UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Mark One)
| x | Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period
ended October 31, 2015.
OR
| ¨ | Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from
to
Commission File Number 0-18275
ITEX CORPORATION
(Exact name of registrant as specified
in its charter)
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 |
(Address of principal executive offices)
(Registrant’s telephone number including
area code)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 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 x No
¨
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes x 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 |
|
x |
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 x
As of October 31, 2015, we had 2,084,869
shares of common stock outstanding (including unvested restricted stock).
ITEX CORPORATION
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
| |
October 31, 2015 | | |
July 31, 2015 | |
| |
(unaudited) | | |
| |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 2,472 | | |
$ | 2,047 | |
Accounts receivable, net of allowance of $420 and $439 | |
| 578 | | |
| 398 | |
Prepaid expenses | |
| 76 | | |
| 174 | |
Loans and advances | |
| 15 | | |
| 8 | |
Deferred tax asset, net of allowance of $15 and $15 | |
| 554 | | |
| 554 | |
Notes receivable | |
| 281 | | |
| 291 | |
Other current assets | |
| 14 | | |
| 11 | |
Total current assets | |
| 3,990 | | |
| 3,483 | |
| |
| | | |
| | |
Property and equipment, net of accumulated depreciation of $404 and $397 | |
| 31 | | |
| 38 | |
Goodwill | |
| 3,191 | | |
| 3,191 | |
Deferred tax asset, net of allowance of $84 and $84 and net of current portion | |
| 3,043 | | |
| 3,124 | |
Intangible assets, net of accumulated amortization of $3,339 and $3,325 | |
| 88 | | |
| 102 | |
Notes receivable - net of current portion | |
| 735 | | |
| 792 | |
Other long-term assets | |
| 7 | | |
| 10 | |
Total assets | |
| 11,085 | | |
| 10,740 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts and other expenses payable | |
| 64 | | |
| 50 | |
Commissions payable to brokers | |
| 227 | | |
| 259 | |
Accrued commissions to brokers | |
| 808 | | |
| 659 | |
Accrued expenses | |
| 253 | | |
| 261 | |
Deferred revenue | |
| 23 | | |
| 27 | |
Advance payments | |
| 126 | | |
| 112 | |
Total current liabilities | |
| 1,501 | | |
| 1,368 | |
| |
| | | |
| | |
Total liabilities | |
| 1,501 | | |
| 1,368 | |
| |
| | | |
| | |
Commitments and contingencies | |
| | | |
| | |
| |
| | | |
| | |
Stockholders’ equity: | |
| | | |
| | |
Common stock, $0.01 par value; 9,000 shares authorized; 1,908 shares and 1,890
shares issued and outstanding, respectively | |
| 19 | | |
| 19 | |
Additional paid-in capital | |
| 22,417 | | |
| 22,361 | |
Stockholder notes receivable | |
| (5 | ) | |
| (6 | ) |
Accumulated deficit | |
| (12,847 | ) | |
| (13,002 | ) |
Total stockholders' equity | |
| 9,584 | | |
| 9,372 | |
| |
| | | |
| | |
Total liabilities and stockholders’ equity | |
$ | 11,085 | | |
$ | 10,740 | |
The accompanying notes are an integral
part of these consolidated financial statements.
ITEX CORPORATION
CONSOLIDATED STATEMENTS
OF INCOME
(In thousands,
except per share amounts)
| |
Three-months ended October 31, | |
| |
2015 | | |
2014 | |
| |
(unaudited) | |
Revenue: | |
| | | |
| | |
Marketplace revenue and other revenue | |
$ | 2,814 | | |
$ | 3,117 | |
| |
| | | |
| | |
Costs and expenses: | |
| | | |
| | |
Cost of marketplace revenue | |
| 1,741 | | |
| 1,923 | |
Corporate salaries, wages and employee benefits | |
| 432 | | |
| 445 | |
Selling, general and administrative | |
| 405 | | |
| 516 | |
Depreciation and amortization | |
| 21 | | |
| 23 | |
| |
| 2,599 | | |
| 2,907 | |
| |
| | | |
| | |
Income from operations | |
| 215 | | |
| 210 | |
| |
| | | |
| | |
Other income: | |
| | | |
| | |
Interest, net | |
| 20 | | |
| 24 | |
| |
| | | |
| | |
| |
| 20 | | |
| 24 | |
| |
| | | |
| | |
Income before income taxes | |
| 235 | | |
| 234 | |
| |
| | | |
| | |
Income tax expense | |
| 80 | | |
| 79 | |
| |
| | | |
| | |
Net income | |
$ | 155 | | |
$ | 155 | |
| |
| | | |
| | |
Net income per common share: | |
| | | |
| | |
Basic | |
$ | 0.08 | | |
$ | 0.06 | |
Diluted | |
$ | 0.08 | | |
$ | 0.06 | |
| |
| | | |
| | |
Weighted average shares outstanding: | |
| | | |
| | |
Basic | |
| 1,896 | | |
| 2,607 | |
Diluted | |
| 1,909 | | |
| 2,611 | |
The accompanying notes are an integral
part of these consolidated financial statements.
