The Committee’s three independent director nominees are Wayne P. Jones, Alnesh Mohan, and Sidd Pagidipati. The relevant portions of their biographies are set forth below.

Wayne P. Jones

Mr. Jones has been involved in franchising and business operations for over 30 years. Mr. Jones is past CEO of Pizza Hut Franchise Association, President of KFC Canada, Senior VP of Operations for Arby’s Restaurants, and Vice President Marketing & Development for Tumbleweed Restaurants, Inc. He also held executive and marketing positions at the H.J Heinz and General Mills companies. Mr. Jones has been a Professor of Business at the University of Louisville, College of Business & Public Administration, Louisville, Kentucky, since 1998. Mr. Jones is CEO and Managing Director of The University Group, LTD, a management consultancy, and consults with a wide range of clients. He is an active lecturer in Corporate Strategy, New Venture Creation, New Product Development, Franchising and Marketing Strategy. He is also a Certified Expert Witness in franchising who serves as an Expert Witness in Marketing and Franchising cases. Mr. Jones holds a Ph.D. from Marquette University, and an MBA from the University of Louisville.

Alnesh Mohan

Mr. Mohan has been involved in the accounting services industry since 1994. Mr. Mohan has served as Partner at Quantum Advisory Partners LLP, a business advisory firm, since 2005, and as Vice-Chairman and CEO of Corner Market Capital Corporation, an investment fund, since 2006. Through Quantum Advisory Partners LLP, Mr. Mohan acts on behalf of a number of public companies and is currently CFO of Hudson Resources Inc., a publicly listed company on the TSX Venture Exchange. Mr. Mohan has a Bachelor of Business Administration degree from Simon Fraser University, and a Master’s of Science in Taxation from Golden Gate University. Mr. Mohan has been a registered Chartered Accountant in British Columbia since 1997, and a registered Certified Public Accountant in Illinois since 2000. Prior to his current positions at Quantum and Corner Market Capital, Mr. Mohan was a Tax Manager at KPMG from 2001-2005 consulting on corporate & personal tax compliance in Canada and the United States.

Sidd Pagidipati

Mr. Pagidipati is the Co-Founder and former Chief Executive Officer of Freedom Health, the 3rd largest Medicare Advantage health plan in Florida and one of the largest privately held health plans in the United States. Inc. Magazine recognized Freedom Health as the 7th fastest-growing private company in America in 2009 (growing over 10,000% in three years) and the 225th fastest growing company in 2010–making the Inc. 500 two years in a row. In 2008, the Indo-US Chamber of Commerce selected Mr. Pagidipati as the Business Man of the Year. In 2009, Mr. Pagidipati founded and became CEO of BusinessChamber.com, an online local networking company. Prior to co-founding Freedom Health, Mr. Pagidipati worked as an investment banker at Merrill Lynch and Donaldson, Lufkin & Jenrette (DLJ), where his expertise included debt and equity financings. Mr. Pagidipati graduated from Magna Cum Laude Georgetown University with a degree in Economics and International Relations.

The Chairman of the Committee – David Polonitza commented:

“The Company’s existing board and management team’s strategy to build on operations other than ITEX’s core franchise business is failing. While revenues generated by the franchise business continues to be stagnant, Corporate overhead related to Company-run barter offices, ITEX media, and other initiatives appears to have grown faster (increase of $2.4 million since FY 2006) than corresponding revenue growth within these segments (increase of $1.5 million since FY 2006). Management’s expenditure of over $4 million on acquisitions mostly related to these segments since 2006 have yielded virtually no increases to the Company’s operating cash flow, due in part to the growth of the Company’s overhead costs by over 80% during that time period.

