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Share Name | Share Symbol | Market | Type |
---|---|---|---|
ITEX Corporation (PK) | USOTC:ITEX | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 4.8366 | 4.00 | 5.90 | 0.00 | 13:00:45 |
x
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
¨
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
Nevada
|
|
93-0922994
|
(State or other jurisdiction of
incorporation or organization) |
|
(IRS Employer
Identification No.) |
|
3326 160th Ave SE, Suite 100
, Bellevue, WA 98008-6418
|
|
|
(425) 463-4000
|
|
|
¨
|
Large accelerated filer
|
|
¨
|
Accelerated filer
|
|
¨
|
Non-accelerated filer
|
|
x
|
Smaller reporting company
|
|
(Do not check if a smaller
reporting company) |
|
|
|
|
|
Page(s)
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|
PART
I.
|
Financial Information
|
|
|
|
|
ITEM 1.
|
Financial Statements
|
|
|
|
|
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Consolidated Balance Sheets as of January 31, 2014 (unaudited) and July 31, 2013
|
1
|
|
|
|
|
Consolidated Statements of Income for the Three and Six-Months Ended January 31, 2014 and 2013 (unaudited)
|
2
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|
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|
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Consolidated Statement of Stockholders’ Equity for the Six-Months Ended January 31, 2014 (unaudited)
|
3
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|
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Consolidated Statements of Cash Flows for the Six-Months Ended January 31, 2014 and 2013 (unaudited)
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4
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Notes to Consolidated Financial Statements (unaudited)
|
5
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ITEM 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
10
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|
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ITEM 4T.
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Controls and Procedures
|
33
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|
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PART II.
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Other Information
|
33
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|
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ITEM 1.
|
Legal Proceedings
|
33
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ITEM 2.
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Unregistered Sales of Equity Securities
|
33
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|
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ITEM 6.
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Exhibits
|
34
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Signatures
|
35
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|
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January 31, 2014
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|
July 31, 2013
|
|
||
ASSETS
|
|
|
|
|
|
|
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Current assets:
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,394
|
|
$
|
3,352
|
|
Accounts receivable, net of allowance of $343 and $363
|
|
|
924
|
|
|
711
|
|
Prepaid expenses
|
|
|
72
|
|
|
107
|
|
Loans and advances
|
|
|
22
|
|
|
7
|
|
Deferred tax asset, net of allowance of $31
|
|
|
818
|
|
|
818
|
|
Notes receivable
|
|
|
374
|
|
|
366
|
|
Other current assets
|
|
|
43
|
|
|
13
|
|
Total current assets
|
|
|
5,647
|
|
|
5,374
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|
|
|
|
|
|
|
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Property and equipment, net of accumulated depreciation of $436 and $423
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|
|
46
|
|
|
57
|
|
Goodwill
|
|
|
3,191
|
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|
3,191
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Deferred tax asset, net of allowance of $133 and net of current portion
|
|
|
3,373
|
|
|
3,549
|
|
Intangible assets, net of accumulated amortization of $3,238 and $3,180