ITEX CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY
FOR THE THREE-MONTHS ENDED OCTOBER 31,
2015
(In thousands)
(Unaudited)
| |
Common Stock | | |
Additional
Paid-in | | |
Stockholder
Note | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Capital | | |
Receivable | | |
Deficit | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Balance at July 31, 2015 | |
| 1,890 | | |
$ | 19 | | |
$ | 22,361 | | |
$ | (6 | ) | |
$ | (13,002 | ) | |
$ | 9,372 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common stock repurchased and retired | |
| (1 | ) | |
| - | | |
| (3 | ) | |
| - | | |
| - | | |
| (3 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Payments on stockholder notes receivable | |
| - | | |
| - | | |
| - | | |
| 1 | | |
| - | | |
| 1 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation expense | |
| 19 | | |
| - | | |
| 59 | | |
| - | | |
| - | | |
| 59 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| 155 | | |
| 155 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at October 31, 2015 | |
| 1,908 | | |
$ | 19 | | |
$ | 22,417 | | |
$ | (5 | ) | |
$ | (12,847 | ) | |
$ | 9,584 | |
The accompanying notes are an integral
part of these consolidated financial statements.
ITEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| |
Three-months ended October 31, | |
| |
2015 | | |
2014 | |
| |
| |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net income | |
$ | 155 | | |
$ | 155 | |
Items to reconcile to net cash provided by operations: | |
| | | |
| | |
Depreciation and amortization | |
| 21 | | |
| 24 | |
Stock based compensation | |
| 59 | | |
| 67 | |
Bad debt expense | |
| 51 | | |
| 77 | |
Change in deferred income taxes | |
| 81 | | |
| 79 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (231 | ) | |
| (74 | ) |
Prepaid expenses | |
| 98 | | |
| 20 | |
Loans and advances | |
| (7 | ) | |
| (5 | ) |
Other assets | |
| - | | |
| (3 | ) |
Accounts payable and other expenses payable | |
| 14 | | |
| 5 | |
Commissions payable to brokers | |
| (32 | ) | |
| (16 | ) |
Accrued commissions to brokers | |
| 149 | | |
| 155 | |
Accrued expenses | |
| (8 | ) | |
| 70 | |
Deferred revenue | |
| (4 | ) | |
| (8 | ) |
Advance payments | |
| 14 | | |
| - | |
Net cash provided by operating activities | |
| 360 | | |
| 546 | |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase of property and equipment | |
| - | | |
| (1 | ) |
Payments on notes payables | |
| - | | |
| (2 | ) |
Payments received from notes receivable | |
| 67 | | |
| 65 | |
Advances on notes receivable | |
| - | | |
| (15 | ) |
| |
| | | |
| | |
Net cash provided by investing activities | |
| 67 | | |
| 47 | |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Principal payments on stockholder notes receivable | |
| 1 | | |
| 16 | |
Repurchase of common stock | |
| (3 | ) | |
| (42 | ) |
Cash dividend paid to Common Shareholders | |
| - | | |
| (143 | ) |
Net cash used in financing activities | |
| (2 | ) | |
| (169 | ) |
| |
| | | |
| | |
Net increase in cash | |
| 425 | | |
| 424 | |
Cash at beginning of period | |
| 2,047 | | |
| 3,673 | |
Cash at end of period | |
$ | 2,472 | | |
$ | 4,097 | |
| |
| | | |
| | |
Supplemental cash flow information: | |
| | | |
| | |
Cash paid for taxes | |
$ | 11 | | |
$ | 2 | |
The accompanying
notes are an integral part of these consolidated financial statements.
ITEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1
– DESCRIPTION OF OUR COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (In thousands, except per share amounts)
Description of the Company
ITEX Corporation (“ITEX”, “Company”,
“we” or “us”) was incorporated in October 1985 in the State of Nevada. Through our independent licensed
broker and franchise network (individually, “broker,” and together the “Broker Network”) in the United
States and Canada, we operate a “Marketplace” in which products and services are exchanged by Marketplace members
utilizing “ITEX dollars.” ITEX dollars are only usable in the Marketplace and allow thousands of member businesses
(our “members”) to acquire products and services without exchanging cash. We administer the Marketplace and provide
record-keeping and payment transaction processing services for our members.
Unaudited Interim Financial Information
We have prepared the accompanying consolidated
financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for
interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments,
consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated balance sheets,
operating results, and cash flows for the periods presented. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)
have been omitted in accordance with the rules and regulations of the SEC. The preparation of financial statements in conformity
with GAAP requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities
and the disclosure of contingent liabilities as of the date of the financial statements and the reported amount of revenue and
expenses during the reporting period. These consolidated financial statements should be read in conjunction with the audited consolidated
financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of
our 2015 Annual Report on Form 10-K filed with the SEC on October 13, 2015.
