UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2015~~2016

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-30853

INTERNATIONAL MONETARY SYSTEMS, LTD.

(Exact name of Registrant as specified in its charter)

Wisconsin

39-1924096

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

16901 West Glendale Drive, New Berlin, ~~Wisconsin 53151 (Address of principal executive offices) (262) 780-3640 (Registrant’s telephone number, including area code)~~

Wisconsin 53151

(Address of principal executive offices)

(262) 780-3640

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer ☐	Accelerated Filer ☐	Non-Accelerated Filer ☐	Smaller Reporting Company ☒

		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of Common Stock, $.0001 par value, outstanding as of ~~October~~May 311, ~~2015~~2016 was ~~614~~586,~~175~~929.

INTERNATIONAL MONETARY SYSTEMS, LTD.

TABLE OF CONTENTS

		Page No.
Part I.	FINANCIAL INFORMATION	3
Item 1 -	Financial Statements ~~September~~March 3031, ~~2015~~2016	3
	Unaudited Consolidated Balance Sheets – September 30, 2015 and December 31, 2014	3
	Unaudited Consolidated Balance Sheets –March 31, 2016 and December 31, 2015	1
	Unaudited Consolidated Statements of Operations – Three Months and Nine Months Ended September 30, 2015 and 2014	4
	Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) – Three Months Ended March 31, 2016 and 2015	2
	Unaudited Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2015 and 2014	5
	Unaudited Consolidated Statements of Cash Flows – Three Months Ended March 31, 2016 and 2015	3-4
	Unaudited Notes to Consolidated Financial Statements	75
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	108
Item 3 -	Quantitative and Qualitative Disclosures about Market Risk	1210
Item 4 -	Controls and Procedures	1210
Part II.	OTHER INFORMATION	1311
Item 1	Legal Proceedings	1311
Item 1A -	Risk Factors	1311
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	1311
Item 3 -	Defaults on Upon Senior Securities	1311
Item 4 -	Specialized Matters	1311
Item 5 -	Other Information	1311
Item 6 -	Exhibits	1412

INTERNATIONAL MONETARY SYSTEMS, LTD.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30, 2015			December 31, 2014
	March 31, 2016			December 31, 2015
ASSETS
Current assets
Cash	$	~~759~~675,~~352~~708		$	~~796~~844,~~547~~961
Marketable securities		~~257~~273,~~027~~695			~~269~~275,~~931~~568
Accounts receivable, net		~~593~~557,~~224~~932			~~786~~705,~~849~~912
Earned trade account		3861,~~104~~173			2666,~~821~~971
Prepaid expenses		~~142~~162,~~850~~917			~~124~~134,~~987~~298
Total current assets		1,~~790~~731,~~557~~425			2,~~005~~027,~~135~~710
Other assets
Property and equipment, net		~~342~~334,~~195~~896			~~393~~322,~~446~~482
Membership lists and other intangibles, net		1837,~~291,908~~438			21,~~053~~064,~~755~~673
Goodwill		3,482,522			3,482,522
Deferred tax assets		206,269			-
Assets held for investment		92,573			93,823
Assets held for investment and other long term assets		95,072			84,773
Deferred tax assets		301,876			254,620
Total non-current assets		5,~~417~~049,~~966~~305			65,~~014~~218,~~496~~120
Total assets	$	76,~~208~~780,~~523~~730		$	87,~~019~~245,~~631~~830
LIABILITIES
Current liabilities
Accounts payable and accrued expenses	$	~~930~~748,~~019~~122		$	1,~~032~~019,~~380~~193
Credit lines, short term notes, and current portion of long term debt		~~889~~1,~~522~~080,197			1800,~~008,636~~052
Current portion of notes payable to related parties		20,000			6020,000
Common stock subject to guarantee		~~21,702~~-			21,702
Total current liabilities		1,~~861~~848,~~243~~319			21,~~122~~860,~~718~~947
Long-term liabilities
Long term debt, net of current portion		1570,~~089,475~~886			1946,~~571,546~~502
Notes payable related parties, net of current portion		~~600~~650,000			~~470~~650,000
Deferred compensation		~~246~~231,000			~~291~~238,~~000~~500
Deferred income taxes		-			27,290
Total long-term liabilities		1,451,886			1,835,002
Total long-term liabilities		1,935,475			2,359,836
Total liabilities		3,300,205			3,695,949
Total liabilities		3,796,718			4,482,554
Commitments and Contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $.0001 par value, 2,000,000 authorized, -0- outstanding		-			-
Common stock, $.0001 par value 28,000,000 authorized, and 614,175 issued and outstanding at both September 30, 2015 and December 31, 2014		61			61
Common stock, $.0001 par value 28,000,000 authorized, 586,929 and 587,652 issued and outstanding at March 31, 2016 and December 31, 2015, respectively		58			58
Paid in capital		65,~~104~~879,~~004~~723			65,~~104~~879,~~004~~723
Treasury stock, 36,524 and 24,709 shares at September 30, 2015 and December 31, 2014, respectively		(304,244	)		(232,598	)
Treasury stock, 2,066 and 966 shares at March 31, 2016 and December 31, 2015, respectively		(20,794	)		(8,709	)
Accumulated other comprehensive income		7386,~~498~~505			~~102~~84,~~564~~417
Accumulated deficit		(2,~~461~~464,~~514~~967	)		(2,~~436~~405,~~954~~608	)
Total stockholders’ equity		3,~~411~~480,~~805~~525			3,~~537~~549,~~077~~881
Total liabilities and stockholders’ equity	$	76,~~208~~780,~~523~~730		$	87,~~019~~245,~~631~~830

