payment of rent in default, pay
Lessor five percent (5%) of the payment in default as a late payment fee.
In the event Lessee does not or shall neglect or fail to perform and
observe any of the covenants or conditions herein contained which on its part
are to be performed, including the independent covenant for payment of rent,
Lessor may lawfully, immediately, or at any time thereafter, and while
6
<PAGE> 10
such neglect or default continues, and upon 30 days prior written notice of
default which remains uncorrected, except in those cases where it is not
feasible for Lessee to correct the default within 30 days, and Lessee has
commenced correction within 30 days of the notice or demand and is diligently
pursuing the correction to completion, then without further notice or demand,
enter into or upon said premises and repossess the same as if its former estate,
and expel Lessee and those claiming under it, and remove its effects, forcibly
if necessary, without prejudice to any remedies which might otherwise be used
for arrears of rent or preceding breach of covenant; and such expulsion and
removal, whether by the direct act of Lessor or its assigns, or through the
medium of legal proceedings for that purpose instituted, shall not affect the
liability of Lessee or its representatives for the past rent due or future rent
to accrue under this lease, but the same shall continue as set forth herein as
if such removal or expulsion had not taken place. Lessee further covenants and
agrees to pay and discharge all reasonable costs, attorneys' fees and expenses
that shall be paid and incurred by Lessor in enforcing or defending the
covenants and agreements of this lease. The remedies of Lessor shall be
cumulative.
Accelerated base rent and other obligations of Lessee to Lessor shall
bear interest on the unpaid balance thereof from time to time until paid at the
rate of one percent (1%) applied monthly to the total amount of principal and
accumulated interest accrued.
18. OPTION TO EXTEND INITIAL TERM. Provided Lessee shall in all
respects be current in the performance of its obligations under this lease
agreement, and not otherwise, and not while holding over, and it shall desire to
extend the initial term of this lease agreement, it shall have the option to do
so for one additional three (3) year term, which options shall be exercised by
giving notice to Lessor of its election to extend the initial term not less than
six (6) months prior to the commencement of the extended term, whereupon this
lease agreement shall be extended for such additional term without the necessity
for any extension agreement, and all of the terms and conditions of this lease
agreement shall continue as though the initial term included the extended term
with annual modifications to base rent.
19. EFFECT OF BANKRUPTCY OR INSOLVENCY. The interest of Lessee under
this agreement shall not be subject to involuntary assignment, transfer or sale
by operation of law or in any manner whatsoever, and any such attempt at
involuntary assignment, transfer or sale shall be void and of no effect.
7
<PAGE> 11
In the event any proceedings under the Bankruptcy Act or similar laws
are commenced by or against Lessee which are not dismissed before an
adjudication in bankruptcy or the confirmation of a composition, arrangement or
plan of reorganization, or in the event Lessee is adjudged insolvent or makes an
assignment for the benefits of its creditors, or if a receiver is appointed for
Lessee in any proceedings or action, then at the election of Lessor, the Lessor
may accelerate the unpaid rent as provided herein and all obligations of Lessee
to Lessor hereunder including all such obligations of any and all persons
claiming under Lessee as upon default by Lessee.
20. LESSOR'S ENTRY FOR INSPECTION, MAINTENANCE AND REPAIR; FOR RENT
SIGN. Lessor shall have the right, at reasonable times during the business hours
of Lessee with reasonable advance verbal notice, except in the case of an
emergency when entry may be made at any time by key and alarm disarmament code
provided by Lessee, to enter upon the premises for the purposes of inspecting
the same and of showing the said premises to prospective tenants or to
purchasers or to lenders or to maintain or to make repairs or modifications to
the improvements thereon. Lessee will permit the usual "For Rent" or similar
signs to be placed upon the premises at any time within six (6) months prior to
he expiration of the term of this lease agreement.