Principles of Consolidation
The consolidated financial statements include
the accounts of ITEX Corporation and its wholly owned subsidiary BXI Exchange, Inc. All inter-company accounts and transactions
have been eliminated in consolidation.
Use of Estimates
Management has made a number of estimates
and assumptions relating to the reporting of revenues, expenses, assets and liabilities and the disclosure of contingent assets
and liabilities to prepare these consolidated financial statements. Actual results could differ from these estimates.
Income Per Share
We present in our financial statements
on the face of the income statement both basic and diluted earnings per share. Basic earnings per share excludes potential dilution
and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. As of October 31, 2015, we had no contracts to issue common stock. The Company had 176 unvested
restricted stock units that were dilutive as of October 31, 2015.
The following table presents a reconciliation
of the denominators used in the computation of net income per common share basic and net income per common share – diluted
for the three-month period ended October 31, 2015 (in thousands, except per share data) (unaudited):
| |
Three-months Ended October 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Net income available for shareholders | |
$ | 155 | | |
$ | 155 | |
| |
| | | |
| | |
Weighted avg. outstanding shares of common stock | |
| 1,896 | | |
| 2,607 | |
Dilutive effect of restricted shares | |
| 13 | | |
| 4 | |
Common stock and equivalents | |
| 1,909 | | |
| 2,611 | |
Earnings per share: | |
| | | |
| | |
Basic | |
$ | 0.08 | | |
$ | 0.06 | |
Diluted | |
$ | 0.08 | | |
$ | 0.06 | |
Recent Accounting Pronouncements
In November 2015, the FASB issued Accounting
Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes, intended to improve how deferred taxes are classified
on organizations’ balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities
and assets as current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all
deferred tax assets and liabilities as noncurrent. The pronouncement is effective for reporting periods beginning after December
15, 2016. Early adoption is permitted as of the beginning of an interim or annual period. The adoption of ASU 2015-17 is not expected
to have any material impact on the Company’s consolidated financial statements.
NOTE 2
– COMMITMENTS
The Company leases office space under operating
leases. Lease commitments include a lease for the Company’s corporate headquarters in Bellevue, Washington. The Company
operates on this lease under a month-to-month basis. As of October 31, 2015, there are no future minimum commitments under this
operating lease.
The lease expense for our executive office
space for the three-months ended October 31, 2015 and 2014 was $21 and $40, respectively.
NOTE 3
– LEGAL PROCEEDINGS AND LITIGATION CONTINGENCIES
From time to time we are subject to a variety
of claims and litigation incurred in the ordinary course of business. In our opinion, the outcome of our pending legal proceedings,
individually or in the aggregate, will not have a material adverse effect on our business operations, results of operations, cash
flows or financial condition.
Management has regular litigation reviews,
including updates from outside counsel, to assess the need for accounting recognition or disclosure of contingencies relating
to pending lawsuits. The Company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable,
and the amount can be reasonably estimated. The Company does not record liabilities when the likelihood that the liability has
been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably
possible or remote. For contingencies where an unfavorable outcome is reasonably possible and which are significant, the Company
discloses the nature of the contingency and, where feasible, an estimate of the possible loss. For purposes of our litigation
contingency disclosures, “significant” includes material matters as well as other items which management believes
should be disclosed.
Management
judgment is required related to contingent liabilities and the outcome of litigation because both are difficult to predict. Litigation
is subject to inherent uncertainties and unfavorable rulings could occur. Although management currently does not believe resolving
any pending proceeding will have a material adverse impact on our financial statements, management’s view of these matters
may change in the future. A material adverse impact on our financial statements could occur
in the future if the effect of an unfavorable final outcome becomes probable and reasonably estimable.
NOTE 4
– INCOME TAXES
Income tax expense during interim periods
is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently
occurring items which are recorded in the interim period.
The Federal effective tax rate related
to our provision for income taxes in the three-months ended October 31, 2015 is similar to that used in the period ended October
31, 2014.
The computation of the annual estimated
effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the
expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent
and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting
estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional
information becomes known or as the tax environment changes.
As of October 31, 2015 we have recognized
a net income tax expense of $80 which is our estimated federal and state income tax liability for the three-months ended October 31,
2015. Realization of our deferred tax asset is dependent upon future earnings in specific tax jurisdictions, the timing and amount
of which are uncertain. As of October 31, 2015 the net deferred tax asset was $3,597.
We account for any uncertainty in income
taxes by recognizing the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities, based on the technical merits of the position. We measure the tax benefits
recognized in the financial statements from such a position based on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate resolution. The application of income tax law is inherently complex. As such, we are required
to make subjective assumptions and judgments regarding income tax exposures. The result of the reassessment of our tax positions
did not have an impact on the consolidated financial statements.