|
|
|
189
|
|
|
248
|
|
Notes receivable - net of current portion
|
|
|
1,228
|
|
|
1,065
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|
Other long-term assets
|
|
|
27
|
|
|
30
|
|
Total assets
|
|
|
13,701
|
|
|
13,514
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|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
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Current liabilities:
|
|
|
|
|
|
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Accounts and other expenses payable
|
|
|
60
|
|
|
101
|
|
Commissions payable to brokers
|
|
|
-
|
|
|
308
|
|
Accrued commissions to brokers
|
|
|
1,181
|
|
|
833
|
|
Accrued expenses
|
|
|
338
|
|
|
320
|
|
Deferred revenue
|
|
|
28
|
|
|
33
|
|
Advance payments
|
|
|
93
|
|
|
130
|
|
Note Payable, current portion
|
|
|
6
|
|
|
7
|
|
Total current liabilities
|
|
|
1,706
|
|
|
1,732
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
2
|
|
|
8
|
|
Total Liabilities
|
|
|
1,708
|
|
|
1,740
|
|
|
|
|
|
|
|
|
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Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
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Stockholders’ equity:
|
|
|
|
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Common stock, $0.01 par value; 9,000 shares authorized; 2,626 shares and 2,596 shares issued and outstanding, respectively
|
|
|
26
|
|
|
26
|
|
Additional paid-in capital
|
|
|
25,353
|
|
|
25,214
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Stockholder notes receivable
|
|
|
(195)
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|
|
(226)
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Accumulated deficit
|
|
|
(13,191)
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|
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(13,240)
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Total stockholders' equity
|
|
|
11,993
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|
|
11,774
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|
|
|
|
|
|
|
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Total liabilities and stockholders’ equity
|
|
$
|
13,701
|
|
$
|
13,514
|
|
1 | ||
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Three-months Ended
January 31, |
|
Six-months Ended
January 31, |
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||||||||
|
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2014
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|
2013
|
|
2014
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|
2013
|
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||||
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Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
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|
Marketplace revenue and other revenue
|
|
$
|
3,696
|
|
$
|
3,960
|
|
$
|
7,121
|
|
$
|
7,671
|
|
|
|
|
|
|
|
|
|
|
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Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Marketplace revenue
|
|
|
2,309
|
|
|
2,551
|
|
|
4,445
|
|
|
4,912
|
|
Corporate salaries, wages and employee benefits
|
|
|
628
|
|
|
477
|
|
|
1,148
|
|
|
961
|
|
Selling, general and administrative
|
|
|
516
|
|
|
368
|
|
|
1,013
|
|
|
836
|
|
Depreciation and amortization
|
|
|
30
|
|
|
65
|
|
|
72
|
|
|
131
|
|
|
|
|
3,483
|
|
|
3,461
|
|
|
6,678
|
|
|
6,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
213
|
|
|
499
|
|
|
443
|
|
|
831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net
|
|
|
28
|
|
|
30
|
|
|
59
|
|
|
61
|
|
Other (expense)
|
|
|
-
|
|
|
(2)
|
|
|
-
|
|
|
-
|
|
|
|
|
28
|
|
|
28
|
|
|
59
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
241
|
|
|
527
|
|
|
502
|
|
|
892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
78
|
|
|
169
|
|
|
163
|
|
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
163
|
|
$
|
358
|
|
$
|
339
|
|
$
|
606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.06
|
|
$
|
0.14
|
|
$
|
0.13
|
|
$
|
0.23
|
|
Diluted
|
|
$
|
0.06
|
|
$
|
0.14
|
|
$
|
0.13
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2,628
|
|
|
2,615
|
|
|
2,615
|
|
|
2,616
|
|