             (in thousands)          FY 2006   FY 2007   FY 2008   FY 2009
             --------------          -------   -------   -------   -------
         Gross Association and
     Transaction Fees generated by
               Franchisees            $14,256   $13,980   $14,219   $14,569
     -----------------------------    -------   -------   -------   -------
         (Increase/Decrease) Since FY 2006          -$276      -$37      $313

    Net Association and Transaction
     Fees generated by Franchisees
           paid to ITEX Corp.          $4,170    $4,713    $4,689    $5,234
    -------------------------------    ------    ------    ------    ------
       (Increase/Decrease) Since FY 2006           $543      $519    $1,064

             Other Revenue               $390      $191    $1,745    $1,933
             -------------               ----      ----    ------    ------
       (Increase/Decrease) Since FY 2006          -$199    $1,355    $1,543

    Corporate Overhead and Expenses
      (Salaries, Other Marketplace
       Expenses, Media Costs, and
                  SG&A)                $2,944    $3,098    $4,308    $5,378
    -------------------------------    ------    ------    ------    ------
       (Increase/Decrease) Since FY 2006           $154    $1,364    $2,434

          Operating Cash Flow          $1,616    $1,806    $2,126    $1,789
          -------------------          ------    ------    ------    ------

    *Source - SEC Filings

“Only by increasing the overall percentage of fees that franchisees pay ITEX Corporate over the past few years has ITEX been able to increase its cash flows. In our opinion, this short-term increase to operating cash flows is contributing to the long-term decline in the health of ITEX’s franchise-system which is its core business.

                (in thousands)       FY 2006   FY 2007    FY 2008   FY 2009
                --------------       -------   -------    -------   -------
         Total Gross Association and
          Transaction Fees generated
                by Franchisees        $14,256    $13,980   $14,219   $14,569
         ---------------------------  -------    -------   -------   -------
          Total Commissions paid to
                  Franchisees         $10,086     $9,267    $9,530    $9,335
          -------------------------   -------     ------    ------    ------
            Net Total Fees paid by
           Franchisees to ITEX Corp.   $4,170     $4,713    $4,689    $5,234
           -------------------------   ------     ------    ------    ------

          Overall % of Franchisee's
          Revenue paid to ITEX Corp.     29.2%      33.7%     32.9%     35.9%
          --------------------------     ----       ----      ----      ----

    *Source - SEC Filings

“We believe the current board is incapable of leading the revitalization of the franchise system and ending unprofitable ventures due to its closed nature, non-ITEX business relationships with one another, and a near decade of service together as board members at two separate companies.

“If the status quo is maintained, we are deeply concerned that the Company’s future is in jeopardy. Shareholders cannot afford to allow this board to have more time to implement an effective strategy. We will not linger on the sidelines at this critical juncture. Our nominees can help implement a strategic plan designed to create value for all shareholders.”

The Committee’s issues with the current ITEX’s board and management can be summarized as follows:

Ill-advised capital allocation decisions

Failure to grow the franchise business

ITEX’s elevated member churn rate

Increases in Corporate overhead surpassing corresponding increases in non-franchisee related revenues

The identification of a material weakness in ITEX’s internal controls

Lack of true independence of ITEX’s board

Capital Allocation

Since 2006, management expended over $4 million in acquisitions. These acquisitions helped to increase Corporate Overhead and Expenses by over $2 million annually, outpacing non-franchise operations revenue gains over that time period. These acquisitions have done little to increase the overall revenue growth of the franchise system. Due to these significant capital expenditures producing miserable results, we are skeptical of management’s future plans for ITEX’s capital.

Increasing Corporate Overhead

Between FY 2006-FY 2009, ITEX’s full time employee count has increased 68% to 32 Full Time Employees from 19, while Corporate Overhead and Expenses (to include salaries and selling, general, and administrative expenses) increased by 79% to $5.37 million. Over that same period, overall revenues increased by only 12% or $1.85 million, while overhead expansion increased by over $2 million – outpacing revenue growth. Management’s “growth” plans have actually resulted in decreasing overall cash flows.

Member churn rate

Though ITEX does not publish their member churn rates in their financial statements, within investor presentations and the 2009 annual meeting, we have discovered the following:

                                         FY 2007        FY 2008  FY 2009
          Approximate Churn Rates             14%            18%      16%

    * Source - FY 07 and 08 Information based upon June 2008
     ITEX Investor relations presentation
    posted on ITEX.com.  FY 09 information is an estimate based
     on information provided to
     shareholders at ITEX's FY 2009 Annual Meeting.