21. DAMAGE OR DESTRUCTION OF PREMISES. In the event the premises shall
be damaged or destroyed during the term of this lease agreement by fire, other
casualty or the elements, it shall be promptly repaired by Lessor, at his
expense. Lessor shall undertake the necessary work within a reasonable period of
time after such damage or destruction and shall pursue the same with due
diligence, in a manner consistent with sound construction methods; but Lessor
shall not be liable for any delays in or interruptions to such construction or
repair occasioned by strikes, acts of God, national emergency, governmental
regulations, inability to procure labor or materials or any other causes,
whether of similar or dissimilar nature, beyond its control. Rent shall be
abated during the period when the premises are unable to be occupied. In the
case where the premises may be partially occupied, rent shall be prorated to the
proportion of the premises which may be occupied.
22. CONSENT NOT TO BE UNREASONABLY WITHHELD. Wherever in this
agreement the consent of Lessor is a prerequisite condition to any act or
omission by Lessee, such consent shall not be unreasonably withheld.
8
<PAGE> 12
23. WAIVER OF BREACH NOT WAIVER OF SUBSEQUENT BREACH. The declination
of Lessor to insist on strict performance of any of the terms and conditions of
this agreement and the obligations of Lessee hereunder shall not be deemed a
waiver of any subsequent breach or default on the part of Lessee.
24. NOTICES IN WRITING. Unless otherwise specifically provided herein,
all notices by either party to the other shall be in writing and given by
receipted personal delivery or sent by certified mail with sender's and return
receipts to the other party at the address set forth hereinabove, or to such
other address as either party shall hereafter designate to the other by notice,
and shall be effective upon receipted personal delivery or mailing as
applicable.
25. ESTOPPEL CERTIFICATES. At any time, and from time to time, Lessee
agrees, upon request in writing from Lessor, to execute, acknowledge and deliver
to Lessor a statement in writing certifying that its lease agreement is
unmodified, or if modified, stating the modifications, and in full force and
effect and the date to and for which the rent and other amounts and charges
hereunder have been paid substantially in the form attached hereto.
26. SUBORDINATE TO MORTGAGE AND ATTORNMENT. This lease agreement shall
at all times be subordinate to any mortgage or security agreement placed by
Lessor upon the premises, provided, so long as Lessee is not in default under
the terms of this lease agreement, the rights of Lessee hereunder shall not be
prejudiced nor its occupancy of the premises be disturbed by any action taken by
the mortgagee under terms of its mortgage, and in consideration thereof, Lessee
agrees to attorn to the mortgagee or any successor in interest to Lessor as its
successor Lessor, and this lease agreement shall continue in full force and
effect between Lessee and the successor Lessor. The parties hereto agree to
execute such documents as may be necessary to give effect to this provision.
27. COVENANTS BINDING UPON ASSIGNS. The covenants, conditions and terms
of this lease agreement shall be binding upon the parties hereto and upon their
successors, assigns, trustees, receivers, heirs and personal representatives, as
the case may be.
28. LAW OF FORUM; PROVISIONS SEVERABLE. This lease agreement shall be
governed by the laws of the State of Wisconsin. If any provision of this lease
agreement shall be declared by a court of competent jurisdiction to be invalid,
illegal or unenforceable under any law applicable thereto, such provision shall
be deemed deleted from this lease agreement without impairing or prejudicing the
validity, legality and enforceability of the remaining provisions hereof.
9
<PAGE> 13
29. ENTIRE AGREEMENT AND MODIFICATION. This instrument is the entire
lease agreement between the parties hereto, and there are no other promises,
conditions or understandings, oral or written, between the parties. This
agreement shall not be modified nor amended unless reduced to writing and
executed as this agreement is executed.
IN WITNESS WHEREOF, Glendale Investments, LLC, as Lessor, has caused
this lease agreement to be executed by its three partners: Donald F. Mardak,
John E. Strabley and Dale L. Mardak, and Continental Trade Exchange, Ltd., as
Lessee, has caused this lease agreement to be executed by its duly authorized
officers, and their respective seals to be hereunto affixed, in multiple
original, at the place and on the date first above written.
LESSOR: LESSEE:
GLENDALE INVESTMENTS, LLC. CONTINENTAL TRADE EXCHANGE, LTD.