NOTE 5
– STOCKHOLDERS’ EQUITY (in thousands, except per share amounts)
The Company has
5,000 shares of preferred stock authorized at $0.01 par value. No preferred shares were issued or outstanding as of October 31,
2015.
On March 9, 2010, the
Company announced a $2,000 stock repurchase program. 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. During the three-month period ended October 31, 2015, the Company repurchased 1 share of common stock for $3. There
were 14 shares of common stock for $42 purchased during the three-month period ended October 31, 2014.
NOTE 6
– STOCK-BASED PAYMENTS (in thousands)
We account for stock-based compensation
in accordance with the related guidance. Under the fair value recognition provisions, we estimate stock-based compensation cost
at the grant date based on the fair value of the award. We recognize that expense ratably over the requisite service period of
the award and recognized $59 and $67 of stock based compensation expense for the periods ending October 31, 2015 and 2014, respectively.
At October 31, 2015,
161 shares of common stock granted under the 2004 Plan remained unvested and 15 under the 2014 plan. At October 31, 2015, the
Company had $543 of unrecognized compensation expense, expected to be recognized over a weighted-average period of approximately
six years.
NOTE 7
– SUBSEQUENT EVENTS
On August 20, 2015, the Board of Directors
of ITEX Corporation declared a semi-annual cash dividend in the amount of $0.10 per share, payable on December 10, 2015 to stockholders
of record as of the close of business on December 1, 2015.
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in thousands, except per share amounts)
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. Forward-looking statements
reflect our expectations and assumptions only as of the date of this report and are subject to risks and uncertainties. Actual
events or results may differ materially. We have included a detailed discussion of certain risks and uncertainties that could
cause actual results and events to differ materially from our forward-looking statements in the section titled “Risk Factors”
in Item 1A of our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on October 13, 2015. 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.
Overview
ITEX Corporation operates a marketplace
(the “Marketplace”) in which products and services are exchanged by Marketplace members utilizing ITEX dollars (“ITEX
dollars”). ITEX dollars are only usable in the Marketplace and allow thousands of member businesses (our “members”)
to acquire products and services without exchanging cash. We service our member businesses through our independent licensed brokers
and franchise network (individually, “broker” and together, the “Broker Network”) in the United States
and Canada. We administer the Marketplace and provide record-keeping and payment transaction processing services for our members.
We generate revenue by charging members percentage-based transaction fees, association fees, and other fees assessed in United
States dollars and Canadian dollars where applicable (collectively and as reported on our financial statements, “USD”
or “Cash”).
For each calendar year, we divide our operations
into 13 four-week billing and commission cycles always ending on a Thursday (“operating cycle”). For financial statement
purposes, our fiscal year is from August 1 to July 31 (“year”, “2016” for August 1, 2015 to July 31, 2016,
“2015” for August 1, 2014 to July 31, 2015). Our first quarter is the three-month period from August 1, 2015 to October
31, 2015 (“three-month period ended October 31”). We report our results as of the last day of each calendar month
(“accounting cycle”). The timing of billing and collection activities after the end of the billing cycle does not
correspond with the end of the accounting period, therefore this timing difference results in the fluctuations of the balances
of cash, accounts receivable, commissions payable and accrued commissions on the consolidated balance sheets and consolidated
statements of cash flows.
Each operating cycle we generally charge
our members association fees of $20 USD ($260 USD annually) and $10 ITEX dollars ($130 ITEX dollars annually). We also charge
transaction fees in USD from both the buyer and seller computed as a percentage of the ITEX dollar value of the transaction.
The following summarizes our operational
and financial highlights for the quarter and our outlook (in thousands except per share data):
| · | Comparative
Results. For the three-months ended October 31, 2015, as compared to the three-months
ended October 31, 2014, our revenue decreased by $303, or 10%, from $3,117 to $2,814.
However, our income from operations increased by $5, or 2%, from $210 to $215. Net income
was the same amount for both periods at $155. |
| · | Revenue Sources.
Our decrease in revenues for the three-months ended October 31, 2015 reflects a reduction
in our transaction volume and a reduction in our membership base. Association revenue
decreased $76, or 7% from $1,048 to $972 and our transaction revenue decreased $194,
or 10% from $1,956 to $1,762. |
| · | Revenue Trends.
Our reduction in revenue this quarter was due to a reduction in members and a corresponding
reduction in transaction and association fees generated from our members. Based on reported
revenues and informal market information available to us, trade exchanges overall are
faced with a general decline in year-over-year revenue. We believe this reflects, in
part, the effect of enhanced competition. Trade exchanges currently compete with a wide
variety of online and offline companies providing products and services to consumers
and merchants, including big box stores. There are numerous avenues to move excess inventory
or products and services. We strive to view industry change as an opportunity to conceive
new services, technologies, or new ideas that can further transform the industry and
our business. We have approximately 33% recurring revenues from association fees. Approximately
two-thirds of our revenues each year come from transactions fees assessed during that
year. We believe the expansion of our membership base will increase our recurring revenues.
