A Message From the Chairman and CEO of ITEX Corporation
BELLEVUE, Wash., Feb. 14 /PRNewswire-FirstCall/ -- ITEX Corporation (OTC Bulletin Board: ITEX), The Membership Trading Community(SM), a leading marketplace for cashless business transactions in North America, today released a letter from Chairman and Chief Executive Officer Steven White to shareholders reporting on recent events and to comment on the unsolicited Western Sizzlin tender offer.
A MESSAGE FROM YOUR CHAIRMAN AND CEO February 14, 2008 DEAR VALUED SHAREHOLDERS:
The ITEX success story continues to unfold. I am writing to update you on recent developments and to comment on the status of the current unsolicited tender offer.
Acquisitions
I am pleased to report the persistence and tenacity we have demonstrated since acquiring the trade exchange marketplace previously operated by Intagio in August 2007 is paying off. Early on we corrected some staffing problems at our new corporate locations and quickly got up to speed in our integration efforts. The transaction volume at our corporate locations has doubled during the past two months from August lows. Further, we are continuing to add outstanding new members in these former Intagio areas, as you may have noted in last week's announcement of the participation of the Chicago-based Ala Carte restaurant chain.
Two weeks ago we completed the purchase and successful integration of a regional trade exchange in Cleveland. This acquisition is being managed by our existing corporate location, so our integration costs are minimal and the profit contribution will be higher. Furthermore, there is no dilution to shareholders as the consideration for this transaction did not include ITEX common stock or other equity.
During the past three years, operating income has increased by an average of 25% annually. Operating income in 2007 is 142% over what it was in 2004. This has occurred through astute acquisitions, membership growth and outstanding execution. Since inheriting an operating loss in fiscal 2003, we have increased operating income every single year beginning with fiscal 2004. Operational income in 2007 was $1,505,000. Cash flow from operations was even higher, exceeding $2,000,000. These are outstanding numbers and growth rates for a company of our size.
Revenue growth
We believe that revenue is likely to exceed $15,000,000 in fiscal 2008, 50% more than fiscal 2005's revenue of $10,225,000. We are focusing our efforts on recruiting the small business owner, our core customer. We have expanded our value proposition, introducing the Executive Privileges Program in 2007. Along with added services, we are testing new fees schedules. For example: members who enroll online pay a 6% transaction fee compared to the historical 5%; and when members register online they avoid paying a "set up" charge that might range anywhere from $100 to $995.
In support of this fee structure, our franchisees have agreed not to charge a set-up fee to any online registration. This legacy charge, from which ITEX received no revenue, has been difficult to purge from the franchise base. Our online registration program began in June of 2007 and is beginning to get traction. We are adding 30 new online members each month and the number is growing.
We hired a national sales manager in July of 2007. Since that time new member registration is up on average to 260 per month, a ten percent gain over the previous year. Adding new members is key to our success and growth.
We have assisted several of our franchisees with acquisitions in various regions, making them stronger and more productive offices. Providing liquidity and value for our franchise network allows entrepreneurs to work within the ITEX system knowing they are building value and personal net worth. This in turn has allowed them to become more committed to investing resources in making their offices flourish. The more successful a franchise, the more successful ITEX will be.
In the past, ITEX dollars have rarely been used for corporate expenses. This may seem a little odd, for a cashless transaction processor to not utilize its own currency, but we wanted to keep our financials very transparent and based strictly on "cash." Beginning this fiscal year, ITEX dollars that are used for corporate spending are fully disclosed on our income statement. When we use ITEX dollars for a recognized and documented expense, the expense is offset with an increase in revenue. There is no change to net income and the balance sheet is not affected. We will be using ITEX dollars that we earn to offset cash expenses, just as we encourage our members to do. This should have a positive effect on our revenue in the low six figures for this fiscal year, as well as a positive impact on our cash flow.