Diluted
|
|
|
2,632
|
|
|
2,616
|
|
|
2,618
|
|
|
2,617
|
|
2 | ||
|
|
|
Common Stock
|
|
Additional
Paid-in |
|
Stockholder
Note |
|
Accumulated
|
|
|
|
|
||||||
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Receivable
|
|
Deficit
|
|
Total
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2013
|
|
2,596
|
|
$
|
26
|
|
$
|
25,214
|
|
$
|
(226)
|
|
$
|
(13,240)
|
|
$
|
11,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock repurchased and retired
|
|
(24)
|
|
|
(1)
|
|
|
(95)
|
|
|
|
|
|
|
|
|
(96)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on stockholder notes receivables
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense
|
|
54
|
|
|
1
|
|
|
234
|
|
|
|
|
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(290)
|
|
|
(290)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
339
|
|
|
339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2014
|
|
2,626
|
|
$
|
26
|
|
$
|
25,353
|
|
$
|
(195)
|
|
$
|
(13,191)
|
|
$
|
11,993
|
|
3 | ||
|
|
|
Six-months ended January
31, |
|
||||
|
|
2014
|
|
2013
|
|
||
|
|
(unaudited)
|
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
339
|
|
$
|
606
|
|
Items to reconcile to net cash provided by operations:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
72
|
|
|
131
|
|
Stock based compensation
|
|
|
235
|
|
|
121
|
|
Decrease in allowance for uncollectible receivables
|
|
|
(20)
|
|
|
(54)
|
|
Change in deferred income taxes
|
|
|
176
|
|
|
309
|
|
Gain on sale of assets
|
|
|
-
|
|
|
(4)
|
|
Loss on disposal of equipment
|
|
|
-
|
|
|
4
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(193)
|
|
|
(242)
|
|
Prepaid expenses
|
|
|
35
|
|
|
(23)
|
|
Loans and advances
|
|
|
(15)
|
|
|
(13)
|
|
Prepaid advertising credits
|
|
|
-
|
|
|
3
|
|
Other assets
|
|
|
(27)
|
|
|
(27)
|
|
Accounts payable
|
|
|
(41)
|
|
|
65
|
|
Commissions payable to brokers
|
|
|
(308)
|
|
|
(654)
|
|
Accrued commissions to brokers
|
|
|
348
|
|
|
464
|
|
Accrued expenses
|
|
|
18
|
|
|
(54)
|
|
Deferred revenue
|
|
|
(5)
|
|
|
(10)
|
|
Other long-term liabilities
|
|
|
(6)
|
|
|
(1)
|
|
Advance payments
|
|
|
(37)
|
|
|
(39)
|
|
Net cash provided by operating activities
|
|
|
571
|
|
|
582
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Membership list purchase
|
|
|
-
|
|
|
45
|
|
Proceeds from note payable
|
|
|
-
|
|
|
15
|
|
Payments on note payable
|
|
|
(1)
|
|
|
(2)
|
|
Purchase of property and equipment
|
|
|
(2)
|
|
|
(17)
|
|
Payments received from notes receivable
|
|
|
267
|
|
|
181
|
|
Advances on Loans
|
|
|
(438)
|
|
|
(76)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(174)
|
|
|
146
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Principal payments on Broker notes receivable
|
|
|
31
|
|
|
52
|
|
Repurchase of Common stock
|
|
|
(96)
|
|
|
(26)
|
|
Cash dividend paid to Common Shareholders
|
|
|
(290)
|
|
|
(235)
|
|
Net cash used in financing activities
|
|
|
(355)
|
|
|
(209)
|
|
Net increase in cash
|
|
|
42
|
|
|
519
|
|
Cash at beginning of period
|
|
|
3,352
|
|
|
1,942
|
|
Cash at end of period
|
|
$
|
3,394
|
|
$
|
2,461
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
Cash paid for taxes
|
|
$
|
35
|
|
$
|
5
|
|
4 | ||
|
5 | ||
|
|
|
Three-months Ended
January 31, |
|
Six-months Ended
January 31, |
|
||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for shareholders
|
|
$
|
163
|
|
$
|
358
|
|
$
|
339
|
|
$
|
606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted avg. outstanding shares of common stock
|
|
|
2,628
|
|
|
2,615
|
|
|
2,615
|
|
|
2,616
|
|
Dilutive effect of restricted shares
|
|
|
4
|
|
|
1
|
|
|
3
|
|
|
1
|
|
Common stock and equivalents
|
|
|
2,632
|
|
|
2,616
|
|
|
2,618
|
|
|
2,617
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.06
|
|
$
|
0.14
|
|
$
|
0.13
|
|
$
|
0.23
|
|
Diluted
|
|
$
|
0.06
|
|
$
|
0.14
|
|
$
|
0.13
|
|
$
|
0.23
|
|
6 | ||
|
|
(1)
|
The expected payments for 2014 reflect future minimum payments for the six-month period from February 1, 2014 to July 31, 2014.
|
|
(1)
|
The expected payments for 2014 reflect future minimum payments for the six-month period from February 1, 2014 to July 31, 2014.