We continue to seek to increase our revenue by: |
| o | enhancing
our internet applications; |
| o | offering
expanded tools and features with ITEX MobileSM; |
| o | marketing
the benefits of participation in the Marketplace; |
| o | expanding
Marketplace offerings of goods and services; |
| o | adding
and retaining qualified brokers. |
In order to add new brokers we are sustaining our
broker recruiting incentives. Through our Broker Mentor program, existing brokers recruit prospective brokers and provide ongoing
training to the prospective broker until certain performance thresholds are met. Upon meeting the performance thresholds, the
prospective broker is offered a franchise for a reduced fee.
| · | Financial
Position. At October 31, 2015, we had a cash balance of $2,472, compared to a
balance of $2,047 at July 31, 2015. Our net cash flows provided by operating activities
were $360 for the three-month period ended October 31, 2015, compared to $546 for the
corresponding period the previous year. |
RESULTS OF OPERATIONS
Condensed Results (in thousands, except per share data):
| |
Three Months Ended October 31, | |
| |
2015 | | |
2014 | |
| |
(unaudited) | |
Marketplace revenue and other revenue | |
$ | 2,814 | | |
$ | 3,117 | |
| |
| | | |
| | |
Cost of marketplace revenue | |
| 1,741 | | |
| 1,923 | |
Operating expenses | |
| 858 | | |
| 984 | |
Income from operations | |
| 215 | | |
| 210 | |
| |
| | | |
| | |
Other income, net | |
| 20 | | |
| 24 | |
Income before income taxes | |
| 235 | | |
| 234 | |
| |
| | | |
| | |
Provision for income taxes | |
| 80 | | |
| 79 | |
| |
| | | |
| | |
Net income | |
$ | 155 | | |
$ | 155 | |
| |
| | | |
| | |
Net income per common share: | |
| | | |
| | |
Basic | |
$ | 0.08 | | |
$ | 0.06 | |
Diluted | |
$ | 0.08 | | |
$ | 0.06 | |
| |
| | | |
| | |
Average common and equivalent shares: | |
| | | |
| | |
Basic | |
| 1,896 | | |
| 2,607 | |
Diluted | |
| 1,909 | | |
| 2,611 | |
Revenue for the three-months ended October
31, 2015, as compared to the corresponding three-months ended October 31, 2014, decreased by $303, or 10%. The decrease in revenues
during the three-months ended October 31, 2015 was from a reduction in members and a reduction in transaction and association
fees generated from our members.
Cost of Marketplace revenue consists of
commissions paid to brokers, payment of processing fees and other expenses directly correlated to Marketplace revenue, decreased
by $182, or 9% for the three-month period ended October 31, 2015, as compared to the corresponding three-months ended October
31, 2014.
Operating expenses which include corporate
salaries, wages and employee benefits, selling, general and administrative, depreciation and amortization decreased by $126, or
13% for the three-months ended October 31, 2015, compared to the corresponding period of fiscal 2015.
Income from operations for the three-months
ended October 31, 2015, as compared to the corresponding three-months ended October 31, 2014, increased by $5 or 2%. This net
increase is primarily the result of the $126 decrease in operating expenses offset by the $121 decrease in gross profit for the
period ended October 31, 2015.
Net income for the three-months ended October
31, 2015, as compared to the corresponding three-months ended October 31, 2014, was the same amount at $155.
Earnings per share, both basic and diluted,
increased by $0.02 to $0.08 per share in the three-months ended October 31, 2015 compared to the three-months ended October 31,
2014.