Approximately 10,000 member businesses have left the ITEX marketplace between FY2007-FY2009 based upon ITEX’s publicly disclosed churn rates. With only 24,000 ITEX members, the amount of businesses leaving the ITEX system is unacceptable. We partly attribute this high rate of turnover to ITEX’s acquisition policy, and the squeezing of franchisees in general through higher fees to ITEX Corporate, resulting in their inability to properly maintain staffing to satisfy their existing members.

Corporate Governance and Accounting Issues

We believe shareholder concerns regarding governance are being ignored. The board has given no indication that it intends to change its composition, despite the fact that each of ITEX’s three current board members have non-ITEX business relationships with one another. Additionally, in FY 2009, an ITEX board member was retained by the Company as a consultant by the “interim” CFO, who also serves as the CEO and Chairman of the Company. This board member was to assist with internal audit matters during fiscal 2009. Subsequently, the Company has admitted that material weaknesses existed in its internal auditing procedures during FY 2010. This is the second time a material weakness was identified by the Company since 2005. We believe a CFO with a strong accounting background is needed to ensure the Company can correct its accounting deficiencies.

Our Plan to Enhance Shareholder Value at ITEX

We believe that ITEX is the leader in the barter industry and business can be revitalized with the help of our highly qualified director nominees. If elected at the 2010 Annual Meeting of Shareholders, our nominees would, subject to their fiduciary duties, endeavor to work with the other board members to address the concerns discussed above. A general outline of the initiatives that our nominees would seek to implement are as follows:

Rework ITEX’s fee policies, and the implementation of a franchisee incentive program that allows franchisee’s to grow, while improving ITEX’s operating cash flow

Actively recruit entrepreneurs with the proper fit to join ITEX’s franchises brokers

Refocus the company on franchise-related initiatives

End an ineffective acquisition strategy – organic growth will be the focus

Upon restructuring the franchise business, return excess cash flows beyond conservative operating requirements to shareholders

Hire a full-time CFO to improve ITEX’s accounting practices

List ITEX’s stock on a NASDAQ exchange

Provide current management with the opportunity to work under new directors, while preparing an executive team to replace existing management if necessary

Over the coming months we will be communicating with you regarding details of our ideas to improve the ITEX Corporation. Our recently launched website, www.enhanceitex.com, will be the primary channel over which we will impart information on vital matters. We encourage shareholders to visit our website regularly and to share their thoughts with us about the ITEX Corporation.

CERTAIN INFORMATION CONCERNING THE PARTICIPANTS

The Committee to Enhance ITEX (the “Committee”), together with the other Participants (as defined below), intends to make a preliminary filing with the Securities and Exchange Commission (“SEC”) of a proxy statement and accompanying proxy card to be used to solicit proxies for the election of its slate of director nominees at the 2010 annual meeting of stockholders of ITEX Corporation (the “Company”).

THE COMMITTEE STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT WHEN IT IS AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY STATEMENT WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEBSITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THE SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR, INVESTORCOM, INC. AT ITS TOLL-FREE NUMBER (877) 972-0090 OR VIA EMAIL AT ENHANCEITEX@INVESTOR-COM.COM.

The Participants in the proxy solicitation are anticipated to be David Polonitza, Wayne Jones, Sidd Pagidipati, Rahul Pagidipati. Sanjeev Parsad, Alnesh Mohan, Pagidipati Family, LP, MPIC Fund I, LP, MPIC Canadian LP, Corner Market Capital, Inc., Corner Market Capital, U.S., Inc., Corner Market Capital Corp., Richard Polonitza, Greta Polonitza, G. Andrew Cooke, Dr. Devaiah Pagidipati, Dr. Rudrama Pagidipati, Kirk Anderson, and Paul W. Kim (collectively, the “Participants”).