See accompanying notes to consolidated financial statements.

INTERNATIONAL MONETARY SYSTEMS, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (~~UNAUDITED~~LOSS)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net revenue	$	2,898,645		$	2,987,878		$	8,843,134		$	8,883,522
Operating expenses:
Employee costs		1,794,504			1,833,930			5,545,235			5,501,425
Selling, general and administrative		795,008			755,925			2,371,856			2,230,204
Depreciation and amortization		264,171			325,659			889,967			996,451
Total operating expenses		2,853,683			2,915,514			8,807,058			8,728,080
Income (loss) from operations		44,962			72,364			36,076			155,442
Other income (expense)
Interest income		10			10			29			36
Gain (loss) on sales of assets		(2,750	)		-			(5,150	)		(4,075	)
Interest expense		(40,664	)		(53,413	)		(128,151	)		(166,409	)
Total other income (expense)		(43,404	)		(53,403	)		(133,272	)		(170,448	)
Income (loss) before income taxes		1,558			18,961			(97,196	)		(15,006	)
Income tax (expense) benefit		17,010			9,337			72,636			36,246
Net income (loss)		18,568			28,298			(24,560	)		21,240
Components of comprehensive income (loss):
Foreign currency translation adjustment		(16,821	)		(3,289	)		(16,227	)		(5,132	)
Unrealized gain (loss) on available for sale securities		(8,606	)		9,648			(12,839	)		18,550
Comprehensive income (loss)	$	(6,859	)	$	34,657		$	(53,626	)	$	34,658
Net income (loss) per common share
– basic	$	.03		$	.04		$	(.04	)	$	.03
– dilutive	$	.03		$	.04		$	(.04	)	$	.03
Weighted average common shares outstanding
– basic		614,175			633,727			614,175			668,580
– dilutive		614,175			633,727			614,175			668,580

(UNAUDITED)

	Three Months Ended March 31,
	2016			2015

Net revenue	$	2,719,431		$	2,862,461
Operating expenses:
Employee costs		1,877,230			1,879,802
Selling, general and administrative		674,206			758,296
Depreciation and amortization		255,753			327,365
Total operating expenses		2,807,189			2,965,463

Loss from operations		(87,758	)		(103,002	)

Other income (expense)
Interest income		12			10
Interest expense		(35,634	)		(44,977	)
Total other income (expense)		(35,622	)		(44,967	)

Loss before income taxes		(123,380	)		(147,969	)
Income tax benefit		64,021			74,203

Net loss		(59,359	)		(73,766	)

Components of comprehensive income (loss):
Foreign currency translation adjustment		3,961			(9,381	)
Unrealized gain (loss) on available for sale securities		(1,873	)		3,021

Comprehensive income (loss)	$	(57,271	)	$	(80,126	)

Net income (loss) per common share - basic	$	(.10	)	$	(.12	)
- dilutive	$	(.10	)	$	(.12	)
Weighted average common shares outstanding - basic		587,080			614,175
- dilutive		587,080			614,175

See accompanying notes to consolidated financial statements.

