ITEX (ITEX) 10-Q 9 Dec 16 2017 Q1 Quarterly report Financial data

Document And Entity Information

Document And Entity Information	3 Months Ended
	Oct. 31, 2016shares
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 31, 2016
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1
Entity Registrant Name	ITEX CORP
Entity Central Index Key	860,518
Current Fiscal Year End Date	--07-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	ITEX
Entity Common Stock, Shares Outstanding	2,079,245

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Oct. 31, 2016	Jul. 31, 2016
Current assets:
Cash and cash equivalents	$ 3,655	$ 3,235
Accounts receivable, net of allowance of $449 and $408	564	429
Prepaid expenses	63	183
Loans and advances	9	4
Deferred tax asset, net of allowance of $136	414	414
Notes receivable	275	283
Other current assets	21	4
Total current assets	5,001	4,552
Property and equipment, net of accumulated depreciation of $295 and $353	12	16
Goodwill	1,441	1,441
Deferred tax asset, net of allowance of $730 and net of current portion	2,139	2,220
Intangible assets, net of accumulated amortization of $3,393 and $3,380	34	48
Notes receivable - net of current portion	537	592
Other long-term assets	26	25
Total assets	9,190	8,894
Current liabilities:
Accounts and other expenses payable	65	37
Commissions payable to brokers	211	233
Accrued commissions to brokers	750	654
Accrued expenses	289	254
Deferred revenue	19	25
Advance payments	118	114
Total current liabilities	1,452	1,317
Long-term liabilities:
Other long-term liabilities - deferred rent	13	0
Total liabilities	1,465	1,317
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value; 9,000 shares authorized; 1,965 shares and 1,948 shares issued and outstanding, respectively	20	20
Additional paid-in capital	22,508	22,497
Stockholder notes receivable	(2)	(3)
Accumulated deficit	(14,801)	(14,937)
Total stockholders' equity	7,725	7,577
Total liabilities and stockholders' equity	$ 9,190	$ 8,894

CONSOLIDATED BALANCE SHEETS _Pa

CONSOLIDATED BALANCE SHEETS [Parenthetical] - USD ($) shares in Thousands, $ in Thousands	Oct. 31, 2016	Jul. 31, 2016
Allowance for doubtful accounts receivable	$ 449	$ 408
Deferred tax assets, valuation allowance, current	136	136
Accumulated depreciation of property and equipment	295	353
Allowance for deferred tax asset, noncurrent	730	730
Accumulated amortization of intangible assets	$ 3,393	$ 3,380
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	9,000	9,000
Common stock, shares issued (in shares)	1,965	1,948
Common stock, shares outstanding (in shares)	1,965	1,948

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 31, 2016	Oct. 31, 2015
Revenue:
Marketplace revenue and other revenue	$ 2,564	$ 2,814
Costs and expenses:
Cost of marketplace revenue	1,568	1,741
Corporate salaries, wages and employee benefits	406	432
Selling, general and administrative	364	405
Depreciation and amortization	18	21
Costs and Expenses, Total	2,356	2,599
Income from operations	208	215
Other income:
Interest, net	13	20
Nonoperating Income (Expense), Total	13	20
Income before income taxes	221	235
Income tax expense	85	80
Net income	$ 136	$ 155
Net income per common share:
Basic (in dollars per share)	$ 0.07	$ 0.08
Diluted (in dollars per share)	$ 0.07	$ 0.08
Weighted average shares outstanding:
Basic (in shares)	1,954	1,896
Diluted (in shares)	1,965	1,909

CONSOLIDATED STATEMENT OF STOCK

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - 3 months ended Oct. 31, 2016 - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Stockholder Notes Receivable [Member]	Accumulated Deficit [Member]
Balance at Jul. 31, 2016	$ 7,577	$ 20	$ 22,497	$ (3)	$ (14,937)
Balance (in shares) at Jul. 31, 2016		1,948
Common stock repurchased and retired	(7)	$ 0	(7)	0	0
Common stock repurchased and retired (in shares)		(2)
Payments on stockholder notes receivable	1	$ 0	0	1	0
Stock based compensation expense	18	$ 0	18	0	0
Stock based compensation expense (in shares)		19
Net income	136	$ 0	0	0	136
Balance at Oct. 31, 2016	$ 7,725	$ 20	$ 22,508	$ (2)	$ (14,801)
Balance (in shares) at Oct. 31, 2016		1,965