/s/ DONALD F. MARDAK /s/ DONALD F. MARDAK
By:------------------------- By:---------------------------
Donald F. Mardak, Partner Donald F. Mardak, President
/s/ JOHN E. STRABLEY /s/ JUDY E. MARDAK
By:------------------------- By:---------------------------
John E. Strabley, Partner Judy E. Mardak, Secretary
/s/ DALE L. MARDAK
By:-----------------------
Dale L. Mardak, Partner
10
<PAGE> 1
EXHIBIT 10.2
ESCROW AGREEMENT
ESCROW AGREEMENT, made and entered into as of the day of , 2000,
by and among Grafton State Bank, a Wisconsin banking corporation ("Escrow
Agent"), International Monetary Systems, Ltd., a Wisconsin corporation
("Company"), and J.E. Liss & Company, Inc., a Wisconsin corporation registered
as a broker-dealer under the Securities Exchange Act of 1934, as amended
("Managing Placement Agent").
WITNESSETH:
WHEREAS, the Company proposes to offer, offer for sale and sell to the
public up to 1,000,000 shares of its common stock, par value $0.0001 per share
("Common Stock"), at an initial offering price of $ per share ("Offering");
WHEREAS, a registration statement on Form SB-2 with respect to the
Common Stock, including a form of prospectus, has been filed by the Company with
the Securities and Exchange Commission ("Commission") under the Securities Act
of 1933, as amended ("Securities Act"). One or more amendments to or changes in
such registration statement have been or may be so filed, and a final form of
prospectus will be filed with the Commission upon the effectiveness of such
registration statement. Such registration statement (including all exhibits
thereto), as amended at the time it becomes effective and at the time each
post-effective amendment thereto becomes effective, and the final prospectus
filed upon the effectiveness of such registration statement or post-effective
amendment (including any supplements to such final prospectus filed following
such effectiveness) are referred to herein, respectively, as the "Registration
Statement" and the "Prospectus";
WHEREAS, the Managing Placement Agent and such other member firms of
the National Association of Securities Dealers, Inc. ("NASD") as may be
designated by the Managing Placement Agent, in its discretion, to participate in
the distribution of the Common Stock (the Managing Placement Agent and such
additional broker-dealers, if any, being hereinafter collectively referred to as
the "Selected Placement Agents") are entitled to receive selling commissions and
expense allowances in connection with the distribution of the Common Stock, as
set forth in a certain selling agreement between the Managing Placement Agent
and the Company, dated April , 2000 ("Managing Placement Agent Agreement"), a
copy of which is attached hereto as Exhibit A; and
WHEREAS, the Managing Placement Agent Agreement, the Registration
Statement and the Prospectus provide that amounts tendered by investors in
payment of the subscription price for Common Stock, including checks, cash and
cash equivalents ("Subscription Proceeds"), shall be deposited and held in
escrow in a segregated account until such Subscription Proceeds are disbursed by
the Escrow Agent pursuant to this Agreement.
WHEREAS, there is no minimum aggregate amount required to be sold in
the Offering, and all funds received from accepted subscribers may be disbursed
by the Escrow Agent and become immediately available to the Company for the
purposes described in the Prospectus under the caption "Use of Proceeds";
however, the parties hereto have agreed that, if subscriptions for at least
1,000 shares of Common Stock (or such lesser amount as may be agreed to in
writing by the parties hereto, in their discretion) are not accepted by the
Company and fully paid for on or before the Termination Date, the Offering will
terminate, and no Common Stock will be sold. "Termination Date" means November
30, 2000; and
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Escrow. From the date hereof through and including (i) the date of
the final disbursement of funds pursuant to this Agreement or (ii) termination
of the Offering pursuant to Section 12 of the Managing Placement Agent
Agreement, whichever later occurs, the Escrow Agent shall act as escrow agent
and shall receive and disburse all Subscription Proceeds and earnings, if any,
thereon in accordance with the terms of this Agreement. The Escrow Agent hereby
represents to the Company and to each Selected Placement Agent that it is a
"bank" as such term is defined by Section 3(a)(6) of the Securities Exchange Act
of 1934, as amended ("Exchange Act").
<PAGE> 2
2. Deposit Procedure.
(a) The Escrow Agent shall establish an appropriate segregated account
("Escrow Account") designated as the "International Monetary Systems, Ltd.