|
7 | ||
|
8 | ||
|
9 | ||
|
10 | ||
|
· | Revenue Trends and Growth. Compared to 2013, we experienced a downturn in revenue for the six-months ended January 31, 2014 due to the reduction in our transaction volume and a reduction in our membership base. Our primary customers are small businesses with less than ten employees. We believe this segment of the business community remains vulnerable in a difficult economic environment, with strained or insufficient cash flow being a major impediment to growth. In addition, we believe there is a general decline in trade transaction volume reflecting customer access to more sales channel options, plus ease of purchasing power from big box stores and many Internet sites featuring discounted pricing. Although we seek to increase revenues through organic growth and the development of new revenue sources, the primary driver of revenue growth in recent years has been through our business acquisitions. These acquisitions are intermittent and cannot be relied upon as a future source of revenue growth, because of the absence of acquisition candidates, lack of financing, or unacceptable terms. We have approximately 30% recurring revenues from fixed association fees. Approximately two-thirds of our net revenues each quarter come from variable transaction fees. We continue to work to expand our membership base which we expect will increase recurring and transactional revenues. We seek to increase our revenue by: |
o | adding new brokers |
o | marketing the benefits of participation in the Marketplace |
o | enhancing our internet applications; |
o | developing a smart phone application to easily register new members; and |
o | licensing our virtual currency platform to third parties. |
· | Corporate-owned Offices . As of October 31, 2012 and for the period ending January 31, 2014, the ITEX Marketplace was 100% broker managed with no corporate-owned locations. As a general operating philosophy, we depend on the ability of our brokers to enroll new members, train them in the use of the Marketplace, grow our transactional volume by facilitating business among members, manage member relationships, provide members with information about ITEX products and services, and assure the payment of our dues and fees. Our broker model requires less capital investment and lower operating expenses than if we operated the offices in our network directly. From time to time, we complement our Broker Network with corporate-owned locations, acquired either as a result of business acquisitions or as a result of ensuring the orderly transition of broker locations. Part of our strategy when we acquire exchange members is to incubate the asset with corporate direction and assistance, flush out non-performing members, synchronize fee plans, and then transfer certain management rights to these members to new or existing franchisees, with the contractual rights and revenues generated by these members remaining with ITEX. The result is a wider member base, managed by new franchisees, and a member list asset that continues to be owned by ITEX. |
11 | ||
|
· | Internet Applications and Web Services . We continually enhance our internet applications and web services to make our online services more user friendly to our employees, brokers and members, and to create confidence in the Marketplace. We continue to upgrade our payment processing and team software with .NET technologies. We refresh the content at our website www.itex.com to better tell our story and make it more community driven. With virtual or digital currencies receiving increasing interest from investors, businesses and governments, we are seeking potential revenue opportunities by licensing our virtual currency platform to third parties. |
· | Smart Phone technology. We seek to provide useful tools to members to enable them to expand their trading community, find local customers and instantly complete transactions through a mobile device. During the 3 rd quarter we plan to launch a Smart Phone application with ITEXsnap SM and ITEXpay SM which will enable our members to easily register new prospects into our trading community and instantly complete a transaction. |
· | Geographical expansion. We have acquired 11 trade exchange membership lists since 2005 and integrated them into the Marketplace. The acquisitions have contributed to our member counts and revenue and allowed us to expand the breadth of our network by opening offices in several geographic areas in which the ITEX presence was previously weak or nonexistent. In addition, we removed competitors from our industry, strengthening our brand. Part of our strategy when we acquire an exchange’s members is to incubate the new members with corporate staff, flush out non-performing members, synchronize fee plans, and then distribute members to existing franchisees or spin off to new franchisees. We continue to evaluate and consider other potential strategic transactions, if and when such opportunities arise. |
