UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K

               (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE Securities Exchange Act of 1934

                            For The Fiscal Year Ended
                                  July 31, 2000

                         Commission File Number 0-18275

                                ITEX CORPORATION

             (Exact Name of Registrant as Specified in its Charter)

               Nevada                                   93-0922994
   ----------------------------------              -----------------------
    State (or other jurisdiction of                    (IRS Employer
     Incorporation or organization)                  Identification No.)

                 3400 Cottage Way, Sacramento, California 95825
           (Address of principal executive offices including zip code)

                                 (916) 679-1111
               (Registrant's telephone number including area code)

Indicate by check whether the Registrant:  (1) filed all reports  required to be
filed by Section 13 or 15 (d) of the Securities  Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.

                                   Yes    No X
                                             --

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. [ ]

The approximate market value of stock held by non-affiliates is $5,008,000 based
upon  13,911,000  shares  held by such  persons  and the close price of $0.36 on
October 27, 2000. The number of shares outstanding of the Registrant's $0.01 par
value common stock at October 27, 2000 was 16,200,000.

DOCUMENTS INCORPORATED BY REFERENCE Certain portions of Registrant's  definitive
proxy  statement to be filed pursuant to Regulation  14A in connection  with the
annual meeting of shareholders:

                Part III, Items 10, 11, 12 and 13 of this report

                      (This Form 10-K includes ____ pages)
                                ITEX CORPORATION
                                    FORM 10-K
                     For The Fiscal Year Ended July 31, 2000

                                      INDEX
                                                                           Page

----------
                                     PART I

ITEM 1.  BUSINESS

ITEM 2.  DESCRIPTION OF PROPERTIES

ITEM 3.  LEGAL PROCEEDINGS

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                                     PART II

ITEM 5.  MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
          RELATED STOCKHOLDER MATTERS

ITEM 6.  SELECTED CONSOLIDATED DATA

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         SIGNATURES

<PAGE>



                                     PART I

ITEM 1.   BUSINESS

General

ITEX Corporation and its subsidiaries ("ITEX" or the "Company") operates what it
believes is one of the leading  retail trade  exchanges in the United States and
has licensees who operate trade  exchanges in  international  markets in Mexico,
Kuwait and Turkey.  The ITEX retail trade exchange  headquartered in Sacramento,
California,  has approximately 15,308 members (or "clients") who,  collectively,
make up the trade exchange, which operates as an unincorporated association. The
trade exchange  contracts with the Company to administer the exchange and to act
as a third-party recordkeeper for transactions entered into by the members. ITEX
works through  approximately 72 independent  brokers and seven Company owned and
operated  regional  offices  to service  existing  ITEX  clients  and enroll new
clients.

From June 25, 1998 to January 18, 2000, the Company  administered  the BXI trade
exchange ("BXI") through its wholly-owned subsidiary, BXI Corporation,  based in
Burbank  California.  The BXI trade exchange has  approximately  13,800 members,
which are serviced by  approximately  100  independent  brokers.  On January 18,
2000, the net assets and business of BXI Corporation,  including all assets used
in operation of the BXI trade  exchange,  were sold. See Note 2 to  Consolidated
Financial Statements included in this Form 10-K.

The Company founded the ITEX Retail Trade Exchange in 1982.

In general,  businesses  choose to become  members of a trade exchange when they
have excess  capacity of the goods or services they provide  particularly  where
those goods or services are  time-sensitive or over-abundant.  Businesses become
members of trade  exchanges  to extend their  customer  base and market reach to
sell these time-sensitive or over-abundant goods or services. If a restaurant or
hotel does not fill a table or room at a particular time, the ability to realize
revenue on that table or room for that time is gone. However, if someone who may
not be willing  to pay cash for a meal is willing to use trade  credits to dine,
the restaurant has received  revenue in the form of trade credits for that table
at that time which it otherwise would not have realized. Those trade credits can
then be spent by the  restaurant  to purchase  goods and  services it  otherwise
would have to pay for in cash. Goods and services available through the exchange
are also  available  for cash  purchase  by members and  nonmembers.  Naturally,
members  would  prefer to sell their goods or services  for cash,  but for items
that are time  sensitive,  such as  restaurant  meals or hotel  rooms,  it makes
economic sense to sell them for trade credits.  Slow moving or excess  inventory
can also often be traded to achieve better economic  results than if they remain
unsold or are sold at liquidation prices.