Escrow Account," or with such other appropriate designation as shall be assigned
by the Escrow Agent and communicated to the Company and the Managing Placement
Agent. The Escrow Agent shall cause all Subscription Proceeds transmitted to it
by the Selected Placement Agents to be held in the Escrow Account. All checks
received by the Escrow Agent are to be held uncashed until required to be
submitted for collection pursuant to paragraph 2(b) of this Agreement.
(b) All Subscription Proceeds received by the Selected Placement Agents
shall be delivered to the Escrow Agent, at 101 Falls Road, Grafton, Wisconsin
53024, by 12:00, noon, on the business day following receipt thereof by a
Selected Placement Agent, together with a schedule of such payments and the
subscriptions represented thereby. Provided that the Escrow Agent shall have
received with respect to each subscription for Common Stock (i) Facsimile Notice
(as defined herein) from the Company that a subscription has been received by
the Company and (ii) Subscription Proceeds in the amount required to pay in full
for such subscription, delivered by a Selected Placement Agent as aforesaid, the
Escrow Agent shall immediately commence the collection process (as applicable)
with respect to such Subscription Proceeds. Any payment item which is returned
to the Escrow Agent on its initial presentation for payment need not again be
presented for collection. The Facsimile Notice provided for in this paragraph
shall be given by the Company not more than five (5) days following receipt by
the Escrow Agent of such Subscription Proceeds and not less than two (2)
business days prior to any disbursement of Subscription Proceeds by the Escrow
Agent pursuant to this Agreement.
(c) If a subscription is not accepted by the Company, the Company
shall, within five (5) days following its receipt from a Selected Placement
Agent of such subscription, provide the Escrow Agent with Facsimile Notice (as
defined herein) of the name of the rejected subscriber, the address of the
rejected subscriber, and the amount of Subscription Proceeds received from such
rejected subscriber and delivered to the Escrow Agent by a Selected Placement
Agent, as reported to the Company pursuant to the Managing Placement Agent
Agreement.
(d) If the Escrow Agent is holding collected funds with respect to a
rejected subscription, the Escrow Agent shall promptly remit the full amount of
Subscription Proceeds received by a Selected Placement Agent and delivered to
the Escrow Agent, with interest thereon at its passbook rate for the period held
in escrow, to the rejected subscriber at the address provided by the Company. If
the Escrow Agent has presented the Subscription Proceeds of a rejected
subscriber for collection but has not yet collected funds, the Escrow Agent
shall, promptly upon collection of such funds, remit the full amount of
Subscription Proceeds received by a Selected Placement Agent and delivered to
the Escrow Agent, with interest thereon at its passbook rate for the period held
in escrow, to the rejected subscriber at the address provided by the Company. If
the Escrow Agent has not yet presented the Subscription Proceeds of a rejected
subscriber for collection, the Escrow Agent shall promptly return in full the
Subscription Proceeds received by a Selected Placement Agent and delivered to
the Escrow Agent in the form so received and delivered, with interest thereon at
its passbook rate for the period held in escrow, to the rejected subscriber at
the address provided by the Company.
3. Investment of Escrow Funds. The Escrow Agent shall invest all funds
held in the Escrow Account (including earnings, if any, thereon) in United
States government securities or securities guaranteed by the United States,
certificates of deposit of banks located in the United States or any other
investment, provided, in each case, that such investment is permitted by Rule
15c2-4, promulgated by the Securities and Exchange Commission under the Exchange
Act ("Rule 15c2-4"), and NASD Notice to Members 84-7. Such investments shall be
made in a manner consistent with the requirement that the Subscription Proceeds
be available for delivery by the Escrow Agent at the times described herein. The
parties hereto recognize that there may be a forfeiture of interest in the event
of early withdrawal from an interest-bearing account of investment.