Revenue, Costs and Expenses
The following table sets forth our selected
consolidated financial information for the three-months ended October 31, 2015 and 2014 with amounts expressed as a percentage
of total revenues (in thousands) (unaudited):
| |
Three-months ended October 31, | |
| |
2015 | | |
2014 | |
| |
Amount | | |
Percent | | |
Amount | | |
Percent | |
Revenue: | |
| | | |
| | | |
| | | |
| | |
Marketplace revenue and other revenue | |
$ | 2,814 | | |
| 100 | % | |
$ | 3,117 | | |
| 100 | % |
| |
| | | |
| | | |
| | | |
| | |
Costs and expenses: | |
| | | |
| | | |
| | | |
| | |
Cost of marketplace revenue | |
| 1,741 | | |
| 62 | % | |
| 1,923 | | |
| 62 | % |
Salaries, wages and employee benefits | |
| 432 | | |
| 15 | % | |
| 445 | | |
| 14 | % |
Selling, general and administrative | |
| 405 | | |
| 14 | % | |
| 516 | | |
| 16 | % |
Depreciation and amortization | |
| 21 | | |
| 1 | % | |
| 23 | | |
| 1 | % |
| |
| 2,599 | | |
| 92 | % | |
| 2,907 | | |
| 93 | % |
| |
| | | |
| | | |
| | | |
| | |
Income from operations | |
| 215 | | |
| 8 | % | |
| 210 | | |
| 7 | % |
| |
| | | |
| | | |
| | | |
| | |
Other Income, net | |
| 20 | | |
| 1 | % | |
| 24 | | |
| 1 | % |
| |
| | | |
| | | |
| | | |
| | |
Income before income taxes | |
| 235 | | |
| 9 | % | |
| 234 | | |
| 8 | % |
| |
| | | |
| | | |
| | | |
| | |
Provision for income taxes | |
| 80 | | |
| 3 | % | |
| 79 | | |
| 3 | % |
| |
| | | |
| | | |
| | | |
| | |
Net income | |
$ | 155 | | |
| 6 | % | |
$ | 155 | | |
| 5 | % |
Marketplace revenue
Marketplace revenue consists of transaction
fees, association fees and other revenues net. Revenue also includes a nominal amount of ITEX dollars (non-cash). The following
are the components of Marketplace revenue that are included in the consolidated statements of income (in thousands) (unaudited):
| |
Three-months ended October 31, | | |
Percent | |
| |
2015 | | |
2014 | | |
(decrease) | |
| |
(unaudited) | | |
| |
| |
| | |
| | |
| |
Transaction fees | |
$ | 1,762 | | |
$ | 1,956 | | |
| -10 | % |
Association fees | |
| 972 | | |
| 1,048 | | |
| -7 | % |
Other revenue | |
| 80 | | |
| 113 | | |
| -29 | % |
| |
$ | 2,814 | | |
$ | 3,117 | | |
| -10 | % |
Marketplace revenue for the three-months
ended October 31, 2015 decreased by $303, or 10% to $2,814 as compared to $3,117 for the three-months ended October 31, 2014.
Transaction fees for the three-months ended
October 31, 2015 decreased by $194, or 10%, to $1,762 from $1,956 for the three-months ended October 31, 2014. The decrease in
transaction fees was due to lower transaction volume for the three-months ended October 31, 2015, as compared to the three-months
ended October 31, 2014.
Association fees for the three-months ended
October 31, 2015 decreased by $76, or 7%, to $972 from $1,048 for the three-months ended October 31, 2014. The decrease in association
fees is due to a decrease in net active membership accounts for the comparable periods.
Other revenue for the three-months ended
October 31, 2015 decreased by $33, or 29% to $80 as compared to $113 for the three-months ended October 31, 2014.
ITEX Dollar Revenue
As described in the notes to our consolidated
financial statements, we receive ITEX dollars from members’ transaction and association fees, and, to a lesser extent, from
other member fees. ITEX dollars earned from members are later used by us in revenue sharing and incentive arrangements with our
Broker Network, including co-op advertising for members, as well as for certain general corporate expenses. ITEX dollars are only
usable in our Marketplace.
Occasionally we spend ITEX dollars in the
Marketplace for our corporate needs. As discussed in the notes to our consolidated financial statements, we record ITEX dollar
revenue in the amounts ultimately equal to expenses we incurred and paid for in ITEX dollars, resulting in an overall net effect
of $0 on the operating and net income lines. We recorded $23 and $49 as ITEX dollar revenue for the three-months ended October
31, 2015 and 2014, respectively.
The corresponding ITEX dollar expenses
in the period ended October 31, 2015 was for equipment, legal services, printing, outside services and miscellaneous expenses.
We plan to continue to utilize ITEX dollars for our corporate purposes in future periods.
Cost of Marketplace Revenue
Cost of marketplace revenue consists of
commissions paid to brokers, payment of processing fees and other expenses directly correlated to marketplace revenue. The following
are the main components of cost of marketplace revenue that are included in the consolidated statements of income (in thousands)(unaudited):
| |
Three-months ended October 31, | | |
Percent | |
| |
2015 | | |
2014 | | |
(decrease) | |
| |
(unaudited) | | |
| |
| |
| | |
| | |
| |
Transaction fee commissions | |
$ | 1,316 | | |
$ | 1,461 | | |
| -10 | % |
Association fee commissions | |
| 348 | | |
| 371 | | |
| -6 | % |
Other costs of revenue | |
| 77 | | |
| 91 | | |
| -15 | % |
| |
$ | 1,741 | | |
$ | 1,923 | | |
| -9 | % |
| |
| | | |
| | | |
| | |
Costs of marketplace revenue as percentage of total revenue | |
| 62 | % | |
| 62 | % | |
| | |
Cost of marketplace revenue for the three-months
ended October 31, 2015 was $1,741 as compared to $1,923 for the three-months ended October 31, 2014, a decrease of $182, or 9%.
Transaction fee commissions for the three-months
ended October 31, 2015 decreased by $145 or 10% to $1,316 as compared to $1,461 for the three-months ended October 31, 2014. The
decrease in transaction fee commissions is due to the reduction in transaction fee revenue which is similar to the 10% reduction
is transaction fee revenues for the comparable period.