INTERNATIONAL MONETARY SYSTEMS, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2015			2014
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(24,560	)	$	21,240
Net loss	$	(59,359	)	$	(73,766	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		~~889~~255,~~967~~753			~~996~~327,~~451~~365
Bad debt expense (recovery)		(23,718	)		(8,792	)
Bad debt recovery		(11,745	)		(15,008	)
Amortization of note discount		~~284~~-			~~5,575~~245
Loss on sales of assets		5,150			4,075
Changes in assets and liabilities
Accounts receivable		~~217~~159,~~344~~725			~~193~~224,~~186~~905
Earned trade account		(3447,~~232~~046	)		(~~176~~33,~~060~~493	)
Prepaid expenses		(1728,~~598~~491	)		(243,~~555~~897	)
Other long term assets		3,750			-
Accounts payable and accrued expenses		(278,569	)		(227,750	)
Accounts payable and accrued expenses		(147,297	)		(30,230	)
Deferred income taxes		(47,256	)		(77,853	)
Deferred income taxes		(233,559	)		(277,012	)
Net cash provided by (used in) operating activities		(56,988	)		80,748
Net cash provided by operating activities		635,531			725,878
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(739,~~386~~920	)		(870,~~660~~312	)
Net cash used in investing activities		(73,386	)		(8,660	)
Repayments on notes receivable		1,250			1,250
Net cash used in investing activities		(8,670	)		(69,062	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable, related parties		150,000			50,000
Proceeds from notes payable, related party		-			50,000
Net change in credit lines		60105,000			6295,000
Payments on notes payable, convertible notes payable and related party notes		(~~721~~200,~~467~~471	)		(1286,~~003,848~~165	)
Purchase of treasury stock		(7112,~~646~~085	)		(4042,~~261~~184	)
Net cash used in financing activities		(~~583~~107,~~113~~556	)		(~~932~~183,~~109~~349	)
Effect of exchange rate changes		~~(16~~3,~~227~~961	)		(59,~~132~~381	)
Net decrease in cash		(37169,~~195~~253	)		(~~220~~181,~~023~~044	)
Cash at beginning of period		~~796~~844,~~547~~961			1796,~~035,493~~547
Cash at end of period	$	~~759~~675,~~352~~708		$	~~815~~615,~~470~~503

~~See accompanying notes to consolidated financial statements.~~3

INTERNATIONAL MONETARY SYSTEMS, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Continued

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2015			2014
	2016			2015
SUPPLEMENTAL DISCLOSURES
Cash paid for interest	$	~~128~~35,~~544~~634		$	~~167~~45,~~253~~590
Cash paid for income taxes	$	~~255~~237,~~079~~235		$	~~181~~237,~~134~~550
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Unrealized net gain (loss) on marketable securities	$	(121,~~839~~873	)	$	183,~~550~~021
Notes issued for treasury stock	$	-		$	1,698,085
Trade dollars exchanged for capital assets	$	31,142		$	22,533
Treasury stock retired	$	-		$	1,626,850
Trade dollars exchanged for common stock	$	21,702		$	-
Goodwill and note payable - purchase price adjustment	$	-		$	25,000
Release of common stock guarantee	$	-		$	18,000
Trade dollars exchanged for:
Capital assets	$	28,748		$	29,745
Treasury stock	$	-		$	18,000
Trade dollars received for capital assets	$	5,800		$	3,875

See accompanying notes to consolidated financial statements.

INTERNATIONAL MONETARY SYSTEMS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~September~~March 3031, ~~2015~~2016

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ month ~~periods~~period ended ~~September~~March 3031, ~~2015~~2016, are not necessarily indicative of the results that may be expected for the year ended December 31, ~~2015~~2016.

The Company's 10-K for the year ended December 31, ~~2014~~2015, filed on March 1817, ~~2015~~2016, should be read in conjunction with this report.