4. Initial Closing.
(a) If the Escrow Agent shall (i) be holding in escrow collected funds
representing Subscription Proceeds in an amount equal to the full purchase price
of 1,000 shares of Common Stock (or such lesser amount as may be agreed to in
writing by the parties hereto) and (ii) have received from the Company and the
Managing
2
<PAGE> 3
Placement Agent, on or before the Termination Date and the Initial Closing Date,
respectively, the Facsimile Notice (as defined herein) and Confirmation (as
defined herein) described in paragraph 4(b) hereof, then the Escrow Agent shall
disburse the collected funds then held in the Escrow Account (less fees of the
Escrow Agent as provided herein) to the Company and to the Managing Placement
Agent, as provided herein and subject to the provisions hereof, at the Initial
Closing. As used in this Agreement, the terms "Initial Closing" and "Initial
Closing Date" shall have the meanings ascribed to such terms in Section 4(g) of
the Managing Placement Agent Agreement; the Initial Closing shall be scheduled
as provided therein.
(b) On or before the Termination Date, the Escrow Agent shall have
received Facsimile Notice (as defined herein) from the Company and the Managing
Placement Agent that all conditions precedent to the disbursement of
Subscription Proceeds on the Initial Closing Date (including without limitation
all of the conditions set forth in Section 9 of the Managing Placement Agent
Agreement) have been fully satisfied as required under the Prospectus, the
Managing Placement Agent Agreement, Rule 15c2-4 and/or NASD Notices to Members
84-64 and 84-7, specifically certifying that subscriptions for not less than
1,000 shares of Common Stock have been received and accepted by the Company on
or before the Termination Date; Confirmation (as defined herein) of such
Facsimile Notice shall be delivered to the Escrow Agent on or before the Initial
Closing Date, dated as of the Initial Closing Date.
(c) Provided that the Escrow Agent shall have (i) received and be
holding in escrow collected Subscription Proceeds as required under paragraph
4(a) hereof, (ii) received the Facsimile Notice (as defined herein) required
under paragraph 4(b) hereof on or before the Termination Date and (ii) received
Confirmation (as defined herein) of the Facsimile Notice required under
paragraph 4(b) hereof on or before the Initial Closing Date, the Escrow Agent
shall, on the Initial Closing Date, disburse the collected funds then held in
the Escrow Account as follows: First, to the Escrow Agent in the amount of any
fees then due and payable to such Agent (which shall not exceed on the Initial
Closing Date the aggregate earnings, if any, on funds held in the Escrow
Account, determined as of the business day immediately preceding such Closing
Date); Second, to the Managing Placement Agent in an amount equal to the
aggregate selling commissions and expense allowances then due and payable to the
Selected Placement Agents pursuant to the Managing Placement Agent Agreement;
and Third, to the Company in the amount of any balance then remaining in the
Escrow Account.
(d) If any of the conditions described in paragraphs 4(a) and 4(b)
hereof shall not have been fully satisfied at the close of business on the date
(Termination Date or Initial Closing Date) specified herein for such compliance,
the Escrow Agent shall promptly return all Subscription Proceeds directly to
subscribers, with interest thereon at its passbook rate for the period held in
escrow, and the escrow provided for herein shall thereupon terminate.
5. Additional Closings.
(a) Subsequent to the Initial Closing Date, the collected funds then
held in the Escrow Account shall be disbursed by the Escrow Agent from time to
time, as provided in Section 4(g) of the Managing Placement Agent Agreement, at
one or more Additional Closings. As used herein, the terms "Additional Closing"
and "Additional Closing Date" shall have the meanings ascribed to such terms in
Section 4(g) of the Managing Placement Agent Agreement; Additional Closings
shall be scheduled as provided in such Agreement; provided, however, that no
Additional Closing shall occur less than seven (7) days nor more than thirty
(30) days following the immediately preceding Closing.
(b) Prior to the disbursement of collected funds held in the Escrow
Account at any Additional Closing, the Escrow Agent shall have received
Facsimile Notice (as defined herein) from the Company and the Managing Placement
Agent that all conditions precedent to such disbursement by the Escrow Agent
(including without limitation all of the conditions set forth in Section 9 of
the Managing Placement Agent Agreement) have been fully satisfied as required
under the Prospectus, the Managing Placement Agent Agreement, Rule 15c2-4 and
NASD Notices to Members 84-64 and 84-7. The Facsimile Notice from the Company
and the Managing Placement Agent provided for in this paragraph 5(b) must be
received by the Escrow Agent not less than two (2) business days prior to such
Additional Closing Date; Confirmation (as defined herein) of such Facsimile
Notice shall be delivered to the Escrow Agent by the Company and the Managing
Placement Agent on or before such Additional Closing Date, dated as of such
Additional Closing Date.