Association fee commissions for the three-months
ended October 31, 2015 decreased by $23, or 6% to $348 as compared to $371 for the three-months ended October 31, 2014. The decrease
in association fee commissions is due to a similar reduction in association fee revenue.
Other costs of revenue consist of miscellaneous
Marketplace-related expenses such as marketing and credit card processing fees and other commissions not associated with association
or transaction revenue. Other costs of revenue decreased by $14 or 15% to $771 as compared to $91 for the three-months ended October
31, 2014.
Corporate Salaries, Wages and Employee
Benefits
Corporate salaries, wages and employee
benefits include expenses for employee salaries and wages, payroll taxes, 401(k), payroll related insurance, healthcare benefits,
stock-based compensation, recruiting costs and other personnel related items.
Corporate salaries, wages and employee
benefits expenses for the three-months ended October 31, 2015, as compared to the three-months ended October 31, 2014, decreased
by $13, or 3%. The decrease is primarily due to a reduction in headcount.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
(“SG&A”), include consulting, legal and professional services, as well as expenses for rent and utilities, marketing,
business travel, insurance, bad debts, business taxes, and other expenses. As discussed above in “ITEX Dollar Revenue,”
certain ITEX dollar expenses are also included.
SG&A expenses for
the three-months ended October 31, 2015, as compared to the three-months ended October 31, 2014, decreased by $111 or 22%. Our
selling general and administrative expenses also decreased as a percentage of total revenues in the periods presented. The decrease
is due primarily to a decrease in legal fees, foreign currency expense and rent. Legal fees decreased by $43, foreign currency
expense decreased by $26 and rent decreased by $19 for the three-months ended October 31, 2015.
Depreciation and Amortization
Depreciation and amortization expenses
include depreciation on our fixed assets and amortization of our intangible assets.
Depreciation and amortization for the three-months
ended October 31, 2015, as compared to the three-months ended October 31, 2014, decreased by $2, or 9%.
Other income
Other income includes interest received
on notes receivable and promissory notes. Interest income is derived primarily from our notes receivable for corporate-owned office
sales and general loans to brokers.
Income Taxes
We recognized an $80 provision for income
taxes, in the three-month period ended October 31, 2015, as compared to the $79 provision for income taxes in the three-month
period ended October 31, 2014.
The Federal effective tax rate related
to our provision for income taxes in the three-month period ended October 31, 2015 is similar to that used in the period ended
October 31, 2014. The State effective tax rate related to our provision for income taxes in the three-months ended October 31,
2015 is the same as that used in the three-month period ended October 31, 2014.
LIQUIDITY AND CAPITAL RESOURCES
We finance our ongoing operations primarily
from existing cash, investing activities, and cash flows from operations. As of October 31, 2015, and July 31, 2015, we had $2,472
and $2,047, respectively, in cash.
The following
table presents a summary of our cash flows for the three-months ended October 31, 2015 and 2014 (in thousands) (unaudited):
| |
Three-months ended October 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Cash provided by operating activities | |
$ | 360 | | |
$ | 546 | |
Cash provided by investing activities | |
| 67 | | |
| 47 | |
Cash used in financing activities | |
| (2 | ) | |
| (169 | ) |
Increase in cash | |
$ | 425 | | |
$ | 424 | |
We believe that our financial condition
is stable and that our cash balances, other liquid assets, and cash flows from operating activities provide adequate resources
to fund ongoing operating requirements.
Inflation has not had a material impact
on our business. Inflation affecting the U.S. dollar is not expected to have a material effect on our operations in the foreseeable
future.
Operating Activities
For the three-months ended October 31,
2015, net cash provided by operating activities was $360 compared with $546 in the three-months ended October 31, 2014 a decrease
of $186, or 34%. The comparable period decrease in net cash provided by the operating activities is primarily a result of the
$119 increase in accounts receivable and a decrease of $78 of accrued expenses in the three-month period ended October 31, 2015
as compared to the period ended October 31, 2014.
The difference
between our net income and our net cash provided by operating activities was attributable to non-cash expenses included in net
income, and changes in the operating assets and liabilities, as presented below (in thousands) (unaudited):
| |
Three-months ended October 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Net income | |
$ | 155 | | |
$ | 155 | |
Add: non-cash expenses | |
| 142 | | |
| 214 | |
Add: changes in operating assets and liabilities | |
| 63 | | |
| 177 | |
Net cash provided by operating activities | |
$ | 360 | | |
$ | 546 | |
Non-cash expenses
are primarily associated with the amortization of intangible assets, depreciation and amortization of property and equipment,
stock-based compensation expense, and the changes in the deferred portion of the provision (benefit) for income taxes.
Investing Activities
Net cash provided by investing activities
was primarily the result of collections on notes receivable from corporate office sales and advances on broker loans.
For the three-months ended October 31,
2015, net cash provided by investing activities was $67 compared with $47 provided by investing activities in the three-months
ended October 31, 2014, an increase of $20, or 43%. In the three-months ended October 31, 2015, the net cash provided by investing
activities was primarily related to $67 in note receivable principal collections. In the three-months ended October 31, 2014,
the net cash provided by investing activities was primarily related to $65 in note receivable principal collections offset by
$15 in advances on notes receivable.
