The following is a letter (dated
December 6, 2007) from Chairman and Chief Executive Officer Steven
White to shareholders, reporting on 2007 achievements and looking
ahead to the future of ITEX Corporation.
The Year In Review And A Look Forward
I am pleased
to report that ITEX has continued to maintain its solid record of
performance. Today, I will summarize our fiscal 2007 achievements,
our strengths and challenges, and the steps we are taking to move
the company forward.
do: For 25 years we
have helped our members attract new business through our trading
community. Our identity is encapsulated in our slogan: �ITEX, The
Membership Trading CommunitySM, is a leading marketplace
for cashless business transactions across North America.� We
generate revenue by charging members percentage-based transaction
fees and subscription fees. These two revenue streams generated 99%
of our $14 million in revenue last year.
day, we work to grow our business and maintain a profitable
marketplace that assists businesses in becoming more successful. As
our members succeed, they are motivated to transact more business
and refer new members to our trading community. This past year we
endeavored to more clearly refine what we do, improve our processing
methods, and attract more business.
focus groups provided valuable insight into the needs, wants, and
expectations of the small business owner: our core customer. We
sharpened our message to existing and potential members. We analyzed
our value proposition and determined we could offer more. New
revenue streams were explored and the groundwork laid to start
testing our ideas.
As a result
of our efforts this year, our messaging to existing and potential
members is more concise, our marketing material and website has been
redesigned, and we introduced the Executive Privileges Program. We
seek to expand our presence in the business services sector and
accelerate the velocity of transactions in our trading community. In
a challenging national economy, we are convinced small businesses
can benefit even more from the valuable services we provide.
Strengths: ITEX has
three primary strengths � our 24,000 member business base, our
proprietary payment processing and trading platform (�Trading
Platform�), and our ability to manage our capital and the operations
of our business efficiently and profitably. Our Trading Community
has grown more than 50% in the last 30 months. We believe the
relationship with our member base is underused and undervalued, but
is a significant asset with tremendous potential. To enhance this
asset, additional partnerships and services are being explored.
Platform provides excellent tools for our members, our franchise
network and our corporate staff, and benefits from a steady stream
of enhancements and support. This platform can be expanded to
attract many payment processing or private currency systems. In the
future we may license our Trading Platform to other businesses to
manage their private, closed-loop business models. We do not
anticipate licensing the Platform to competitive barter exchanges,
rather to the growing business opportunity of cashless, private
our capital efficiently and continue to generate strong cash flow.
Our cash flow in 2007 exceeded $2.5 million. We retired the
acquisition debt that originated late in fiscal 2005, funded a new
acquisition we completed August 1, 2007, and repurchased and retired
shares of common stock. Both acquisitions increased our member base
and our revenues, and are expected to contribute to net income. In
the near term, we plan to use our capital to either pay off the
recent acquisition, buy back more shares at an opportunistic price
or fund new acquisitions.
to our cash revenue streams, we generated more than $4 million ITEX
dollars in fiscal 2007 and expect to generate more than $5 million
in fiscal 2008. The ITEX dollars were primarily used as revenue
share and sales incentives with franchisees, and for incentives for
existing members. This year we will utilize some of ITEX dollars to
offset cash expenses and provide opportunities to enhance our
primary objective is to increase member count and generate broader
acceptance by the small business sector. Although our revenue has
grown 34% and member count by 50% since 2003, this growth has
occurred primarily through acquisitions. We are focusing on organic
growth, which will help continue our overall successful track
record. I am pleased to report we are seeing signs of this growth in
the first fiscal quarter of 2008.
in the past fiscal year include:
profits, allowing us to realize a sizable tax benefit.
Introduction of the Executive Privilege Program.
� Launch of
free online member registration.
of educational videos on our web site, which is useful for members
towards our future: In
the almost five years since I began serving as Chairman and CEO, we
have overcome several hurdles and mended legacies inherited from the
past. I am proud and grateful for the support that has been afforded
me by shareholders, our staff and our broker offices.
to build a stronger company and find ways to grow and prosper. Many
have forecasted onerous economic conditions for the coming year.
During times such as these, our Trading Community can flourish as
businesses utilize services to not only survive, but prosper as we
assist them in selling their goods and services.
There is a
dynamic energy in our Trading Community that keeps commerce rolling,
their ITEX dollars working, and their calendars full. It is our
mission to put ITEX on the financial map and to see its greatness
achieved. Whether by organic growth or further acquisitions, or
both, we will strive to become an expanding force that will benefit
our members, assist our franchisees and increase value for our
successful in business requires a lot of endurance, tenacity and
resolve. We are resolute in continuing our efforts to maintain your
trust and confidence.
On behalf of
ITEX, I would like to thank our diligent employees; the franchise
network (and their staff), whose dedication and drive is a vital
component in our success; our members, to whom we strive to deliver
value and service; and our valued stockholders, for your continuing
support and interest.
Chairman of the Board, Chief Executive