Principles of Consolidation

The consolidated financial statements for 2016 ~~2015~~ and ~~2014~~2015 include the accounts of International Monetary Systems, Ltd. (“IMS” or “the Company”) and its’ wholly owned subsidiaries Continental Trade Exchange, Ltd., National Trade Association, Inc., ~~INLM CN Inc.~~ and INLM ~~Holdings,~~CN Inc. Significant intercompany accounts and transactions have been eliminated in consolidation.

Revenue Sources and Cost of Revenue

The Company and its subsidiaries earn revenues in both traditional cash dollars and in IMS trade dollars.

Cash Revenue

Cash income is earned through fees assessed when a member joins, transaction fees generated when clients earn or spend their trade dollars, annual and monthly maintenance fees, finance charges on delinquent accounts receivable, and event fees.

Trade Dollar Revenue

Trade revenue is similarly generated through initial membership fees, monthly maintenance fees, transaction fees, finance charges on delinquent accounts, and event fees. Occasionally the Company will accept a favorable trade ratio in lieu of a cash fee.

Revenue Recognition

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

Transaction fees are recognized upon receipt of transactional information accumulated by our systems or reported by our clients.

Membership fees, monthly maintenance fees, finance charges, and other fees are billed monthly to members' accounts, and are recognized in the month the revenue is earned.

Use of Trade Dollars

The Company uses earned trade dollars to purchase various goods and services required in its operations. All barter transactions are reported at the estimated fair value of the products or services received.

Occasionally, the Company sells IMS trade dollars for US dollars. The cash received in these sales is included in gross revenue and the carrying value of the trade dollars up to the value of the cash received is netted against revenue, with any excess cost included in selling, general and administrative expenses.

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.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

Recent Accounting Pronouncements

Management does not anticipate that the recently issued but not yet effective accounting pronouncements will materially impact the Company’s financial condition.

NOTE 2 – CASH

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. As of ~~September~~March 3031, ~~2015~~2016, the Company has cash in excess of FDIC insurance of approximately $~~423~~361,000. No losses have been incurred related to this credit risk exposure.

NOTE 3 – DEBT

InThe ~~the first nine months of 2015, the~~ Company’s ~~issued~~indebtedness ~~notes~~as ~~totaling $150,000 to an officer for cash. The terms~~ of ~~the~~March ~~notes call for quarterly interest payments at 8% for two years~~31, ~~after~~2016 ~~which~~includes the ~~notes are payable in full.~~following:

In February 2015, notes payable to private investors, with outstanding balances totaling $275,000, were renewed for two years. The notes are now due in February 2017, and call for payments of quarterly interest at 9%.

Lines of credit payable to financial institutions, due in 2016	$	230,000
Convertible notes payable to related parties, mature in 2016 and 2017		170,000
Non-convertible notes payable to related parties, maturing in 2017		500,000
Notes payable to third parties, $474,079 due in 2016		1,421,083
Total indebtedness		2,321,083
Less current maturities, including credit lines and short term debt		(1,100,197	)
Long term debt, net of current maturities	$	1,220,886

InAdditionally, ~~May~~the ~~2015,~~Company ahas ~~$60,000~~lines ~~convertible~~of ~~note~~credit ~~payable~~(including tothe aone ~~relative~~described above) with various financial institutions with unused borrowing capacity totaling approximately $317,000 as of ~~the~~March ~~chairman~~31, ~~matured~~2016, ~~and~~which ~~was~~may ~~repaid~~be drawn as needed.

The Company’s indebtedness as of September 30, 2015 includes the following:

Lines of credit payable to financial institutions, due in 2015	$	155,000
Convertible notes payable to related parties, mature between 2016 and 2017		170,000
Non-convertible notes payable to related parties, maturing in 2017		450,000
Notes payable to third parties, $222,446 due in 2015		1,823,997
Total indebtedness		2,598,997
Less current maturities, including credit lines and short term debt		(909,522	)
Long term debt, net of current maturities	$	1,689,475

Additionally, the Company has lines of credit (including the one described above) with various financial institutions with unused borrowing capacity totaling approximately $392,000 as of September 30, 2015, which may be drawn as needed.