Information regarding the Participants and their affiliates, including their direct or indirect interests in the Company, by security holdings or otherwise, is contained in the Schedule 13D initially filed by David Polonitza on September 22, 2009, as amended or may be amended from time to time (the “Schedule 13D”). The Schedule 13D is currently available at no charge on the SEC’s website at http://www.sec.gov. As of the date hereof, the Participants and their affiliates collectively own an aggregate of 473,601 shares of Common Stock of the Company, consisting of the following: (1) 127,635 shares held directly by David Polonitza, (2) 3,000 shares held directly by Rahul Pagidipati, (3) 139,779 shares held directly by the Pagidipati Family, LP, (4) 11,800 shares held directly by Devaiah and Rudrama Pagidipati, (5) 71,395 shares held directly by Kirk Anderson, (6) 6,000 shares held directly by Paul W. Kim, (7) 8,152 shares held directly by Richard and Greta Polonitza, (8) 80,000 shares held in accounts managed by MPIC FUND I, LP, (11) 14,380 shares held in accounts managed by MPIC CANADIAN, LP, (12) 11,460 shares held directly by G. Andrew Cooke. Each of the participants disclaims beneficial ownership of such shares except to the extent of his/its pecuniary interest therein.

DISCLAIMER

Certain factual, financial, and statistical data and other information contained herein was obtained by the Committee to Enhance ITEX from the SEC filings of ITEX Corporation–sources that it deems to be reliable. However, the Committee to Enhance ITEX has not independently verified any of such data or other information, or the reasonableness of the assumptions upon which such data and other information was based, and there can be no assurance as to the accuracy of such data and other information. The Committee to Enhance ITEX recognizes that there may be confidential or otherwise non-public information discussed in this letter that could lead ITEX Corporation or others to disagree with the conclusions reached by the Committee to Enhance ITEX.

The analyses provided may include certain statements, assumptions, estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of the ITEX Corporation. Such statements, assumptions, estimates, and projections reflect various assumptions by the Committee to Enhance ITEX concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, assumptions, estimates or projections or with respect to any other materials herein. Actual results may vary materially from the estimates and projected results contained herein. The Committee to Enhance ITEX disclaims any obligation to update this letter.

Some members of the Committee to Enhance ITEX own common stock of the ITEX Corporation. The members of the Committee to Enhance ITEX may, in future, change their stock holding positions in the ITEX Corporation, collectively or individually, and may possibly increase, decrease, dispose of, or change the form of their investment for any or no reason.

This letter should not be considered a recommendation to buy, sell, or hold any investment. In addition, this letter is neither an offer to purchase nor a solicitation of an offer to sell any securities of the ITEX Corporation.

    Contact:

    John Grau
    InvestorCom, Inc.
    (203) 972-9300

    Or

    David Polonitza
    (502) 460-3141
    polonitza@enhanceitex.com

We had a customer of numerous exchanges in Canada submit this complaint:

We are a media company in the wedding / travel marketplace. This is a niche market. We were printing since 1992 and went green (online) in 2007. Stats are in the Advertise with Us section at the bottom of our website. We have connections with the financial media in Toronto who when look at the barter business just see it from rose-colored glasses – they need to be made aware of the down sides too and what to look out for as in a consumer report.

We executed quite well in the third quarter and I’m pleased to recognize gains in revenue and income from operations compared to last year’s third quarter, said Steven White, Chairman and CEO. Revenue growth was primary due to our media and web services initiatives, which also provided the benefit of additional transaction opportunities for our members. Income from operations increased as a result of revenue growth and a reduction in depreciation and amortization expense. Our increased cash position reflected our operational income.

Mr. White continued, Revenue from our core business remains steady and our cash flow strong. With our stable financial footing, we will continue to focus our efforts on organic growth, enhancing our internet and web services platforms and creating more stockholder value. We are pleased to distribute our first ever quarterly dividend on June 30, 2010, to stockholders of record as of close of business on June 15, 2010.