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2016	Oct. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 136	$ 155
Items to reconcile to net cash provided by operations:
Depreciation and amortization	18	21
Stock based compensation	18	59
Bad debt expense	45	51
Change in deferred income taxes	81	81
Changes in operating assets and liabilities:
Accounts receivable	(180)	(231)
Prepaid expenses	120	98
Loans and advances	(5)	(7)
Other assets	(18)	0
Accounts payable and other expenses payable	28	14
Commissions payable to brokers	(22)	(32)
Accrued commissions to brokers	96	149
Accrued expenses	35	(8)
Deferred revenue	(6)	(4)
Long-term liabilites	13	0
Advance payments	4	14
Net cash provided by operating activities	363	360
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received from notes receivable	63	67
Net cash provided by investing activities	63	67
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on stockholder notes receivable	1	1
Repurchase of common stock	(7)	(3)
Net cash used in financing activities	(6)	(2)
Net increase in cash	420	425
Cash at beginning of period	3,235	2,047
Cash at end of period	3,655	2,472
Supplemental cash flow information:
Cash paid for taxes	$ 25	$ 11

DESCRIPTION OF OUR COMPANY AND

DESCRIPTION OF OUR COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Oct. 31, 2016
Accounting Policies [Abstract]
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]	NOTE 1 – DESCRIPTION OF OUR COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (In thousands, except per share amounts) Description of our 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 allows 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. 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 2016 Annual Report on Form 10-K filed with the SEC on October 19, 2016. 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. 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. We prepare our financial statements using 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, 2016, we had no contracts to issue common stock. The Company had 114 Three-months Ended 2016 2015 Net income available for shareholders $ 136 $ 155 Weighted avg. outstanding shares of common stock 1,954 1,896 Dilutive effect of restricted shares 11 13 Common stock and equivalents 1,965 1,909 Earnings per share: Basic $ 0.07 $ 0.08 Diluted $ 0.07 $ 0.08 In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09) In November 2015, the FASB issued Accounting Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes In February 2016, the FASB issued ASU 2016-02, which amends the FASB Accounting Standards Codification and creates Topic 842, “ Leases Leases In March 2016, the FASB amended the existing accounting standards for stock-based compensation, with Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09) In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (ASU 2016-13)

COMMITMENTS

COMMITMENTS	3 Months Ended
	Oct. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Commitments Disclosure [Text Block]	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. In July 2016, we signed a 5 March 31, 2022 The lease expense for our executive office space for the three-months ended October 31, 2016 and 2015 was $ 33 21

LEGAL PROCEEDINGS AND LITIGATIO

LEGAL PROCEEDINGS AND LITIGATION CONTINGENCIES	3 Months Ended
	Oct. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Legal Matters and Contingencies [Text Block]	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.

INCOME TAXES

INCOME TAXES	3 Months Ended
	Oct. 31, 2016
Income Tax Disclosure [Abstract]
Income Tax Disclosure [Text Block]	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 effective tax rate related to our provision for income taxes in the three-months ended October 31, 2016 is similar to that used in the period ended October 31, 2015. 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, 2016 we have recognized a net income tax expense of $ 85 2,553 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 assessment of our tax positions did not have an impact on the consolidated financial statements.

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY	3 Months Ended
	Oct. 31, 2016
Stockholders' Equity Note [Abstract]
Stockholders' Equity Note Disclosure [Text Block]	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, 2016. 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, 2016, the Company repurchased 2 shares of common stock for $7. There was 1 share of common stock for $3 purchased during the three-month period ended October 31, 2015. On August 16, 2016, the Board of Directors of ITEX Corporation declared a semi-annual cash dividend in the amount of $0.10 per share, payable on December 12, 2016 to stockholders of record as of the close of business on December 1, 2016.

STOCK-BASED PAYMENTS

STOCK-BASED PAYMENTS	3 Months Ended
	Oct. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]	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 $18 and $59 of stock based compensation expense for the periods ended October 31, 2016 and 2015, respectively. At October 31, 2016, 114 415

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	3 Months Ended
	Oct. 31, 2016
Subsequent Events [Abstract]
Subsequent Events [Text Block]	NOTE 7 – SUBSEQUENT EVENTS The Company has evaluated the period after the balance sheet date up through December 9, 2016 and determined that there were no subsequent events or transactions that required recognition or disclosure in the consolidated financial statements.