Members of  exchanges  contractually  agree to sell their  goods or  services to
other members at the same price as cash customers pay but to receive  payment in
trade  credits.  These trade  credits can then be  exchanged  for other goods or
services  offered  by other  members  of the  exchange  and that are used in the
operation of the member's business. Exchange members have access to both printed
and  Internet-based  directories  that list  goods and  services  available  for
purchase for trade credits,  by category,  on a local and national  basis.  Such
directories are frequently updated so they are current as to available goods and
services.  The  Company  may grant,  on behalf of the  exchange,  trade lines of
credit to clients who wish to purchase goods or services for trade credits prior
to selling goods or services to other members of the exchange. The trade credits
of the ITEX retail trade  exchange  are referred to as "ITEX Trade  Dollars." An
"ITEX Trade Dollar" is an accounting unit used by the ITEX retail trade exchange
to record the value of trades as  determined  by the  parties in trade  exchange
transactions.  ITEX Trade Dollars  denote the right to receive goods or services
available from other ITEX Trade Exchange  members,  or the obligation to provide
goods or services to other Exchange members. In general,  Trade Dollars can only
be used by members of the exchange to purchase the goods and services offered by
members of the exchange.  However,  the Company has "reciprocal"  relations with
various other trade  exchanges  pursuant to which it is possible for a member of
the ITEX trade  exchange  to purchase  goods or  services  offered by members of
those  other  trade  exchanges,  and  members  of  other  trade  exchanges  with
reciprocal  agreements  may  acquire  goods  and  services  from the ITEX  trade
exchange.

Trade  Dollars may not be redeemed for cash.  Trade  Dollars may be used only in
the manner and for the  purpose  set forth in the Rules of the  exchange.  Trade
Dollars are not legal tender, securities, or commodities.

The Internal  Revenue Service  considers trade credit income to be equivalent to
cash income and a trade dollar  expense to be equal to a cash dollar of expense.
The  Company is obliged  under the Tax Equity and Fiscal  Responsibility  Act of
1982  (TEFRA) to send Forms 1099-B to each of the  Company's  clients and to the
Internal  Revenue  Service  (which the Company  does  electronically).  The Form
1099-B reflects the total trade credit sales made by the client for the calendar
year, less the amount of any returns. Trade credits received must be reported as
gross income in tax returns.  Expenditures  of trade  credits may be reported as
deductions in tax returns if they qualify as deductible  business expenses or as
other deductions that are permitted by the Internal Revenue Code (e.g.,  medical
expenses, charitable contributions, and the like).

Members of the  exchange  are  serviced  by trade  brokers  who are  independent
contractors  with  respect  to the  Company  or,  in the  case of ITEX  regional
offices,  are  employees  of the  Company.  The Company  provides  brokers  with
training,  help in  facilitating  transactions,  marketing  materials,  computer
services,  computer software systems,  and  Internet-based  resources  including
directories,  listings of goods and services  currently  available  from and the
opportunity to advertise to members  locally,  nationally  and  internationally.
ITEX is in the process of upgrading and broadening these services to clients and
brokers.

Independent Brokers

Members of the exchange have a contractual relationship with the Company and are
assigned to an  independent  broker or a Company  operated  regional  office.  A
broker's  responsibilities are to enroll new ITEX clients, train them in the use
of the system,  facilitate business among clients, monitor the delivery of goods
and services  between  clients and assure  payment of dues and fees to ITEX.  In
recent years, the number of member clients who have left the system as a percent
of  total  member  clients  at  the  beginning  of  the  fiscal  year  has  been
approximately  35% annually.  New member client  enrollment has basically offset
this attrition resulting in the number of member clients remaining approximately
the same during the three years and eight months.

In the four week  accounting  cycle ended July 13, 2000, the seven company owned
offices  servicing  approximately  3,935 clients and the 20 largest  independent
broker offices servicing  approximately 6,081 clients produced,  26.3% and 46.3%
respectively  of total net  revenue  of  $643,000.  The broker  provides  client
members with  information  about goods and services that are available  locally,
nationally and internationally.  ITEX brokers do not have exclusive  contractual
rights to operate in a geographical  area. The ITEX broker contract provides for
a five-year  term unless the contract is  terminated  for cause (as explained in
the contract).  The contract automatically renews for subsequent five-year terms
so long as the broker is not in breach and otherwise is in  compliance  with the
contract  and any  policies  and  procedures  then in  place as  adopted  by the
Company.