Third Quarter 2010 Highlights

· Income from operations increased to $421,000 from $344,000 in the same period last year;

Revenue increased to $4,158,000 from $3,981,000 in the same period last year;

· Net income increased to $269,000 from $224,000 in the same period last year;

· Earnings per share increased to $0.08 from $0.06 in the same period last year;

· Cash at end of period increased to $4,193,000 from $2,557,000 on July 31, 2009;

· Stockholder equity increased to $14,722,000 from $13,981,000 on July 31, 2009;

· Broker incentive expense of $50,000 was recorded in the quarter for a computer upgrade initiative planned in conjunction with the upcoming launch of Office 2010. $79,000 was expensed for the same incentive in the second quarter of 2010, with a total expense of $129,000 in the nine-months ended 2010;

· Repurchased and retired 4,667 common shares.

Subsequent Events
· Effective as of May 3, 2010 (Effective Date), the Company amended its Articles of Incorporation to effect a one for five reverse stock split of its common stock Every five shares of ITEX’s common stock issued and outstanding immediately prior to the Effective Date were automatically combined into one issued and outstanding share. Stockholders who were entitled to fractional shares received a cash payment in lieu of receiving fractional shares. The number of shares of ITEX’s common stock issued and outstanding was reduced from 18,027,914 shares to approximately 3,605,307 shares.
· On May 11, 2010, the Board of Directors declared a cash dividend in the amount of $0.025 per share, payable on June 30, 2010 to stockholders of record as of the close of business on June 15, 2010.

ITEX Corporation’s report on Form 10-Q can be found at www.sec.gov.

While barter used to be seen as somehow countercultural, a rejection of the great impersonal forces of market capitalism, these days, in the same way pot has become mainstream, so has barter. It’s no longer a symbol of anything countercultural; instead, increasingly, it’s a part of the regular business landscape, a way for businesses large and small to find ways to dispose of excess inventory or to take advantage of excess time.

See the full story at http://www.newsreview.com/sacramento/content?oid=1433741

The quarterly cash dividend of 2.5 cents per share will be paid on June 30, 2010, to shareholders of record at the close of business on June 15, 2010.  Thereafter, the Company plans to pay regular quarterly dividends of 2.5 cents per share, or 10 cents per share annually.  Future dividends will be subject to Board approval after its review of the Company’s financial performance.

We anticipate continued profitability with strong operational cash flow to increase our healthy cash position, said Steven White, Chairman and CEO.  We will continue to use our resources to grow our business, enhance our technology infrastructure and to attract small businesses into our trading community, while also returning cash to our shareholders. We believe a dividend enhances shareholder value, provides better visibility for our company in the financial community, and attracts shareholders that seek dividends as part of their investment strategy.

Evidence of this became clear when ITEX started working with then-Idearc, now-SuperMedia. The original objective, according to press releases and Steve White, was to provide the software for SuperMedia to create their own trade exchange, to be named SuperTradeExchange. SuperMedia, with a struggling flagship product (yellow pages phone book – formerly the Verizon Pages) and a new market cap of 6.5 billion dollars post-bankruptcy, seems poised to acquire and manage new business models…

To SuperMedia, barter has probably always been a way of doing business, but not generating revenue. From an Idearc SEC filing December 2006:

Barter Transactions
We enter into certain transactions where a third party provides directory placement arrangements, sponsorships, or other media advertising in exchange for placing their advertising in our print or online directories. Due to the subjective nature of barter transactions, we do not recognize revenue and expense from these transactions. If recognized, revenue associated with barter transactions would be less than 2% of total revenue.

With revenues approaching 2.5 billion dollars, 2% of SuperMedia’s internal barter campaign would equal a minimum of 25 million dollars in media bartered in a direct fashion.

This next part is a guess – I would assume that someone at SuperMedia used to be part of the barter industry. Many of the people I have known in the barter industry over the years have migrated in and out of media while they migrated in and out of barter. This person looked at that number and said, first to themselves and then to someone who had some kind of decision making power, “We have a database of 18 million businesses. We already barter 25M, large, every year. Why aren’t we making more money from this?”