A financial institution has issued a $65,000 standby letter of credit to a landlord in lieu of a security deposit.

NOTE 4 – EQUITY

Common Stock Guarantee Repurchase

NoIn ~~repurchases~~January ~~were~~2016, ~~made~~the inCompany repurchased the ~~first~~remaining ~~nine~~723 ~~months~~shares ofto ~~2015,~~which ~~under~~ the ~~remaining~~ common stock guarantee agreement related at a cost of $21,702, paid in trade dollars. The shares were retired directly to authorized and unissued status.

Share Buyback Program

In ~~accordance~~ accordance with a board approved stock buyback plan, during the ~~following~~first ~~stock~~three ~~buybacks~~months ~~were~~of ~~made~~2016, the Company purchased 1,100 shares, at a cost of $12,085, in open market and private transactions:. The repurchased shares were placed in treasury.

In the first quarter of 2015, the Company purchased 7,056 shares, at a cost of $42,184.

In the second quarter of 2015, the Company purchased 2,962 shares at a cost of $17,494.

In the third quarter of 2015, the Company purchased 1,797 shares at a cost of $11,968.

All repurchased shares were placed in treasury.

Treasury Stock Retirements

There ~~were~~ were no ~~shares~~treasury ~~retired~~share retirements in the first ~~nine~~three months of ~~2015~~2016.

Stock Issued for Services

No stock has been issued for services in ~~2015~~2016.

Stock Options

The Company has adopted an incentive stock option plan under which certain officers, key employees, or prospective employees may purchase shares of the Company's stock at an established exercise price, which shall not be less than the fair market value at the time the option is granted. The final exercise date is any time prior to the five-year anniversary of the first exercise date.

There are no options outstanding at ~~September~~March 3031, ~~2015~~2016.

Stock Warrants

No warrants were issued in the current period.

There are no warrants outstanding as of ~~September~~March 3031, ~~2015~~2016.

NOTE 5 – INCOME TAXES

The difference between the combined Federal and state statutory rate and the effective rate for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~ 2016 relates to the difference in timing of deduction for certain expenses, primarily bad debts, amortization of acquired membership lists, and depreciation of property and equipment, and the rates at which deferred taxes were originally established.

NOTE 6 – CONTINGENT LIABILITIES

In the ordinary course of business, the Company is occasionally involved in litigation, both as plaintiff and defendant. Management either litigates or settles claims after evaluating the merits of the actions and weighing the costs of settling vs. litigating. There are currently no open litigation matters which the Company feels will result in a material loss.

~~NOTE~~ 7~~– COMMITMENTS~~

Effective June 1, 2015, the Company entered into a new lease agreement and relocated its Wichita, Kansas office. The new agreement calls for annual rent of $17,440 for a term of 5 years.

Effective September 24, 2015, the Company extended its lease on offices in Rohnert Park, California. The extension agreement requires base rent of $26,208 per year and, as previously, common area charges. The term of the extension is 5 years.

INTERNATIONAL MONETARY SYSTEMS, LTD.

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to current and historical information, this Quarterly Report on Form 10-Q contains forward-looking statements. These statements relate to our future operations, prospects, potential products, services, developments, business strategies or our future financial performance. These statements can generally be identified by the use of terms such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “target,” “will” or the negative of these terms or other similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual events or results may differ materially. We undertake no obligation to update or revise publicly any forward-looking statement after the date of this report, whether as a result of new information, future events or otherwise.

HIGHLIGHTS

Operations

~~Year~~Operating toexpenses ~~date~~in ~~revenue~~the isfirst ~~flat~~quarter ~~versus~~of ~~prior~~2016 ~~year,~~were ~~while~~5.3% ~~other~~lower ~~companies~~than induring ~~our~~the ~~industry~~same ~~are~~period ~~reporting declines~~ in ~~revenue~~2015.

The new Sarasota, Florida franchise office has made a positive contribution to results in both the third quarter and year to date.

Return to Shareholders

During the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, 111,~~815~~100 shares of the Company’s stock have been repurchased under the Company’s stock buyback plan.