Independent brokers are paid a percentage of revenue collected from ITEX clients
serviced by those  brokers which  generally  ranges from 50% to 75% depending on
the volume of transactions  and net increases in the number of clients  enrolled
during each 28-day  accounting  cycle.  For the four week accounting cycle ended
July 13, 2000,  payments to Independent brokers were 34.6% of revenues collected
from ITEX  clients  which they  serviced.  New  brokers  are signed to  standard
contracts.

The Company  views its  commitment  to its brokers as critical to its  long-term
success.  The Company  depends on a high rate of repeat  business  and views the
quality of its brokers'  interaction with clients as an important element of its
strategy  to  continue  to  successfully  develop  the  Company's  business.  By
providing  training,  marketing  materials and  programs,  Internet and computer
related  support,  it seeks to  foster a strong  cooperative  relationship  with
brokers which will then foster a high level of service to clients by brokers.

Sources of Revenue

ITEX Corporation charges each member of the trade exchange an association fee of
$20 cash each four week  accounting  cycle  ($260  annually)  and 10 ITEX  trade
dollars  each cycle.  This rate  structure  has been in place since  November 4,
1999,  when the cash fee was increased  from $15 to $20 and the Trade Dollar fee
was decreased from 15 Trade Dollars to 10 Trade Dollars.

ITEX also receives  transaction fees on the value of the transaction,  from both
the buyer and the seller. Clients are billed at the end of each accounting cycle
and if a client makes payment  automatically  by credit card or electronic funds
transfer through the Company's  Preferred Member (Autopay) system, the fee is 5%
of the dollar  amount of the  client's  purchases  and sales  during the billing
period.  If a  client  pays by  check  or  otherwise  after  receiving  a mailed
statement at the end of each  four-week  cycle,  the fee is 7-1/2% of the dollar
amount of that client's purchases and sales during the period. Approximately 80%
of payments  are made  through  electronic  funds  transfer  or by credit  cards
automatically using the Preferred Member Autopay system.

The Company prepares its financial  statements on an accrual basis. See Notes To
Consolidated  Financial Statements for a description of accounting policies. The
Company internally  accounts for trade dollars in addition to cash in statements
to clients and brokers and in other ways  necessary  for  operation of the trade
exchanges  and the  business of the  Company.  The Company  considers  the trade
dollars  it  receives  from  transactions  to be  valuable  and uses them in the
operation  of its business  including  the payment of  obligations.  Clients and
brokers  use  trade  dollars  in  exchange  for goods  and  services  and in the
operation of their businesses.

Company Strategies

Key elements of the Company's strategy include the following:

o Increasing  the number of new brokers and  improving the operation of existing
  independent  brokers and the number of clients they serve in key  markets.
  This will require  extensive  recruiting  and training  programs.
  Historically,  the Company has not concentrated its efforts on recruiting
  independent brokers, but believes it will be able to attract qualified
  individuals.

o  Improving  and  increasing  marketing  programs  and  materials  provided  to
   independent  brokers and  Company  offices to assist them in signing new
   clients and  increasing  services  to  members  of the  trade  exchanges.
   Beginning  in mid-1999,  the Company  instituted  a program of broker
   education  known as the "ITEX Boot Camp." In an interactive  educational
   setting brokers are trained in methods of recruiting new members for the
   Exchange and increasing the number and size of trade transactions
   participated in by members.

o Upgrading  and  enhancing  computer  software and related  support,  including
  improved  Internet  access to ITEX  clients  and  brokers.  Recent  advances
  in computer  and  communications  technology  offers the Company
  opportunities  to provide  clients  and  brokers  with  additional   tools and
  simpler  computer applications.  Such  tools  will  enable  them to more
  easily  engage  in trade exchange  transactions.  Opportunities  include
  improving the Company's existing on-line  system known as "Trade Flash" which
  provides  clients with  information about goods and services that are
  immediately available.  Another strategy is to improve  client  profiles  so
  the system  will alert  members  when  products or services they are seeking
  become available on the trade exchange.  Presently the system provides
  listings of members by category and separate  category listings and
  descriptions of goods and services currently available for sale.

o Strengthening  the  infrastructure  at the trade exchanges and  administrative
  offices of the Company,  including  centralized  accounting,  granting  lines
  of credits,  credit  checking,  management of client  information and other
  systems resulting in increased efficiencies and productivity.