Then is born SuperTradeExchange. According to Steve White of ITEX, SuperMedia went through a long period of investigation, looking for the best software and the company that could help them manage and create their monster barter exchange. ITEX happens to be the biggest, has internal software, and a large broker network to handle the business. After the period of investigation, ITEX gets the contract.

According to an ITEX broker I spoke with recently, one of the big complaints of ITEX franchisees is that corporate resources are being diverted to the STX offices. The office listings on the STX website show at least one ITEX corporate office handling the transactions of an STX area.

Next comes the reverse stock split. If you owned five shares of ITEX stock, now you own one. The reasoning behind the reverse split (presumably) is to increase stock value, get listed on the NASDAQ, and increase the visibility and the perceived value of the company. The reverse split also decreases the number of minority shareholders, giving the current management more leeway in decision making power. But what else is behind the reverse split?

I assume SuperMedia would agree to an ITEX buyout with a couple of caveats. First, it can’t just be something nice to add to the pie, ITEX would need to bring substance. 60 cent shares aren’t going to do that. Neither is a paltry (compared to SuperMedia’s revenue) couple million dollars in revenue. What ITEX does bring to the table, though, is a tough corporate staff, a debt free company, and the ability to leverage a niche that SuperMedia never has.

That being said, the original plan of SuperMedia was to run the SuperTradeExchange in a brokerless, online-only environment. For those that are familiar with the past of the barter industry, we know that that model doesn’t work. Big Vine and All Business Barter are the notable failures with that same model.

After messing around with the online-only format, ITEX, I assume, striked up a new deal to provide brokering services to those STX clients. THIS creates value for SuperMedia. Now they are dependent. Now they NEED ITEX to be able to continue to operate profitably.

An increased stock value, a debt free company, filling a genuine need…these are all very valuable to a company that doesn’t foresee a time when yellow pages are going to the be the medium of choice for information gathering.

But what happens to the franchisees? Where do they go?

This is the question, unanswered, that the future has to show. What does Steve White anticipate as part of the buyout? One would assume that SuperMedia would not want to use cash to buy the company, but leverage stock instead. Certainly SuperMedia, with a business database of 18 million, has much to gain from a successful and prosperous barter exchange.

The current franchisees may or may not be a part of the long term future of ITEX. Whether or not SuperMedia would replace them is good question, and if they did, who would they use in their place? Would ITEX convert the franchisees to employees, or would the current arrangement still stand?

Whatever the future is for ITEX, and my opinion is a leveraged buyout by SuperMedia, they remain the biggest exchange in the United States.

“You can barter literally anything,” said Karen Hoffman, who along with former business journalist Shera Dalin authored the new book The Art of Barter: How to Trade for Almost Anything. The book outlines how individuals and business can trade in person, on websites, and through commercial exchanges for products and services.

When first approached, however, most people — and especially businesses — are hesitant to barter, thinking they need the cash, Hoffman told the E-Commerce Times.

“Figure out what you want to barter ahead of time,” said Hoffman, who has 20 years of experience in the bartering industry and was formerly the executive director of theInternational Reciprocal Trade Association. “Put together a win-win proposal.

Bartering Online

Like bartering itself, bartering online is not new. Virtual Barter developed its first online, e-commerce-enabled, barter-exchange software in 2000. The software enables independent barter exchanges, organizations, trade networks, business associations and their members or clients to manage, merchandise and market products and services.

“Virtual Barter has online, e-barter-enabling software, trade exchange management solutions, the infrastructure, core relationships, business model and industry domain expertise to transform and redefine commercial barter as it exists today,” Bruce Kamm, chief evolutionary officer of Virtual Barter, told the E-Commerce Times.

Virtual Barter is now working with a barter exchange to develop barterbook.com. The exchange wanted a barter exchange that resembled the look and feel of Facebook — the most popular social-networking website — along with Facebook-type applications.