RESULTS OF OPERATIONS

THIRD QUARTER RESULTS

Revenue

Revenue ~~was down~~decreased 35% in the ~~third~~first quarter of ~~2015~~2016 compared to the same period in ~~2014~~2015, as we continue to see the residual effects of ~~uncertain~~ uncertain economic and regulatory climates on the Company’s primary members, small businesses. This decrease is in line with, or slightly better than, the results of other companies in the industry.

Expenses

Operating expenses in the quarter ended ~~September~~March 3031, ~~2015~~2016 were $2,~~853~~807,~~683~~189, a decrease of $61158,~~831~~274 or 25.13% compared to the ~~third~~first quarter of ~~2014~~of 2015. This decrease is primarily due to decreased ~~employee~~administrative costs ~~due~~and to lower ~~headcount~~amortization ~~and~~expense ~~lower~~as ~~occupancy~~a ~~costs~~number of the membership lists acquired in prior years become fully amortized.

The Company generated an operating ~~income~~loss of $4487,~~962~~758 for the quarter, compared to an operating ~~income~~loss of $72103,~~364~~002 in ~~2014~~2015. After adjusting for interest and income taxes, there was a net ~~profit~~loss for the quarter of $1859,~~568~~359 compared to a net ~~profit~~loss of $2873,~~298 in~~766 in the ~~same~~first quarter of ~~2014~~2015. ~~Interest expense has decreased as the Company has aggressively paid down the debt load taken on strategically in prior years to fund acquisitions and the stock buyback program expanded in 2011.~~

EBITDA for the three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015 are as follows:

Adjustments to Reconcile GAAP Net Income to EBITDA

	2015			2014
	2016			2015
Net income	$	18,568		$	28,298
Net loss	$	(59,359	)	$	(73,766	)
Interest expense		4035,~~664~~634			5344,~~413~~977
Income taxes		(17,010	)		(9,337	)
Income tax expense (benefit)		(64,021	)		(74,203	)
Depreciation and amortization		~~264~~255,~~171~~753			~~325~~327,~~659~~365
EBITDA	$	~~306~~168,~~393~~007		$	~~398~~224,~~033~~373

108

YEAR TO DATE

Revenue

Revenue is flat in the first nine months of 2015 compared to the same period in 2014, as we continue to see the residual effects of uncertain economic climates, especially among small businesses, the Company's primary client base.

Expenses

Operating expenses for the nine months ended September 30, 2015 were $8,807,058, an increase of $78,978, or 1% compared to the first nine months of 2014. This increase is primarily due to increased franchisee costs and other administrative expenses. These increases are partially offset by lower occupancy costs.

The Company has generated operating income of $36,076 for year to date, compared to operating income of $155,442 in 2014. After adjusting for interest and income taxes, the net loss for the first nine months of 2015 was $24,560 compared to net income of $21,240 in the comparable period in 2014. Interest expense has decreased as the Company has aggressively paid down the debt load taken on strategically to fund acquisitions and the stock buyback program expanded in 2011.

EBITDA for the nine months ended September 30, 2015 and 2014 are as follows:

Adjustments to Reconcile GAAP Net Income to EBITDA

	2015			2014
Net income (loss)	$	(24,560	)	$	21,240
Interest expense		128,151			166,409
Income taxes		(72,636	)		(36,246	)
Depreciation and amortization		889,967			996,451
EBITDA	$	920,922		$	1,147,854

LIQUIDITY, SOURCES OF CAPITAL AND LINES OF CREDIT

AtOn ~~September~~March 3031, ~~2015~~2016, there was a working capital deficit of approximately $71117,000, compared to a deficit of approximately $~~118~~232,000 at ~~December~~March 31, ~~2014~~2015. A working capital deficit at the end of the first quarter is typical for the Company due to the somewhat cyclical nature of the business. We believe that current cash needs can be met with the present cash ~~and~~balance ~~investments balances~~ and from working capital generated ~~from operations~~ over the next 12 months. Additionally, the Company has letters of credit with various financial institutions with unused borrowing capacity of approximately $~~392~~317,000, which may be drawn as needed.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are affected by management's applications of accounting policies. Critical accounting policies for IMS include the following:

REVENUE SOURCES AND REVENUE RECOGNITION

The Company and its subsidiaries earn revenues in both traditional cash dollars and in IMS trade dollars.