3
<PAGE> 4
(c) Provided that the Facsimile Notice (as defined herein) required
under paragraph 5(b) hereof shall have been received by Escrow Agent not less
than two (2) business days prior to, and confirmed in writing on or before, each
Additional Closing Date, the Escrow Agent shall, on such Additional Closing
Date, disburse the collected funds then held in the Escrow Account as follows:
First, to the Escrow Agent in the amount of any fees then due and payable to
such Agent (which shall not exceed on any Additional Closing Date the aggregate
earnings, if any, on funds held in the Escrow Account, determined as of the
business day immediately preceding such Closing Date); Second, to the Managing
Placement Agent in an amount equal to the aggregate selling commissions and
expense allowances then due and payable to the Selected Placement Agents
pursuant to the Managing Placement Agent Agreement; and Third, to the Company in
the amount of any balance then remaining in the Escrow Account.
6. Books and Records. The Escrow Agent shall maintain accurate records
of all transactions hereunder. Promptly upon the termination of escrow, or as
may reasonably be requested by the Company or the Managing Placement Agent prior
thereto, the Escrow Agent shall provide the Company and the Managing Placement
Agent with a complete copy of such records, certified by the Escrow Agent to be
a complete and accurate account of all such transactions. The authorized
representatives of the Company and the Managing Placement Agent shall also have
access to such books and records at all reasonable times during normal business
hours upon reasonable notice to the Escrow Agent.
7. Escrow Agent Fees. As compensation for services performed by it
pursuant to this Agreement, the Escrow Agent shall be entitled to receive from
the Company the fees set forth on Schedule A hereto; such fees shall be deducted
from Escrow Income (as defined in such Schedule A), and the Company shall pay to
the Escrow Agent on demand any portion of such fees which remains unpaid
following the final Closing.
8. Termination. This Agreement shall terminate on the final disposition
of the moneys and property held in escrow under and pursuant to the terms
hereof, provided that the rights of the Escrow Agent and the obligations of the
Company under paragraphs 7 and 9 shall survive the termination hereof.
9. General Provisions.
(a) This Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto.
(b) The Escrow Agent shall not be liable, except for its own negligence
or willful misconduct and, except with respect to claims based upon such
negligence or willful misconduct that are successfully asserted against the
Escrow Agent. The Company shall indemnify and hold harmless the Escrow Agent
(and any successor Escrow Agent) from and against any and all losses,
liabilities, claims, actions, damages and expenses, including reasonable
attorneys' fees and disbursements, arising out of and in connection with this
Agreement.
(c) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that any person purporting
to give notice or advice, or to accept and acknowledge receipt, or to make any
statement or execute any documents in connection with the provisions of this
Agreement has been duly authorized to do so.
(d) In the event that the Escrow Agent (i) shall be uncertain as to its
duties arising under this Agreement or (ii) shall receive instructions from the
Company or the Managing Placement Agent as to the funds held in the Escrow
Account which, in its opinion, are inconsistent with each other or are in any
conflict with any of the provisions of this Agreement, the Escrow Agent shall be
authorized to hold any and all Subscription Proceeds received by it, together
with any other amounts which shall accrue to or be deposited in the Escrow
Account, pending the settlement of any such controversy by final adjudication of
a court of competent jurisdiction, or the Escrow Agent may, at its option,
deposit such funds with the clerk of a court of competent jurisdiction, in an
appropriate proceeding to which all parties in interest are duly joined.
4
<PAGE> 5
(e) The Escrow Agent (and any successor escrow agent) may at any time
resign as such by delivering all amounts held in the Escrow Account to any
successor escrow agent designated by the Company in writing, or to any court of
competent jurisdiction, whereupon the Escrow Agent shall be discharged of and
from any and all further obligations arising in connection with this Agreement.