· | Financial Position . At January 31, 2014, we had a cash balance of $3,394, compared to a balance of $3,352 at July 31, 2013. Our net cash flows provided by operating activities were $571 for the six -month period ended January 31, 2014, compared to $582 for the corresponding period the previous year. Our business model has demonstrated the ability to generate consistent cash flows, which have historically supplied us with our primary source of liquidity. In February 2013, we increased our quarterly cash dividend 25% to $0.05 per share, representing an annualized dividend yield of 5.58% (based on the 12-month trailing average closing price of our stock up to July 2013). We seek to maintain a liquidity cushion sufficient to fund our business activity and handle contingencies, while preserving the ability to return cash to our stockholders through dividends and share buybacks. However, our Board of Directors may decide to use capital for acquisitions, revenue generating opportunities or other corporate purposes. See Risk Factor below “ Our ability to pay dividends on our common stock is subject to the discretion of our Board of Directors and may be limited by our lack of liquidity or access to capital. ” |
12 | ||
|
|
|
Three-months ended
January 31, |
|
Six-months ended
January 31, |
|
||||||||
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
3,696
|
|
$
|
3,960
|
|
$
|
7,121
|
|
$
|
7,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of marketplace revenue
|
|
$
|
2,309
|
|
$
|
2,551
|
|
$
|
4,445
|
|
$
|
4,912
|
|
Operating expenses
|
|
|
1,174
|
|
|
910
|
|
|
2,233
|
|
|
1,928
|
|
Income from operations
|
|
|
213
|
|
|
499
|
|
|
443
|
|
|
831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income,net
|
|
|
28
|
|
|
28
|
|
|
59
|
|
|
61
|
|
Income before income taxes
|
|
|
241
|
|
|
527
|
|
|
502
|
|
|
892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
78
|
|
|
169
|
|
|
163
|
|
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
163
|
|
$
|
358
|
|
$
|
339
|
|
$
|
606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.06
|
|
$
|
0.14
|
|
$
|
0.13
|
|
$
|
0.23
|
|
Diluted
|
|
$
|
0.06
|
|
$
|
0.14
|
|
$
|
0.13
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common and equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2,628
|
|
|
2,615
|
|
|
2,615
|
|
|
2,616
|
|
Diluted
|
|
|
2,632
|
|
|
2,616
|
|
|
2,618
|
|
|
2,617
|
|
13 | ||
|
14 | ||
|
|
|
Three-months ended January 31,
|
|
|
Six-months ended January 31,
|
|
||||||||||||||||||
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
||||||||||||
|
|
Amount
|
|
Percent
|
|
|
Amount
|
|
Percent
|
|
|
Amount
|
|
Percent
|
|
|
Amount
|
Percent
|
|
|||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketplace revenue and other revenue
|
|
$
|
3,696
|
|
100
|
%
|
|
$
|
3,960
|
|
100
|
%
|
|
$
|
7,121
|
|
100
|
%
|
|
$
|
7,671
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Marketplace revenue
|
|
|
2,309
|
|
62
|
%
|
|
|
2,551
|
|
64
|
%
|
|
|
4,445
|
|
63
|
%
|
|
|
4,912
|
|
64
|
%
|
Salaries, wages and employee benefits
|
|
|
628
|
|
17
|
%
|
|
|
477
|
|
12
|
%
|
|
|
1,148
|
|
16
|
%
|
|
|
961
|
|
13
|
%
|
Selling, general and administrative
|
|
|
516
|
|
14
|
%
|
|
|
368
|
|
9
|
%
|
|
|
1,013
|
|
14
|
%
|
|
|
836
|
|
11
|
%
|
Depreciation and amortization
|
|
|
30
|
|
1
|
%
|
|
|
65
|
|
2
|
%
|
|
|
72
|
|
1
|
%
|
|
|
131
|
|
2
|
%
|
|
|
|
3,483
|
|
94
|
%
|
|
|
3,461
|
|
87
|
%
|
|
|
6,678
|
|
94
|
%
|
|
|
6,840
|
|
90
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
213
|
|
6
|
%
|
|
|
499
|
|
13
|
%
|
|
|
443
|
|
6
|
%
|
|
|
831
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
28
|
|
1
|
%
|
|
|
30
|
|
1
|
%
|
|
|
59
|
|
1
|
%
|
|
|
61
|
|
1
|
%
|
Gain/(Loss) on sale of assets, net
|
|
|
-
|
|
0
|
%
|
|
|
(2)
|
|
0
|
%
|
|
|
-
|
|
0
|
%
|
|
|
-
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
241
|
|
7
|
%
|
|
|
527
|
|
13
|
%
|
|
|
502
|
|
7
|
%
|
|
|
892
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
78
|
|
3
|
%
|
|
|
169
|
|
4
|
%
|
|
|
163
|
|
2
|
%
|
|
|
286
|
|
4
|
%
|
Net income
|
|
$
|
163
|
|
4
|
%
|
|
$
|
358
|
|
9
|
%
|
|
$
|
339
|
|
5
|
%
|
|
$
|
606
|
|
8
|
%
|
|
|
Three-months ended
January 31, |
|
Percent
increase |
|
|
Six-months ended
January 31, |
|
Percent
increase |
|
||||||||
|
|
2014
|
|
2013
|
|
(decrease)
|
|
|
2014
|
|
2013
|
|
(decrease)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction fees
|
|
$
|
2,419
|
|
$
|
2,704
|
|
-11
|
%
|
|
$
|
4,623
|
|
$
|
5,152
|
|
-10
|
%
|
Association fees
|
|
|
1,092
|
|
|
1,145
|
|
-5
|
%
|
|
|
2,202
|
|
|
2,309
|
|
-5
|
%
|
Other revenue
|
|
|
185
|
|
|
111
|
|
67
|
%
|
|
|
296
|
|
|
210
|
|
41
|
%
|
|
|
$
|
3,696
|
|
$
|
3,960
|
|
-7
|
%
|
|
$
|
7,121
|
|
$
|
7,671
|
|
-7
|
%
|
15 | ||
|
|
·
|
All ITEX dollar purchases for corporate and Marketplace purposes are approved by senior management.