Paid members of barterbook have the option to refer friends to join the social bartering network and provide a product or service to barter. “The concept was to use social media and networking, to propel new member marketing instead of employing typical methods of salespeople on the street and on the phone,” Kamm explained.

A number of online barter exchanges have also set up accounts with Twitter, the popular micro-blogging social network, to highlight new bartering opportunities in real-time with their members, who are then followers of the barter exchange, Kamm said.

“It’s a great way for a members to learn about new trade opportunities, as new offers can be pushed to hundreds or even thousands of followers in a few seconds,” he said.

Trading on Social Media

The Community Connect Trade Association, which allows businesses to trade their products and services to earn trade dollars to buy from any other participating member, is an example. It is using the social networks Facebook and LinkedIn.

The idea is to use the social networks to spread its message, said Annete Riggs, managing director. “We are learning that these tools are very helpful for connecting to others and spreading the word in a more viral way,” she told E-Commerce Times.

Community Connect converted its Facebook group into a fan page. “When someone sees that a person they respect has become a fan, they want to know more about it,” Riggs explained. “With LinkedIn a similar thing happens, but it also builds on the six degrees of separation concept, so you can find specific types of businesses.”

Despite all the new social-media tools available, Riggs said that online bartering on its own has not proven to be that effective yet. “I believe that for the experience to be consistent and effective trust is still very important,” Riggs explained. “Most commerce happens locally. People want to connect and know who they are dealing with.”

Read the entire article by Brian R. Hook on Ecommerce Times.
E-Commerce Times
04/23/10 5:00 AM PT

As a result of the reverse stock split, every five shares of ITEX’s common stock that are issued and outstanding immediately prior to the Effective Time will be automatically combined into one issued and outstanding share.  No fractional shares will be issued in connection with the reverse stock split.  Stockholders who are entitled to fractional shares will receive a cash payment in lieu of receiving fractional shares equal to the fractional share interest multiplied by $1.50 per share on a pre-split basis.

The number of shares of ITEX’s common stock issued and outstanding will be reduced from 18,027,914 shares to approximately 3,605,307 shares.  ITEX filed an amendment to its Articles of Incorporation to effect the reverse stock split.  The authorized shares will be proportionally reduced from 45,000,000 to 9,000,000 shares.

Effective May 3, 2010, ITEX’s common stock will begin trading on the OTC Bulletin Board on a split-adjusted basis  under the symbol ITEXD for a period of 20 trading days.  Thereafter, our trading symbol will revert back to the original symbol, ITEX.

Steven White, ITEX Chairman and CEO stated, The reverse split will convert a couple hundred small stock positions into a fractional share, which the Company will cash out.  Eliminating these stockholders will provide better efficiencies and lower costs for the ongoing management of our shareholder base, and positions us for other stockholder value strategies.

·   Improve ITEX Corporation’s corporate governance:   ITEX must improve its governance and internal controls.  Independent board members need to be added to the audit and compensation committee.  At present there exists an incestuous relationship between the three directors and their various companies.  Unlike existing board members who have not personally purchased a share of ITEX stock since 2006, these new board members should have purchased a meaningful amount of ITEX shares to ensure that they “eat their own cooking” and their interests are aligned with the future of ITEX.

·   Boost the number of franchise locations and overall member count through organic growth:   A key component of this initiative is to invest in the company’s franchising efforts to recruit new franchisees, while properly incentivizing existing franchisees to expand to additional locations.   Currently utilizing a “Pull” effort to recruit new franchisees, ITEX should adopt a “Push” marketing campaign to better inform potential franchisees of the ITEX opportunity.  ITEX is the largest barter marketplace in North America in terms of members and transactions, yet smaller competitors such as Tradebank, have recently received recognition as one of Bond’s Top 100 Franchises .  ITEX has the resources and size to match or exceed these accomplishments.