The resignation of the Escrow Agent will take effect (i) upon the appointment of
a successor (including a court of competent jurisdiction) or (ii) thirty (30)
days after the date of delivery of its written notice of resignation to the
Company and the Managing Placement Agent, whichever first occurs. If at such
time the Escrow Agent has not received a written designation of a successor
escrow agent, the Escrow Agent's sole responsibility thereafter shall be to
safekeep the funds held in the Escrow Account until receipt by the Escrow Agent
of a written designation by the Company of a successor escrow agent or a final
order of a court of competent jurisdiction.
(f) The parties hereto hereby irrevocably submit to the jurisdiction of
any Wisconsin state court or federal court sitting in Wisconsin in any action or
proceeding arising out of or relating to this Agreement, and the parties hereby
irrevocably agree that all claims in respect of such action or proceeding shall
be heard and determined in such state or federal court. The parties to this
Agreement hereby consent to and grant to any such court jurisdiction over the
persons of such parties and over the subject matter of any such dispute and
agree that delivery or mailing of any process, instrument or other paper in
connection with any such action or proceeding in the manner provided in this
Agreement, or in such other manner as may be permitted by law, shall be valid
and sufficient service of such process, instrument or other paper.
(g) This Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their respective successors and assigns, and
shall not be enforceable by or inure to the benefit of any third party. Except
as provided herein with respect to a resignation by the Escrow Agent, no party
hereto may assign any of its rights or obligations under this Agreement without
the prior written consent of the other parties hereto.
(h) This Agreement may only be modified by a written instrument signed
by the parties hereto, and no waiver hereunder shall be effective unless in
writing signed by the party to be charged.
(i) The Escrow Agent makes no representation as to the validity, value,
genuineness or the collectibility of any security or other document or
instrument held by or delivered to such Escrow Agent pursuant to the terms of
this Agreement.
(j) For purposes hereof, "Facsimile Notice" shall mean the delivery by
telephone facsimile (FAX) of a notice, request, demand or other communication
provided for herein, and "Confirmation" shall mean the delivery by hand (via
commercial courier service or otherwise) or by first class mail, if and to the
extent required hereunder, of a manually-signed (if applicable) counterpart of
any such notice, demand or other communication. All Facsimile Notices and
Confirmations shall be deemed given when received and shall be telecopied and
delivered by hand, respectively, to the parties at the facsimile (FAX) telephone
numbers and addresses listed below, or to such other persons or facsimile
telephone numbers/addresses as the relevant party shall designate from time to
time in writing delivered by hand as aforesaid:
<TABLE>
<S> <C>
If to the Company: International Monetary Systems, Ltd.
Attention: Donald F. Mardak
Facsimile Notice (FAX) Telephone Number: (262) 780-3655
Confirmation Address: 16901 West Glendale Drive
New Berlin, Wisconsin 53151
If to the Escrow Agent: Grafton State Bank
Escrow Department
Attention: Dorothy Jochims
Facsimile Notice (FAX) Telephone Number: (414) 377-6697
Confirmation Address: 101 Falls Road
Grafton, Wisconsin 53024
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C>
If to the Managing Placement Agent: J.E. Liss & Company, Inc.
Attention: Jerome E. Liss
Facsimile Notice (FAX) Telephone Number: (414) 225-3168
Confirmation Address: 424 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
</TABLE>
(k) This Agreement shall be construed in accordance with and governed
by the internal law of the State of Wisconsin.
(l) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written.
International Monetary Systems, Ltd.
By:
----------------------------------------
Donald F. Mardak, President
J.E. Liss & Company, Inc.