Purchase of Independent Broker Offices

Sacramento,   California.  On  October  20,  1999,  the  Company  completed  the
acquisition of all of the outstanding stock of California Trade Exchange,  Inc.,
a California  corporation  which operated the business of the Company's  largest
independent  broker  located in Sacramento,  California.  The purchase price was
paid by issuing  1,966,667 shares of the Company's  restricted common stock that
were  assigned  a value of  $669,000.  The  primary  identifiable  assets of the
acquired  business  were  accounts  receivable,  furniture and equipment and the
right to service ITEX clients as  represented by the  Independent  Retail Broker
Agreement  for that office  (the  member  list).  Of the total  purchase  price,
$390,000 was  assigned to the right to service the member  list,  which is being
amortized over a four-year period.

Operating  Income  of the  Sacramento  brokerage  for the two years and the nine
months ended September 30, 1999 prior to acquisition are as follows (unaudited):

<TABLE>
<CAPTION>
                                     Nine Months
                                        Ended            Year Ended      Year Ended
                                     September 30,       December 31,    December 31,
                                        1999                1998            1997
                                     -------------       ------------    ------------
<S>                                  <C>                  <C>            <C>

Revenue
  Membership fees .............       $ 164,375          $ 263,487       $  78,152
  Commissions .................         533,434            610,943         325,146
                                      ---------          ---------       ---------

     Total revenue ............       $ 697,809          $ 874,430       $ 403,298
                                      =========          =========       =========
Operating  income
 (loss) before
 depreciation
 and interest .................       $ 139,304          $ 215,983       $  (4,556)
                                      =========          =========       =========
Number of client
 members, end of
 period .......................       $     806          $     706       $     496
                                      =========          =========       =========
</TABLE>

The  Sacramento  brokerage  office was  licensed  to Collins M.  Christensen  on
September  15, 1995.  Mr.  Christensen,  the principal  owner of the  Sacramento
brokerage business, is now President,  Chief Executive Officer and a Director of
the Company.  Gerry Layo,  minority owner of the Sacramento  brokerage  business
served as a vice  president  of the Company in charge of broker  training  until
March 7, 2000. Of the shares issued in the transaction, Mr. Christensen received
1,573,334 shares and Mr. Layo received 393,333 shares.

Seattle,  Washington.  In February 2000, the Company  acquired all of the issued
and  outstanding  stock of Seattle  Trade  Network,  Inc.,  ("STN") a Washington
corporation  which  operated the business of the  independent  broker located in
Issaqua  (Seattle  area),  Washington.  The purchase price consisted of $150,000
cash,  150,000  ITEX Trade  Dollars  and 200,000  shares of common  stock of the
company. In addition,  the Company issued 15,000 warrants to purchase restricted
common stock of the Company at an exercise price of $0.75 per share.  One of the
former stockholders of "STN" continued as an ITEX employee to manage the Seattle
office.

Houston,  Texas.  Also in February 2000, the Company  acquired the assets of the
operator  of the  independent  broker  office  located in  Houston,  Texas.  The
purchase price was $100,000 cash,  payable  $50,000 at closing and the remainder
over time,  100,000  ITEX Trade  Dollars  and 100,000  shares of the  restricted
common stock of the Company and the option to acquire up to an additional 25,000
shares of restricted  common stock at an exercise price of $0.75 per share.  The
owner of the  operation  has remained as an ITEX  employee to manage the Houston
office. The primary  identifiable  assets of the acquired business were accounts
receivable,  furniture  and  equipment  and the right to service ITEX clients as
represented by the Independent Retail Broker Agreement for that office.

Discontinued Businesses

In recent years the Company  engaged in investing  in,  starting,  and acquiring
operations and ventures  outside its core business of operating  trade exchanges
and  related  operations.  These  businesses  have not been  profitable  and the
Company  does not intend to make  additional  investments  in them,  nor does it
appear that the  businesses  would be successful if  additional  management  and
capital  were  devoted  to them.  The  Company  is in the  process of an orderly
liquidation  of  these  investments.   A  significant  amount  of  the  original
investments  will not be recovered.  See, Item 7,  Management's  Discussion  and
Analysis.