Financing Activities
Our net cash used in financing activities
consists of cash dividends to stockholders, discretionary repurchases of our common stock and principal payments on stockholders’
notes receivable.
For the three-months
ended October 31, 2015, net cash used in financing activities was $2 compared with $169 used in financing activities in the three-months
ended October 31, 2014, a decrease of cash used in financing activities of $167. In the three-months ended October 31, 2015, we
did not pay out a dividend as we have moved to a semi-annual payment format and we purchased $3 of shares. In the three-months
ended October 31, 2014, we paid $143 in cash dividends to our stockholders and purchased $42 of shares.
Commitments
The Company leases
office space under operating leases. Lease commitments include a lease for the Company’s corporate headquarters in Bellevue,
Washington. The Company operates on this lease under a month-to-month basis. As of October 31, 2015, there are no future minimum
commitments under this operating lease.
The lease expense for our executive office
space for the three-months ended October 31, 2015 and 2014 was $21 and $40, respectively.
Critical Accounting Policies and
Estimates
Our discussion
and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of financial statements
in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate
significant estimates used in preparing our financial statements, including those related to:
| · | 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 |
We base our estimates
on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates if our assumptions change or if actual circumstances differ
from those in our assumptions.
For a summary of all of our significant
accounting policies, including the critical accounting policies discussed above, see Note 1, Summary of Significant Accounting
Policies, to our consolidated financial statements filed with our 2015 annual report on Form 10-K.
Recent Accounting Pronouncements
For a discussion of new accounting pronouncements
and their impact on the Company, see Note 1 of the Notes to Consolidated Financial Statements included in this Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure controls and procedures.
Under the supervision and with the participation
of our management, including the Chief Executive Officer and Chief 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 CEO and CFO concluded that our disclosure controls and procedures are effective as of the end of
the period covered by this report.
(b) Changes in internal control over financial reporting.
There have been no changes in our internal
controls over financial reporting during our most recent quarter that we believe have materially affected, or are reasonably likely
to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 3 ― “Legal Proceedings
and Litigation Contingencies” included in the “Notes to Consolidated Financial Statements” for information
regarding legal proceedings.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
The following table provides information
about our purchases or any affiliated purchaser during the three-months ended October 31, 2015 of equity securities that are registered
by us pursuant to Section 12 of the Exchange Act.
| |
(a) | | |
(b) | | |
(c) | | |
(d) | |
Period | |
Total Number of Shares Purchased | | |
Average Price Paid per Share | | |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | |
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1) | |
8/01/15 - 8/31/15 | |
| - | | |
| - | | |
| - | | |
| - | |
9/01/15 – 9/30/15 | |
| - | | |
| - | | |
| - | | |
| - | |
10/01/15 - 10/31/15 | |
| 917 | | |
$ | 3.26 | | |
| 917 | | |
$ | 1,025,960 | |
| (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. |
Item
6. Exhibits
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 |
SIGNATURES
In accordance with the requirements of
the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
ITEX CORPORATION |
|
(Registrant) |
|
|
|
Date: December 11, 2015 |
By: |
/s/ Steven White |
|
Steven White |
|
Chief Executive Officer |
|
(Duly Authorized Officer) |
|
|
|
Date: December 11, 2015 |
By: |
/s/ John Wade |
|
John Wade |
|
Chief Financial Officer |
EXHIBIT 31.1
CERTIFICATION
I, Steven White, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of ITEX
Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant disclosure controls
and procedures and presented in this report our conclusion about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| b. | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control
over financial reporting. |
Date: December 11, 2015
|
/s/ Steven White |
|
Steven White |
|
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION
I, John Wade, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of ITEX
Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| c. | Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
| d. | Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; |
| e. | Evaluated the effectiveness of the registrant disclosure controls
and procedures and presented in this report our conclusion about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and |
| f. | Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| b. | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control
over financial reporting. |
Date: December 11, 2015
|
/s/ John Wade |
|
John Wade |
|
Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report
of ITEX Corporation, a Nevada corporation (the “Company”) on Form 10-Q for the quarter ended October 31, 2015, as
filed with the Securities and Exchange Commission (the “Report”), Steven White, Chief Executive Officer of the Company,
does hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the Company. |
/s/
Steven White |
|
Steven White |
|
Chief Executive Officer |
|
|
|
December 11, 2015 |
|
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report
of ITEX Corporation, a Nevada corporation (the “Company”) on Form 10-Q for the quarter ended October 31, 2015, as
filed with the Securities and Exchange Commission (the “Report”), John Wade, Chief Financial Officer of the Company,
does hereby certify pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:
| (3) | The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and |
| (4) | The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the Company. |
/s/ John Wade |
|
John Wade |
|
Chief Financial Officer |
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December 11, 2015 |
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