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12/08/2009

ITEX CEO Steven White Reviews 2009

(An open letter to the stock-holders)

This past year has certainly strained many companies throughout the world and I am pleased to report that ITEX has remained focused, executed well on its core business, implemented several strategic investments and experienced growth during a very difficult economic time.

As in my past letters to you, I can once again boast that our company is moving in a positive direction. In particular, our financial condition continued to improve over the past year and has never been stronger. We increased revenues when many companies in the U.S. experienced declines; we retired all long-term debt when many businesses have become more burdened with debt; and we increased cash and assets when many saw their balance sheets contract.

We ended the fiscal year with more than $2.5 million in cash and almost $2.9 million in operational cash flow. Our operational income increased in each of the four quarters of last year, from $22,000 in the first quarter to $426,000 in the fourth quarter. Our credit facility with U.S. Bank recently increased from $1.5 million to $2.5 million, with an exceptional 2.25% interest rate (adjustable), displaying the bank�s confidence in us.

We attribute our financial success in part to our disciplined, conservative and astute management of our finances, our ability to run the company with a lean, smart and dedicated staff, and our understanding that in order make forward leaps, we need to follow our entrepreneurial drive and fearlessly pursue opportunities.

The four acquisitions we have undertaken since August 2005 were calculated risks that have made us a larger and stronger company. Our strategic initiatives, commenced in the past two years, have been gaining momentum; adding revenues, cash flow, more brand recognition and strengthening our position as the de facto industry leader for barter and trading communities.

During fiscal 2009, we continued to allocate resources to personnel, franchisee support and development, as well as technology; and toward a number of strategic initiatives such as developing our Web Services program, executing a national strategic partnership strategy, launching ITEX Media Services, and beginning a national advertisement campaign in premier business publications. Many of the expenses incurred were for start up and one-time costs. However, we do expect to continue to further invest in some of these initiatives in 2010.

As unemployment and under-employment continues to impact more than 17 million nationwide, we believe many of these individuals will take the future into their own hands. As entrepreneurs they will start their own businesses and search for innovative ways to generate sales. ITEX continues to be a perfect solution for these new business owners.

Stockholder Value

We work very hard to create value for our stockholders. Since 2005, stockholder equity has increased more than 182%. Though we are pleased with this result, we understand for many stockholders the most important metric is share price.

As a smaller public company, we continually seek to balance our desire to create value for stockholders with the need to use our resources wisely. We are cognizant of the burdensome costs of being a public company. We seek to establish effective internal control over our financial reporting in a cost-effective manner.

But primarily, we seek to emphasize corporate performance. Focusing on our core customers, ITEX members and franchisees, and managing the resources our customers generate is paramount to me and the corporate staff. While corporate governance ratings are increasingly important to investors, having the highest corporate governance quotient or the most rigorous internal control system is not my primary goal, particularly if such efforts impact our service to our customers or significantly deplete our resources.

Organizational Priorities

Our corporate headquarters employ 20 dedicated individuals who are responsible for strategy and long term planning, branding, technology, accounting, legal, investor relations, processing transactions for the trading community, and customer relations. For 20 individuals to manage 90 offices (who collectively employ some 400 individuals), generating $16.5 million in annual revenue spreads everyone quite thin. We have no time to waste and expect extraordinary performance from everyone on our team. My priorities for running the organization are:

         Increase the value proposition to our members by making participation in the ITEX Marketplace cost effective, easy and profitable;

         Provide exceptional service to our franchisees and pay an equitable revenue share to help them succeed;

         Fairly compensate our employees and provide a secure, innovative work environment that provides opportunity for professional advancement;

         Increase stockholder value by improving operating performance, building net assets and long-term potential.

For more information on ITEX go to www.itex.com.



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