Competition

The Company  competes with a wide range of other  companies and  individuals who
offer goods and services at retail,  wholesale and discount locations as well as
those that offer such items for sale over the Internet.  Some of the present and
potential future competitors of the Company have greater  financial,  technical,
marketing or personnel resources than the Company.  The competitive  environment
could have one or more of the following adverse effects on the Company:

     o Negatively  impact the Company's ability to generate greater revenues and
       profits from such sources as membership fees and transaction fees

     o limit the Company's opportunities to enter into or renew agreements with
       brokers

     o limit the Company's ability to develop new systems and services

     o limit the Company's ability to continue to grow or sustain its membership
       base

     o Require price reductions in membership or transaction  fees, or both, and
       require increased spending on marketing and systems development

     o Result in a loss of the Company's market share in the retail trade
       exchange industry

     o Require an increase in the Company's sales and marketing expenditures

Any of the foregoing  events could have an adverse  effect on revenues or result
in an increase  in costs as a percent of  revenue,  either of which could have a
material  adverse effect on the Company's  business,  financial  condition,  and
operating results.

The Company is among a relatively few companies that provide  opportunities  for
customers to trade their goods and services for other goods and services,  for a
fee. It believes, however, that as a result of improvements in communication and
computer  technology,  including use of the Internet,  it is likely that trading
will become a more acceptable  form of doing business and new  competitors  will
develop.

Government Regulations

The Company and its independent  brokers are subject to various  federal,  state
and  local  laws,  regulations  and  administrative  practices  affecting  their
businesses,   including,  among  others,  the  requirement  to  obtain  business
licenses,   tax  withholding  and  remittance  of  matching   contributions  for
employees'  social  security  accounts,  and other  such laws,  regulations  and
administrative  practices  required of businesses in general.  In addition,  the
Company, is a "third party record keeper" (similar to banks) under TEFRA, and is
required  to  account  for and  report  to the  IRS the  total  of  trade  sales
transactions  of each  member  of the  exchange.  The  Company  believes  it has
complied  with such laws and  regulations  in the past,  with the  exception  of
timely filings with the Securities and Exchange Commission,  and believes it can
comply with all such regulations in the future.

Trademarks and Service Marks

"ITEX and Design" (the ribbon design of the ITEX logo) is a registered trademark
and service mark of the Company on the  Principal  Register of the United States
Patent and Trademark Office.  This registration will expire on December 29, 2007
unless before that date the Company files an application for renewal as required
by Section 9 of the Trademark Act of 1946.

The Company has filed trademark  applications for the word mark "ITEX" (that is,
independent  of the  logo)  and for the word mark and  design  "Intercard".  The
Company's policy is to strenuously police the use of its marks and to oppose any
infringement.

Employees

As  of  October  15,  2000,  the  Company  employed  approximately  90  persons.
Additionally the  approximately 72 independent ITEX brokers employ support staff
estimated to total approximately 300 additional persons. The independent brokers
and their employees are not employees of the Company.

Executive Officers of the Registrant

The directors  and executive  officers of the Company as of October 15, 2000 are
as follows:

         NAME                  AGE            POSITION
---------------------------  -------        ------------------------------------
Dr. Evan B. Ames               60             Director
John Castoro                                  Vice President, Corporate Offices
Collins M. Christensen         42             President, Chief Executive
                                               Officer, Director
Robert I. Harris               53             Secretary and General Counsel
Lewis A. Humer, Jr.            40             Chief Operating Officer and
                                               Director
Robert Nelson                  52             Director
Dr. Charles T. Padbury         61             Director
Mary Scherr                    62             Director

Collins M. Christensen, President, CEO and Director, Director since 1999.

     Mr. Christensen, who was appointed President and Chief Executive Officer of
the Company on May 21, 1999. Prior to becoming President of the Company,  he had
been the owner of a cellular telephone company and a limousine service.  In 1995
he became an independent licensed broker for the Company and formed and operated
an office in Sacramento,  California. That office was acquired by the Company in
May  1999.  (See Item 1,  Business,  General,  Purchase  of  Independent  Broker
Offices.

Evan B. Ames, Director since 1995.
     Dr. Ames is a Registered  Investment Adviser registered with the Securities
& Exchange Commission.

John Castoro,  Vice President, Corporate Offices since ________.
     Prior to coming to work as Vice President of Corporate Offices, Mr. Castoro
worked as a Vice President of Barter Advantage,  one of the leading  independent
exchanges in the United States,  located in New York. There, he managed both for
sales  and  trading.  Prior to that Mr.  Castoro  was a trade  director  for the
Company for three years.