By:
----------------------------------------
Jerome E. Liss, President
Grafton State Bank
By:
----------------------------------------
Thomas J. Sheehan, President
6
<PAGE> 7
ESCROW AGREEMENT
Schedule A
This Schedule A to the Escrow Agreement, dated as of , 2000, by
and among Grafton State Bank ("Escrow Agent"), International Monetary Systems,
Ltd. ("Company") and J.E. Liss & Company, Inc. ("Managing Placement Agent"),
sets forth the compensation arrangements referred to in paragraph 7 of such
Agreement, as follows:
For services performed by it pursuant to the Escrow Agreement, the Escrow
Agent shall be entitled to receive from the Company fees in the amounts of
$2,500, payable upon the execution hereof, plus $250 per Closing and $10 per
subscriber (whether accepted or rejected); provided, however, that the Escrow
Agent shall receive, in the aggregate, not less than $3,000 in consideration of
its services rendered pursuant to the terms of the Escrow Agreement. Except for
the initial payment due upon the execution of this Agreement, such fees shall be
(a) due and payable on the Initial Closing Date and each Additional Closing Date
until paid in full and (b) payable, through the final Closing, only from and to
the extent of available Escrow Income; provided that, if payments made from
available Escrow Income, made at the Initial Closing and one or more Additional
Closings are not, in the aggregate, sufficient to pay such fees in full, the
Company shall pay on demand any such fees which remain unpaid following the
final Closing. "Escrow Income" is the amount of interest and/or dividends, if
any, which shall have been (x) paid on or in respect of the Escrow Account
(representing earnings on funds held therein) and (y) deposited in such Account
as collected funds on or prior to the business day immediately preceding such
Initial Closing Date or Additional Closing Date, as the case may be. If and to
the extent that Escrow Income exceeds the aggregate fees payable to the Escrow
Agent hereunder, such excess shall be paid to the Company at the Initial Closing
or Additional Closing(s), as the case may be. The foregoing notwithstanding, if
the Offering is terminated prior to the Initial Closing, pursuant to the
provisions of Section 12 of the Managing Placement Agent Agreement or otherwise,
the Escrow Agent shall be entitled to receive fees in the aggregate amount of
$3,500, and no more, payable by the Company on demand. All terms used herein
shall have the same meanings ascribed to them in the Escrow Agreement of which
this Schedule is a part.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF KRANITZ & PHILIPP
We consent to the references to us under the captions "Certain
Relationships and Related Transactions" and "Legal Matters" in the prospectus
comprising a part of the registration statement of International Monetary
Systems, Ltd. on Form SB-2 (File No. 333-94597), and elsewhere in the
registration statement.
/s/ KRANITZ & PHILIPP
KRANITZ & PHILIPP
Milwaukee, Wisconsin
April 3, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT OF SMITH & GESTELAND, LLP
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in the registration statement on Form SB-2 of
International Monetary Systems, Ltd. (File No. 333-94597) of our report, dated
March 10, 2000, on the consolidated balance sheets of International Monetary
Systems, Ltd. and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholder equity, and cash flows
for each of the two years in the period ended December 31, 1999. We also
consent to the references to us under the captions "Prospectus Summary - Summary
Financial Data," "Selected Financial Data" and "Experts" in the prospectus.
/s/ Smith & Gesteland, LLP
--------------------------
SMITH & GESTELAND, LLP
Madison, Wisconsin
April 3, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND RELATED CONSOLIDATED STATEMENTS OF INCOME,
CHANGES IN STOCKHOLDER EQUITY AND CASH FLOWS OF INTERNATIONAL MONETARY SYSTEMS,
LTD. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
(AND ACCOMPANYING NOTES) INCLUDED IN THE REGISTRATION STATEMENT OF SUCH
REGISTRANT ON FORM SB-2.
</LEGEND>
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 101,505 8,789
<SECURITIES> 0 0
<RECEIVABLES> 173,550 147,359
<ALLOWANCES> 27,275 15,308
<INVENTORY> 89,685 60,680
<CURRENT-ASSETS> 437,212 351,793
<PP&E> 225,764 174,806
<DEPRECIATION> 139,440 110,940
<TOTAL-ASSETS> 621,286 507,132
<CURRENT-LIABILITIES> 80,505 87,779
<BONDS> 0 0
0 0
0 0
<COMMON> 214 5,108
<OTHER-SE> 538,305 343,108
<TOTAL-LIABILITY-AND-EQUITY> 621,286 507,132
<SALES> 0 0
<TOTAL-REVENUES> 1,396,851 1,181,540
<CGS> 0 0
<TOTAL-COSTS> 1,415,839 1,162,888
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (18,988) 18,652
<INCOME-TAX> (4,583) 9,278
<INCOME-CONTINUING> (14,405) 9,374
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (14,405) 9,374
<EPS-BASIC> (0.01) 0.01
<EPS-DILUTED> (0.01) 0.01
</TABLE>