Cash Revenue

Trade Dollar Revenue

Trade revenue is similarly generated through initial membership fees, monthly maintenance fees, transaction fees and event fees. Occasionally the Company will accept a favorable trade ratio in lieu of a cash fee.

Revenue Recognition

Transaction fees are recognized upon receipt of transactional information accumulated by our systems or reported by our clients.

Membership fees, monthly maintenance fees, finance charges, and other fees are billed monthly to members' accounts, and are recognized in the month the revenue is earned.

Use of Trade Dollars

RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

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

GOODWILL AND MEMBERSHIP LISTS

Goodwill and membership lists are stated at cost and arise when IMS acquires another company or the assets of another trade exchange. Membership lists are amortized over the estimated life of ten years.

The Company tests goodwill and intangible assets at least annually for impairment, or when facts and circumstances indicate impairment is probable. It is the Company’s policy to test impairment at the end of each year. Therefore, no impairment of goodwill or membership lists was recorded in the first ~~nine~~three months of ~~2015~~2016.

INCOME TAXES

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

RECENT ACCOUNTING PRONOUNCEMENTS

Management does not anticipate that any recently issued, but not yet effective, accounting pronouncements will materially impact the Company’s financial condition.

OFF BALANCE SHEET ARRANGEMENTS

We do not have any off balance sheet arrangements or other relationships with unconsolidated entities.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required by Smaller Reporting Companies.

ITEM 4 CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on our evaluation under the framework in Internal Control — Integrated Framework (2013) issued by COSO, our management concluded that our internal control over financial reporting was effective as of ~~September~~March 3031, ~~2015~~2016.

Changes in Internal Control over Financial Reporting

There was no change in internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during our first fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting .

PART II OTHER INFORMATION

Item 1 Legal Proceedings

Item 1A Risk Factors

Not applicable for Smaller Reporting Companies.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

(a) and (b) There were no unregistered sales of equity securities.

					Maximum
Period	Total Number of Shares Purchased		Average Price Paid Per Share		Maximum Number of Shares That May Yet be Purchased Under the Plans
	Total				Number of Shares
	Number		Average		That May Yet
	of Shares		Price Paid		be Purchased
Period	Purchased		Per Share		Under the Plans
Purchase related stock buyback guarantees
July 1 to July 31, 2015		-	$	-
January 1 to January 31, 2016		723	$	30.00		-
August 1 to August 31, 2015		-	$	-
February 1 to February 29, 2016		-	$	-		-
September 1 to September 30, 2015		-	$	-		723
March 1 to March 31, 2016		-	$	-		-
Board Authorized repurchase plan
July 1 to July 31, 2015		200	$	5.73
January 1 to January 31, 2016		-	$	-		-
August 1 to August 31, 2015		1,278	$	5.97
February 1 to February 29, 2016		-	$	-		-
September 1 to September 30, 2015		319	$	10.00		unlimited
March 1 to March 31, 2016		1,100	$	10.99		unlimited

Item 3 Defaults Upon Senior Securities

None

Item 4 Mine Safety Disclosures

No applicable items for disclosure.

Item 5 Other Information

None

1311

Item 6 Exhibits and Reports on Form 8-K

Item 6 Exhibits and Reports on Form 8-K

(a) Exhibits

31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
31.2	Certification of Principal Financial and Accounting Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document~~***~~
101.SCH	XBRL Taxonomy Extension Schema Document ~~***~~
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document ~~***~~
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document ~~***~~
101.LAB	XBRL Taxonomy Extension Label Linkbase Document ~~***~~
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document ~~***~~

*** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

(b) Reports on Form 8-K

1412

INTERNATIONAL MONETARY SYSTEMS, LTD.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

International Monetary Systems, Ltd. (Registrant) /s/ John E. Strabley John E. Strabley, Chief Executive Officer (Principal Executive Officer) ~~November~~May 410, ~~2015~~2016 /s/ David A. Powell David A. Powell, Chief Financial Officer (Principal Accounting and Financial Officer) ~~November~~May 410, ~~2015~~2016

1513

Filing Compare · INTERNATIONAL MONETARY SYSTEMS LTD /WI/