Robert I. Harris, Esq., Secretary and General Counsel since May 1, 2000.
     Mr.  Harris joined the Company on May 1, 2000 as General  Counsel.  In July
2000, he became secretary of the corporation.  Prior to joining the Company, Mr.
Harris was in private practice in Sacramento for 20 years.

Lewis A. Humer, Jr., age 40, Chief Operating  Officer.
     Mr.  Humer joined the Company in March 1999 as Director of Training and was
named Vice  President of Operations  in June 1999.  Prior to joining the Company
Mr. Humer was a Vice  President of Operations  and was an Operations  Manager of
two manufacturing  companies.  In 2000 he was named Vice President of Operations
and Chief Operating Officer.

Robert Nelson, CPA, age 52, Director since 1995.
     Mr.  Nelson  is a  Certified  Public  Accountant  in  private  practice  in
Portland,  Oregon specializing in tax accounting. He is a member of the American
Institute of CPAs and the Oregon Society of CPAs.

Charles T. Padbury, age 61, Director since 1992.
     Dr.  Padbury is a  Beaverton,  Oregon  dentist and has been a member of the
ITEX  Retail  Trade  Exchange  since 1985.  During  1996 and again in 1999,  Dr.
Padbury served briefly as Chairman of the Board of Directors. In March 1999, Dr.
Padbury served as acting CEO until the  appointment  of Mr.  Christensen to that
office in May 1999.

Mary Scherr, CTB, age 62, Director since 1986.
     Ms. Scherr served as Vice President of Broker Development and Director from
1993 to midyear  2000,  and which time she ceased being an employee and officer,
while remaining a Director. She had been appointed Senior Vice President in 1999
and so served until midyear 2000.

As of August 1, 1996,  Outside Directors (i.e.,  Directors who are not employees
of the Company) have  received  $500 per Board meeting  attended in person or by
telephone  and members of Board  committees  have  received  $250 per  committee
meeting  attended.  In addition,  all Directors  serving on January 1, 1997 were
issued 1,000 shares of the  Company's  restricted  common stock and received the
option to acquire a minimum of 2,500 additional  shares pursuant to an Employees
Incentive  Stock Option Plan with the exercise price being the closing bid price
of the stock on the trading day before the grant is made.

In September 1997 the Board approved  payment to Directors of the sum of $20,000
annually,  payable monthly in advance, and issuance on January 2 of each year in
which a  Director  is serving as such of 2,500  shares of the  Company's  common
stock and grant of the option to acquire up to 10,000 additional shares with the
exercise price being set as described above. In addition,  attendance of Outside
Directors at committee  meeting is  compensated  at the rate of $750 per meeting
with the chair of the committee receiving $1,000 per committee meeting.

No funds  have been set aside or accrued  by the  Company  to  provide  pension,
retirement or similar benefits for Directors or Executive  Officers,  other than
those who are covered by the Company's 401(K) plan as employees of the Company.

Business Risks

Characteristics  and dynamics of the  Company's  business and markets in general
create risks to the Company's  long-term  success and to  predictable  financial
results. These risks include:

o Operating losses and negative cash flow of primary business.

Operating  losses and negative  cash flow have been incurred in each of the last
five  fiscal  years ended July 31,  2000.  Such  losses and  negative  cash flow
resulted in part from increased staffing,  marketing and administrative expenses
while  revenues  remained  relatively  flat and in part by  previous  management
focusing on new business  ventures which required  substantial cash investments.
These non-core businesses have been discontinued. There can be no assurance that
the Company will be able to achieve  long-term  profitability  or positive  cash
flow.

o Ability to shift more revenue from trade dollars to cash.

A primary strategy of the Company is to increase  revenues by strengthening  and
expanding  its network of  independent  brokers and to provide more and improved
services to clients  and  brokers.  In the  interim the Company may  emphasize a
higher percentage of membership and transaction fees be collected in cash rather
than in trade dollars. Such a change was instituted in November 1999.

o Ability to obtain financing.

In November  1998 the Company  incurred  debt with a face amount of  $1,625,000,
bearing interest at 4%, from which the Company realized approximately $1,100,000
after a 20%  discount  from the face value and fees paid to brokers  and related
expenses.

In July 1999 the Company  retired  $312,500 of the above notes at the discounted
amount of $250,000 and in January 2000 retired an additional  $62,500 by payment
of  $50,000.  In April 2000,  the Company  retired the balance of these notes of
$1,250,000 by converting $675,000 plus accrued interest into 1,133,659 shares of
common stock and payment of $575,000 plus accrued interest in cash.