Unsolicited Tender Offer
At the start of December's tender offer, Western Sizzlin Corporation owned about 3.9% of our outstanding shares. As of the end of January, less than 4% of ITEX shares had been tendered to Sizzlin. This is a confirmation that ITEX shareholders agree with the ITEX Board's recommendation that shareholders should reject the tender offer.
In promoting its offer to ITEX shareholders, Sizzlin has stated that its holding company structure is an effective business model, as it allows Sizzlin "to focus on allocating capital." Let's take a closer look at Sizzlin's recent capital allocation decisions. Securities and Exchange Commission ("SEC") filings show Sizzlin made a risky bet from working capital on call options to purchase a position in Steak and Shake (NYSE: SNS) which did not pan out; a wager that lost Sizzlin shareholders a cool $1.6 million. This single loss more than wiped out the combined operational income for Sizzlin's past 7 reported quarters. I wonder how Sizzlin's staff and franchisees feel about that decision. To further highlight the risk of having your cash managed by Sizzlin, consider another example. Two affiliates of Sizzlin, Western Acquisitions L.P. and the LION Fund L.P, each managed by the Sizzlin CEO, have joined together to take a stock position in Steak and Shake of approximately 2.4 million shares. SEC reports indicate that the aggregate purchase price for these shares was $33.9 million. As of the close of the market on February 8, 2008, this investment had lost $14.2 million.
In my view, a similar highly questionable decision by the Sizzlin CEO is the extension of the ITEX tender offer through February 28, 2008. After receiving such a cold reception from ITEX shareholders, this would seem to be a waste of Sizzlin capital and resources. Even stranger is the fact that Sizzlin is now offering less value to ITEX shareholders than the original offer. Because Sizzlin stock has declined in value, its offer to ITEX shareholders has effectively declined from $1.19 a share on December 27, 2007, the date Sizzlin commenced the tender offer, to $0.93 on January 28, 2008, the date Sizzlin mailed its most recent letter to ITEX shareholders. Personally, I think the tender offer is an insult to the intelligence of ITEX shareholders and the hard working individuals of our organization.
In conclusion, I'm happy to report that your company is doing exceptionally well and our hard work continues to show results. Our franchisees and our staff, along with your Board of Directors and me, are dedicated to continue making the Trading Community a common and useful tool for small business. We want to thank you for your trust and support.
We look forward to sharing the next chapter of our success. Sincerely yours, Steven White Chairman and CEO
PS -- We always welcome referrals. If you know of a small business that would benefit from their association with the ITEX business community, please send a quick e-mail to ceo*itex.com or a fax to 425.463.4040 with the company name, owner, contact phone number and address. It would be helpful if you could mention to the owner that you are a shareholder and that one our representatives will contact them immediately.
Of course, any business can always access http://www.itex.com and complete the registration process for no fee.
Thanks again, Steve
This letter contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. All statements that express expectations and projections with respect to future matters may be affected by changes in our strategic direction, as well as developments beyond our control. We cannot assure you that our expectations will necessarily come to pass. Actual results could differ materially because of issues and uncertainties such as fees and expenses incurred in connection with Western Sizzlin Corporation's unsolicited exchange offer and the risk factors and other important factors that could affect our business and financial results discussed in our periodic reports and filings with the Securities and Exchange Commission, including our Forms 10-KSB and Forms 10-QSB, which are available at http://www.sec.gov, including under the caption, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Additional Information
ITEX has filed a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") and amendments thereto regarding Western Sizzlin Corporation's exchange offer, which sets forth the reasons for the recommendation of the ITEX Board and related information. The Schedule 14D-9 and other public filings made from time to time by the Company with the SEC are available without charge from the SEC's website at http://www.sec.gov, or from ITEX's website at http://www.itex.com.