|
|
·
|
We do not sell or purchase ITEX dollars for USD.
|
16 | ||
|
|
|
Three-months ended
January 31, |
|
|
Percent
increase |
|
|
Six-months ended
January 31, |
|
|
Percent
|
|
||||||||||
|
|
2014
|
|
|
2013
|
|
|
(decrease)
|
|
|
2014
|
|
|
2013
|
|
|
(decrease)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction fee commissions
|
|
$
|
1,830
|
|
|
$
|
2,051
|
|
|
-11
|
%
|
|
$
|
3,492
|
|
|
$
|
3,901
|
|
|
-10
|
%
|
Association fee commissions
|
|
|
398
|
|
|
|
420
|
|
|
-5
|
%
|
|
|
795
|
|
|
|
844
|
|
|
-6
|
%
|
Corporate-owned office costs
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
7
|
|
|
-100
|
%
|
Other costs of revenue
|
|
|
81
|
|
|
|
80
|
|
|
1
|
%
|
|
|
158
|
|
|
|
160
|
|
|
-1
|
%
|
|
|
$
|
2,309
|
|
|
$
|
2,551
|
|
|
-9
|
%
|
|
$
|
4,445
|
|
|
$
|
4,912
|
|
|
-10
|
%
|
Costs of Marketplace revenue as percentage of total revenue
|
|
|
62
|
%
|
|
|
64
|
%
|
|
|
|
|
|
62
|
%
|
|
|
64
|
%
|
|
|
|
17 | ||
|
|
|
Three-months ended
January 31, |
|
Percent
|
|
|
Six-months ended
January 31, |
|
Percent
|
|
||||||||||||
|
|
2014
|
|
|
2013
|
|
increase
|
|
|
2014
|
|
|
2013
|
|
increase
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate salaries, wages and employee benefits
|
|
$
|
628
|
|
|
$
|
477
|
|
|
32
|
%
|
|
$
|
1,148
|
|
|
$
|
961
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate salaries, wages and employee benefits as percentage of total revenue
|
|
|
17
|
%
|
|
|
12
|
%
|
|
|
|
|
|
16
|
%
|
|
|
13
|
%
|
|
|
|
|
|
Three-months ended
January 31, |
|
Percent
|
|
|
Six-months ended
January 31, |
|
Percent
|
|
||||||||||||
|
|
2014
|
|
|
2013
|
|
increase
|
|
|
2014
|
|
|
2013
|
|
increase
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
$
|
516
|
|
|
$
|
368
|
|
|
40
|
%
|
|
$
|
1,013
|
|
|
$
|
836
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses as percentage of total revenue
|
|
|
14
|
%
|
|
|
9
|
%
|
|
|
|
|
|
14
|
%
|
|
|
11
|
%
|
|
|
|
18 | ||
|
|
|
Three-months ended
|
|
|
|
|
|
Six-months ended
|
|
|
|
|
|
|||||||||||
|
|
January 31,
|
|
|
Percent
|
|
|
January 31,
|
|
|
|
Percent
|
|
|||||||||||
|
|
2014
|
|
|
2013
|
|
|
decrease
|
|
|
2014
|
|
|
|
2013
|
|
|
|
decrease
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
30
|
|
|
$
|
65
|
|
|
-54
|
%
|
|
$
|
72
|
|
|
|
$
|
131
|
|
|
|
-45
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization as percentage of total revenue
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
|
|
|
1
|
%
|
|
|
|
2
|
%
|
|
|
|
|
19 | ||
|
|
|
Three-months ended
|
|
|
Percent
|
|
|
Six-months ended
|
|
Percent
|
|
||||||||||||
|
|
January 31,
|
|
|
increase
|
|
|
January 31,
|
|
increase
|
|
||||||||||||
|
|
2014
|
|
|
2013
|
|
|
(decrease)
|
|
|
2014
|
|
|
2013
|
|
(decrease)
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
28
|
|
|
$
|
30
|
|
|
|
-7
|
%
|
|
$
|
59
|
|
|
$
|
61
|
|
|
-3
|
%
|
(Loss) on sale of assets
|
|
$
|
-
|
|
|
$
|
(2)
|
|
|
|
-100
|
%
|
|
$
|
-
|
|
|
$
|
-
|
|
|
-
|
|
Other income
|
|
$
|
28
|
|
|
$
|
28
|
|
|
|
0
|
%
|
|
$
|
59
|
|
|
$
|
61
|
|
|
-3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, as percentage of total revenue
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