In May 1999 the Company  entered  into an  agreement  with its  commercial  bank
relative to a line of credit for $250,000,  which was at that time in default. A
new  agreement  provided that $50,000 would be repaid each month for five months
beginning June 15, 1999.  The Company has made all five  payments,  resulting in
the bank note being fully repaid in October  1999.  As of the date  hereof,  the
Company does not have a line of credit with any bank.

In July 1999 at a time when the Company was in need of cash for operations,  the
Company raised $480,000 from convertible  loans from an individual,  who at that
time was Chairman of the Company's  Board of Directors  and another  individual,
the President,  CEO and Director of the Company in a private transaction.  Those
loans bore interest rates of 10% per annum and were subsequently paid in full in
January 2000.

To finance  future  expansion of the  Company's  core  business of operating its
retail  trade  exchange  and to retire the notes  described  above,  the Company
concluded  it  should  sell the net  assets  and  business  of its  wholly-owned
subsidiary,  BXI Corporation.  This business was acquired by the Company on June
25, 1998 and was sold on January 18, 2000. See, Item 7, Management's  Discussion
and  Analysis.  There is no  assurance  that the Company will be  successful  in
raising additional capital, if required, or in achieving profitability.

o Investigation by the Securities and Exchange Commission.

The  Company  was the  subject of an  investigation  by this  agency of the U.S.
Government  for over three years.  On September 27, 1999,  the SEC filed a civil
Complaint in the United States  District Court for the District of Oregon naming
the Company and former officers and/or directors of the Company,  Terry L. Neal,
Michael T. Baer, Graham H. Norris,  Cynthia  Pfaltzgraff and Joseph M. Morris as
defendants and alleging securities fraud and other securities law violations. In
January 2000, the Company  reached a settlement  with the SEC for disposition of
that  litigation.  Without  admitting  or denying the  allegations  of the SEC's
Complaint,  the Company  consented  to entry of a final  judgment  of  permanent
injunction. See, Item 3, Legal Proceedings.

o Delisting of stock from the Nasdaq Small Cap market.

Because  the  Company  did not  file  reports  to the  Securities  and  Exchange
Commission  in a timely  manner and citing public  interest  concerns,  the NASD
delisted  the  Company's  common stock from the Nasdaq Small Cap stock market in
December  1998.  When  eligible  under the rules of the  Small-Cap  Market,  the
Company  will apply for  re-listing.  However,  there is no  assurance  that the
Company  will  be able to be  re-listed  and  management  anticipates  that  the
re-listing will, in any event,  take several months to complete once the Company
is eligible.  This  situation  makes it more difficult for the Company to obtain
financing.

o Ability  to recruit  brokers  and  clients  in  markets  now served and in new
  markets and to develop marketing programs.

The  success  of the  Company  depends on its  ability to expand its  network of
independent  brokers  and the  number of clients  they serve and to improve  the
operating  and marketing  programs it furnishes to brokers.  The Company will be
dependent  on the ability of its broker  network to expand the number of clients
and the volume of  transactions  through  the trade  exchange.  Competition  for
qualified  employees  and  brokers  is intense  and their  ability to enroll new
client  members is unknown,  thus there is no assurance that the Company will be
successful in achieving these plans.

o Ability to upgrade and improve computer software and internet-based systems to
  clients and independent brokers.

The Company's computer systems are important for providing accounting service to
clients and brokers and  communicating  the  availability  of goods and services
offered for trade.  To be  successful  in the future the Company  believes it is
important  that its  computer  and  Internet  systems  reflect  improvements  in
computer and communications  technology.  There is no assurance that the Company
will be successful in upgrading its computer systems and Internet applications.