DESCRIPTION OF OUR COMPANY AN14

DESCRIPTION OF OUR COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Oct. 31, 2016
Accounting Policies [Abstract]
Quarterly Financial Information Policy [Policy Text Block]	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 2016 Annual Report on Form 10-K filed with the SEC on October 19, 2016.
Consolidation, Policy [Policy Text Block]	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, Policy [Policy Text Block]	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.
Earnings Per Share, Policy [Policy Text Block]	Income Per Share We prepare our financial statements using 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, 2016, we had no contracts to issue common stock. The Company had 114 Three-months Ended 2016 2015 Net income available for shareholders $ 136 $ 155 Weighted avg. outstanding shares of common stock 1,954 1,896 Dilutive effect of restricted shares 11 13 Common stock and equivalents 1,965 1,909 Earnings per share: Basic $ 0.07 $ 0.08 Diluted $ 0.07 $ 0.08
New Accounting Pronouncements, Policy [Policy Text Block]	Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09) In November 2015, the FASB issued Accounting Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes In February 2016, the FASB issued ASU 2016-02, which amends the FASB Accounting Standards Codification and creates Topic 842, “ Leases Leases In March 2016, the FASB amended the existing accounting standards for stock-based compensation, with Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09) In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (ASU 2016-13)

DESCRIPTION OF OUR COMPANY AN15

DESCRIPTION OF OUR COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	3 Months Ended
	Oct. 31, 2016
Accounting Policies [Abstract]
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]	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, 2016 (in thousands, except per share data) (unaudited): Three-months Ended 2016 2015 Net income available for shareholders $ 136 $ 155 Weighted avg. outstanding shares of common stock 1,954 1,896 Dilutive effect of restricted shares 11 13 Common stock and equivalents 1,965 1,909 Earnings per share: Basic $ 0.07 $ 0.08 Diluted $ 0.07 $ 0.08

DESCRIPTION OF OUR COMPANY AN16

DESCRIPTION OF OUR COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 31, 2016	Oct. 31, 2015
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net income available for shareholders	$ 136	$ 155
Weighted avg. outstanding shares of common stock (in shares)	1,954	1,896
Dilutive effect of restricted shares (in shares)	11	13
Common stock and equivalents (in shares)	1,965	1,909
Earnings per share:
Basic (in dollars per share)	$ 0.07	$ 0.08
Diluted (in dollars per share)	$ 0.07	$ 0.08

DESCRIPTION OF OUR COMPANY AN17

DESCRIPTION OF OUR COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual) shares in Thousands	Oct. 31, 2016shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Unvested Restricted Stock Units	114

COMMITMENTS (Details Textual)

COMMITMENTS (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2016	Oct. 31, 2015
Other Commitments [Line Items]
Operating Leases, Rent Expense	$ 33	$ 21
Lessee Leasing Arrangements, Operating Leases, Term of Contract	5 years
Lease Expiration Date	Mar. 31, 2022

INCOME TAXES (Details Textual)

INCOME TAXES (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2016	Oct. 31, 2015
Income Taxes [Line Items]
Income Tax Expense (Benefit)	$ 85	$ 80
Deferred Tax Assets, Net	$ 2,553

STOCKHOLDERS' EQUITY (Details T

STOCKHOLDERS' EQUITY (Details Textual) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Aug. 16, 2016	Mar. 09, 2016
Preferred Stock, Par or Stated Value Per Share (in dollars per share)	$ 0.01
Preferred Stock, Shares Authorized (in shares)	5,000
Stock Repurchase Program, Authorized Amount				$ 2,000
Stock Repurchased During Period, Shares	2	1
Stock Repurchased During Period, Value	$ 7	$ 3
Dividends Payable, Amount Per Share			$ 0.10

STOCK-BASED PAYMENTS (Details T

STOCK-BASED PAYMENTS (Details Textual) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 31, 2016	Oct. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation, Total	$ 18	$ 59
Equity Incentive 2004 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period	114
Equity Incentive 2014 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 415