·   Provide additional services to the ITEX member base:  ITEX helps businesses utilize excess capacity, while increasing sales through an exclusive distribution channel. ITEX’s current marketplace, franchise network, internet presence, and national footprint could allow it to enter the fast growing market of social buying without a significant capital outlay. Businesses such as Groupon and LivingSocial have recently received tens of millions of dollars in venture financing, by promising small businesses a minimum number of customers and providing consumer discounts through collective buying power. At their core, ITEX and firms such as Groupon, provide small businesses with a similar value proposition – new customers who can utilize excess capacity. While Groupon and LivingSocial are rolling out their services city-by-city, ITEX and its franchisees have an existing presence of hundreds of small in cities across the country. Using franchisees as sales agents to both existing ITEX members and businesses outside the network, ITEX Corporate  and the franchise base would benefit from an additional revenue stream that will expose ITEX to thousands of new customers. This is just one potential additional service that the company can develop leveraging its current infrastructure and business relationships.

·   Supply clarity as to the future of ITEX’s arrangement with SuperMedia, Inc.:   In February 2009, SuperMedia, Inc., a company with over $2 Billion in annual revenues, signed a subscription-based service offering with ITEX Corporation.  ITEX created the SuperTradeExchange for SuperMedia, in exchange for a flat base subscription fee and a percentage fee for the total value of transactional activity hosted by the platform .  Based upon SuperMedia’s investor presentations, the SuperTradeExchange initiative is intended to sustain SuperMedia’s existing client base, which is multiple times larger than ITEX’s.  ITEX’s existing 24,000 member businesses provided an established marketplace for the newly-created SuperTradeExchange members to trade with.  The initiative was also intended to benefit ITEX’s franchisees, by providing them with new customers to trade with.  As transaction fees remain stagnant, it does not appear that this is taking place.

We do not want this opportunity to be wasted.  ITEX Corporation is currently utilizing its company-owned offices to act as Trade Directors for the SuperTradeExchange, which could complicate the scalability of the SuperTradeExchange if it can increase its member count, due to the limited number of ITEX Corporate employees.  If franchisees were provided the ability to service the SuperTradeExchange members, this would provide a value-creating opportunity for the ITEX Marketplace and its franchisees, while allowing the SuperTradeExchange to rapidly expand.

·    Proper management of excess free cash flows:   If there are no investment opportunities available that provide an adequate Return on Investment (ROI), management should return excess cash flows and capital to shareholders.  We encourage ITEX to continue their share repurchase efforts while cautiously examining any potential acquisitions.  It is far superior for ITEX to work on retaining members in the ITEX marketplace through improved service and product offerings, than paying $300-$1000 per member in an acquisition.

·   Improve ITEX’s churn rate:   In fiscal year 2009, we estimate the company had a 16% churn rate, or approximately 4,000 members who left the ITEX marketplace.  This follows churn rates of 14% and 18% for FY 2008 and FY 2007 respectively.  Approximately 10,000 businesses have left the ITEX marketplace between FY2007-FY2009.  As of the fiscal 2009 annual meeting, ITEX was not surveying members who left the marketplace as to why they did so (which is what the Polonitza Group suggested be done at ITEX’s last meeting).  How can the organization improve these figures if they do not truly know why members are leaving?  Focusing resources on improving ITEX member retention rate, such as improved ITEX member education initiatives, while signing up  new members and franchisees, will be far more cost effective than entering into transactions to purchase new members.

·   Splitting the CEO and CFO positions:   Chief Executive Officers should devote their time focusing on the management of the business, providing leadership, planning, organizing, and maximizing the corporation’s resources.  ITEX’s CEO has served as both the firm’s CEO and interim-CFO since 2003.  To eliminate both potential conflicts of interest, while providing the CEO with the sole job of focusing on his responsibilities, we believe that ITEX should hire a separate CFO in either a full-time or part-time capacity.  ITEX has a number of attractive opportunities that it can capitalize on currently, and the CEO should be 100% focused on this task.  It is also essential for a public corporation to have separation in these duties to provide adequate accounting controls.

See the filing in its entirety at http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=7171627