About ITEX
ITEX, The Membership Trading Community(SM), is a thriving community of member businesses buying and selling more than $270 million a year in ITEX dollar transactions. Member businesses increase sales through an exclusive distribution channel managed by franchisees, licensees and corporate-owned locations, by utilizing ITEX dollars to exchange goods and services. ITEX is powered by ITEX Payment Systems, the leading payment technology platform for processing cashless business transactions. ITEX is headquartered in Bellevue, Washington.
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Estimated Market Cap 16,130,886 as of Feb 13, 2008 Outstanding Shares 17,726,248 as of Oct 31, 2007 Authorized Shares 50,000,000 as of Jan 1, 2005 Number of Share Holders of Record 894 as of Oct 2, 2007 Float 15,256,312 as of Jan 10, 2005
Posts: 3255 | From: Los Angeles California | Registered: Jan 2006
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posted
Gosh, you may be right, lol...Anybody who writes this cheeky AND recognizes the horrid customer-experience of "Steak and Shake" just may be onto sumpin...
quote:Let's take a closer look at Sizzlin's recent capital allocation decisions. Securities and Exchange Commission ("SEC") filings show Sizzlin made a risky bet from working capital on call options to purchase a position in Steak and Shake (NYSE: SNS) which did not pan out; a wager that lost Sizzlin shareholders a cool $1.6 million.
posted
ITEX Announces Results for First Quarter of Fiscal 2008
Revenue increases to $3,853,000
BELLEVUE, Wash., Dec 12, 2007 /PRNewswire-FirstCall via COMTEX/ -- ITEX Corporation (OTC Bulletin Board: ITEX), The Membership Trading Community(SM), a leading marketplace for cashless business transactions in North America, today filed its Form 10-QSB with the Securities and Exchange Commission and announced results for its fiscal 2008 first quarter ended October 31, 2007. Revenue for the quarter ended October 31, 2007 increased by 2% over the same quarter in the prior year. For the quarter ended October 31, 2006, ITEX reported $357,000 of unique conversion revenue from former BXI members who had changed fee plans. Without the one-time conversion revenue in 2006, revenue for the quarter ended October 31, 2007 would have reflected an increase of $420,000, or 12% over the comparable 2006 quarter. Organic growth from existing operations contributed $92,000 to this revenue increase.
Included in the fiscal 2008 first quarter financial statements is $21,000 in ITEX dollar transactions that met non-monetary recognition criteria of Accounting Principle Board 29. In past periods, ITEX dollar transactions did not impact the financial statements because it was determined they did not meet non-monetary recognition criteria or were not material.
Steven White, Chairman and CEO stated: "Comparing year over year quarters and excluding the one-time conversion revenue in last year's first quarter, our income from operations increased 28%. Our fiscal 2008 first quarter results also included acquisition costs for our Intagio transaction. Overall, I'm quite pleased with the results for this quarter."
"More good news to report is that our acquisition of Intagio members in August 2007 contributed $287,000 in revenue this quarter. Despite a few challenges during the transition, we are very satisfied with the early results of the acquisition. Of the six Intagio regions acquired, three regions were sold in the first quarter and we retained three to operate as corporate-owned or prototype offices. Within our prototype offices, we are able to implement new commission structures, test new support fees and pursue other strategies to increase revenues and better serve members. We have focused on organic growth and are pleased to see traction in our revenue growth strategies. Further, new member registrations for the quarter were 823 compared to 669 in the comparable period for the previous year, representing a 23% increase."
Mr. White concluded, "Everything considered, this was a strong quarter. If we adjust for acquisition costs and one-time conversions, our revenue and income from operations this quarter had impressive gains over last year's numbers. We reflected some ITEX dollar revenue and expenses in our financial statements this quarter. Though the amount of these transactions is less than one percent of our total revenue for the quarter, we clearly identified and disclosed the amount of revenue and expense generated by these ITEX dollar transactions on our income statement. Considerable time and effort was devoted this quarter to the integration of the Intagio members. The integration is now completed; our new corporate-owned offices and our Broker Network are geared up for our busy holiday season."