Three-Months ended January 31
|
|
|
Six-months ended January 31,
|
|
||||||||||||||||||
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
||||||||||||
|
|
Amount
|
|
Rate
|
|
|
Amount
|
|
Rate
|
|
|
Amount
|
|
Rate
|
|
|
Amount
|
|
Rate
|
|
||||
Expected tax provison at federal statutory rate
|
|
$
|
84
|
|
35
|
%
|
|
$
|
183
|
|
35
|
%
|
|
$
|
175
|
|
35
|
%
|
|
$
|
309
|
|
35
|
%
|
State income taxes
|
|
|
(6)
|
|
-2
|
%
|
|
|
(14)
|
|
-3
|
%
|
|
|
(12)
|
|
-2
|
%
|
|
|
(23)
|
|
-3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
78
|
|
32
|
%
|
|
$
|
169
|
|
32
|
%
|
|
$
|
163
|
|
32
|
%
|
|
$
|
286
|
|
32
|
%
|
20 | ||
|
|
|
Six-months ended January 31,
|
|
||||
|
|
2014
|
|
2013
|
|
||
|
|
|
|
|
|
|
|
Cash provided by operating activities
|
|
$
|
571
|
|
$
|
582
|
|
Cash provided by (used) in investing activities
|
|
|
(174)
|
|
|
146
|
|
Cash used in financing activities
|
|
|
(355)
|
|
|
(209)
|
|
Increase in cash
|
|
$
|
42
|
|
$
|
519
|
|
21 | ||
|
|
|
Six-months ended January 31,
|
|
||||
|
|
2014
|
|
2013
|
|
||
|
|
|
|
|
|
|
|
Net income
|
|
$
|
339
|
|
$
|
606
|
|
Add: non-cash expenses
|
|
|
463
|
|
|
507
|
|
Changes in operating assets and liabilities
|
|
|
(231)
|
|
|
(531)
|
|
Net cash provided by operating activities
|
|
$
|
571
|
|
$
|
582
|
|
22 | ||
|
Year ending July 31,
|
|
|
Operating
leases |
|
Purchase
commitments |
|
Total
|
|
||
2014 (1)
|
|
|
84
|
|
|
8
|
|
|
92
|
|
2015
|
|
|
127
|
|
|
2
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
211
|
|
$
|
10
|
|
$
|
221
|
|
(1) | The expected payments for 2014 reflect future minimum payments for the six-month period from February 1, 2014 to July 31, 2014. |
23 | ||
|
· | revenue recognition, including allowances for uncollectible accounts; |
· | accounting for ITEX dollar activities; |
· | the allocation of purchase price in business combinations; |
· | valuation of notes receivable; |
· | accounting for goodwill and other long-lived intangible assets; |
· | accounting for income taxes; |
· | share-based compensation; and |
· | litigation matters |
24 | ||
|
25 | ||
|
26 | ||
|
· | Responding to proxy contests, litigation and other actions by dissident shareholders can interfere with our ability to execute our strategic plan, disrupt our operations, be costly and time-consuming, and divert the attention of our management and employees from the pursuit of business strategies; |
· | Perceived uncertainties as to our future direction diverts the attention of, damages morale and creates instability among members of our Broker Network, and adversely impact our existing and potential strategic and operational relationships and opportunities; |
· | We may experience difficulties in hiring, retaining and motivating personnel during the resulting uncertain and turbulent times; |
· | If individuals are elected or appointed to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create additional value for our stockholders; |
· | We would experience substantial increases in legal fees, insurance, administrative and associated costs incurred in connection with responding to proxy contests and related litigation; |