First Quarter 2008 Highlights -- Revenue of $3,853,000 -- Intagio acquisition added $287,000 in revenue -- Income from operations of $272,000 -- Net cash provided by operations of $767,000 -- Total assets of $15,290,000 -- 202,384 common shares repurchased and canceled -- $1,000,000 credit line renewed -- Qualified ITEX dollar transactions reflected in our financial statements
ITEX Corporation's report on Form 10-QSB can be found at http://www.sec.gov. About ITEX
ITEX, The Membership Trading Community(SM), is a thriving community of member businesses buying and selling more than $270 million a year in ITEX dollar transactions. Member businesses increase sales through an exclusive distribution channel managed by franchisees, licensees and corporate-owned locations, by utilizing ITEX dollars to exchange goods and services. ITEX is powered by ITEX Payment Systems, a leading payment technology platform for processing cashless business transactions. ITEX is headquartered in Bellevue, Washington.
ITEX CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts)
October 31, July 31, 2007 2007 (unaudited) (audited) ASSETS
Total current assets 2,152 3,936
Long-term assets 13,138 10,368
Total assets 15,290 14,304
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities 2,484 1,955
Long-term liabilities 465 19
Total liabilities 2,949 1,974
Total stockholders' equity 12,341 12,330
Total liabilities and stockholders' equity 15,290 14,304
ITEX CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)
Three Months ended October 31 2007 2006 (unaudited) (unaudited) Revenue Marketplace revenue $3,832 $3,790 ITEX dollar revenue 21 - 3,853 3,790 Cost and expenses: Costs of Marketplace revenue 2,498 2,583 Corporate salaries, wages and employee benefits 372 391 Selling, general and administrative 573 450 Depreciation and amortization 138 71 3,581 3,495
Income from operations 272 295
Other income (expense): Net interest (1) (6) Gain on sale of offices - 70 (1) 64
Income before income taxes 271 359
Income tax expense 115 122
Net Income $156 $237
Net income per common share Basic $0.01 $0.01 Diluted $0.01 $0.01
Average common and equivalent shares Basic 17,669 17,841 Diluted 17,880 18,246
Supplemental information: ITEX dollar activity included in costs and expenses: Cost of Marketplace revenue $ - $ - Corporate salaries, wages and employee benefits 1 - Selling, general and administrative 20 - Depreciation and amortization - - $21 $ -
This press release contains forward-looking statements that involve risks and uncertainties concerning our expected performance (as described without limitation in the quotations from current management in this release) and comments within the safe harbor provisions established under The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of our future performance. We believe that these potential risks and uncertainties include, without limitation: the continuing development of successful marketing strategies for our concepts; our ability to increase revenues and sustain profitability; the availability of adequate working capital; our dependence both on key personnel and our franchise network; and the effect of changes in the overall economy and in technology. Statements in this release should be evaluated in light of these factors. These risk factors and other important factors that could affect our business and financial results are discussed in our periodic reports and filings with the Securities and Exchange Commission, including our Forms 10-KSB and Forms 10-QSB, which are available at http://www.sec.gov., including under the caption, "Management's Discussion and Analysis of Financial Condition and Results of Operations." All information set forth in this release is as of December 12, 2007, and ITEX undertakes no duty to update this information. SOURCE ITEX Corporation
quote:Originally posted by T e x: Gosh, you may be right, lol...Anybody who writes this cheeky AND recognizes the horrid customer-experience of "Steak and Shake" just may be onto sumpin...
quote:Let's take a closer look at Sizzlin's recent capital allocation decisions. Securities and Exchange Commission ("SEC") filings show Sizzlin made a risky bet from working capital on call options to purchase a position in Steak and Shake (NYSE: SNS) which did not pan out; a wager that lost Sizzlin shareholders a cool $1.6 million.
Yep I sorta liked the Cheekiness, remind me of someone. LOL
Posts: 3255 | From: Los Angeles California | Registered: Jan 2006
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