· | A successful change in control of the Company would result in substantial compensation charges and other expenses, and potentially allow an insurgent shareholder to reimburse his proxy or takeover expenses, resulting in substantial charges. |
27 | ||
|
28 | ||
|
29 | ||
|
30 | ||
|
· | Diversion of management time, as well as a shift of focus from operating the businesses to challenges related to integration and administration; |
· | Challenges associated with integrating employees from the acquired company into the acquiring organization. These may include declining employee morale and retention issues resulting from changes in, or acceleration of, compensation, or changes in management, reporting relationships, future prospects, or the direction of the business; |
· | The need to integrate each company’s accounting, management, information, human resource and other administrative systems to permit effective management, and the lack of control if such integration is delayed or not implemented; |
· | The need to implement controls, procedures and policies appropriate for a public company at companies that prior to acquisition had lacked such controls, procedures and policies; |
· | The need to transition operations, members, and customers onto our existing platforms; and |
· | Liability for activities of the acquired company before the acquisition, including violations of laws, rules and regulations, commercial disputes, tax liabilities and other known and unknown liabilities. |
31 | ||
|
32 | ||
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
|
|
|
|
|
|
|
|
|
Maximum Number (or
|
|
|
|
|
|
|
|
|
|
|
Approximate Dollar
|
|
|
|
|
|
|
|
|
Total Number of Shares
|
|
Value) of Shares that
|
|
|
|
|
|
|
|
|
Purchased as Part of
|
|
May Yet Be Purchased
|
|
|
|
|
Total Number of
|
|
Average Price Paid
|
|
Publicly Announced Plans
|
|
Under the Plans or
|
|
|
Period
|
|
Shares Purchased
|
|
per Share
|
|
or Programs
|
|
Programs (1)
|
|
|
11/01/13 - 11/30/13
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
12/01/13 12/31/13
|
|
1,100
|
|
4.10
|
|
1,100
|
|
$
|
1,435,873
|
|
01/01/14 - 01/31/14
|
|
18,035
|
|
4.00
|
|
18,035
|
|
$
|
1,363,696
|
|
(1) | Amounts shown in this column reflect amounts remaining under the $2.0 million stock repurchase program, authorized by the Board of Directors and announced on March 9, 2010. The program authorizes the repurchase of shares in open market purchases or privately negotiated transactions, has no expiration date and may be modified or discontinued by the Board of Directors at any time. |
33 | ||
|
Exhibit Number
|
|
Description
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1**
|
|
Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2**
|
|
Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |
|
|
|
**
|
|
Furnished, not filed
|
34 | ||
|
|
|
ITEX CORPORATION
(
Registrant
)
|
|
|
|
Date: March 10, 2014
|
By:
|
/s/ Steven White
|
|
|
Steven White
|
|
|
Chief Executive Officer
|
|
|
(Duly Authorized Officer)
|
|
|
|
Date: March 10, 2014
|
By:
|
/s/ John Wade
|
|
|
John Wade
|
|
|
Chief Financial Officer
|
35 | ||
|
1 Year ITEX (PK) Chart |
1 Month ITEX (PK) Chart |
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