ITEM 2.   DESCRIPTION OF PROPERTIES

In  February  2000,  the Company  purchased  an office  building in  Sacramento,
California and the Company moved its corporate  headquarters to that location in
June 2000. The consideration  paid consisted of: (a) $200,000 cash, a promissory
note for $300,000  with  interest at 10%,  with monthly  interest  payments only
until  August 29, 2001 at which time the entire  principle  is due,  (c) 333,333
shares of common stock of the Company that will be increased, if necessary, at a
future  date to enable  the seller to  realize  $1,500,000  from the sale of the
stock, and (d) 200,000 ITEX Trade Dollars. The Company has recorded the building
at the total of the cash paid, the  promissory  note, and the value of the stock
of $1,500,500 to be provided,  altogether totaling  $2,000,000.  The arrangement
provides that if the seller is unable to sell the stock, the Company may satisfy
this  obligation  by paying cash. In the event that the stock cannot be sold and
the Company does not pay cash,  the seller may  foreclose on the  building.  The
Company has recorded the arrangement  with respect to the stock as "common stock
subject to a put" in the balance sheet,  which is not included in  stockholders'
equity.

As of October 15, 2000, the Company had leased facilities as follows:
<TABLE>
<CAPTION>

        Location                  Lease Expiration             Square Feet           Annual Rent
   ----------------------        -------------------           ------------      --------------------
   <S>                           <C>                           <C>               <C>

   Portland, Oregon (1)           December 31, 2001            10,900             $ 209,900
   Seattle, Washington            June 30, 2000                   850             $  26,400(4)
   Costa Mesa, California         December 31, 2000             1,500             $  20,000

   St. Louis, Missouri            March 31, 2002                2,500             $  21,100
   Houston, Texas                 Month to Month                3,200                29,160
                                                                                                                 Trade dollars
   New York, New York             November 30, 2004             1,800             $  31,500
</TABLE>

(1)   Includes  1,300  square feet of office space sublet to a third party at an
      annual rent of $26,500.


ITEM 3.   LEGAL PROCEEDINGS

o SEC Inquiry

During June 1996, the Company  announced in a press release that the Company was
the subject of an informal inquiry from the Securities and Exchange  Commission.
Subsequently,  the Company  received  subpoenas  for the  production  of certain
documents  pursuant to a formal order of private  investigation.  In  connection
with that investigation,  the SEC took the deposition of several individuals. On
September  27,  1999,  the SEC  filed a civil  Complaint  in the  United  States
District Court for the District of Oregon naming the Company and former officers
and/or  directors  of the  Company,  Terry L. Neal,  Michael T. Baer,  Graham H.
Norris,  Cynthia  Pfaltzgraff  and Joseph M. Morris,  as defendants and alleging
securities  fraud and other  securities law  violations.  In January,  2000, the
Company  entered into a Consent and  Undertaking  with the SEC wherein,  without
admitting or denying the allegations of the Complaint,  the Company consented to
entry of a Final Judgment of Permanent Injunction which, among other things, (i)
permanently  restrains  and enjoins the Company  from  violating  Sections 5 and
17(a) of the Securities Act of 1933 and Sections 10(b),  13(a),  13(b)(2)(A) and
13(b)(2)(B)  of the  Securities  Exchange  Act of 1934 and Rules  10b-5,  13a-1,
13a-13 and  12b-20  thereunder,  and (ii)  orders  the  Company  to restate  its
financial statements for the fiscal year ended July 31, 1997. The Final Judgment
based upon the Consent was entered by the Court on February 3, 2000. The Company
was given 90 days from that date to file its  amended  Form 10K for fiscal  1997
and its Form 10K's for 1998 and 1999. The Company complied with this requirement
on May 3, 2000.

o Sondra Ames Litigation.

In October 1998, the Company was served with summons and complaint for an action
in the Superior  Court of Orange County,  California  styled Sondra Ames v. ITEX
Corporation,  Graham H. Norris and John Does I through X. The complaint  alleged
(i) fraud in the acquisition by ITEX of plaintiff's trade exchange in 1996; (ii)
violation of Rule 10b-5 of the Securities and Exchange Act of 1934 in connection
with plaintiff's purchase of ITEX stock on the open market in 1996; (iii) breach
of written and oral  contracts,  (iv) sex  discrimination  and  harassment;  (v)
discrimination based on religion; (vi) retaliation and tortuous discharge; (vii)
defamation;  and (viii) violation of various  provisions of the California labor
code.  Plaintiff  asked for $5,000,000  actual damages and for punitive  damages
along with other statutory  relief.  The case was subsequently  moved to Federal
Court.

Plaintiff  was a  former  employee  and  former  officer  of the  Company  whose
employment  agreement  expired in April 1998. The parties settled the matter for
an  undisclosed  amount,  which is  confidential  by the terms of the settlement
agreement,  in January 2000 without any  admission of liability and the case has
been dismissed in its entirety.  The amount for which the matter was settled was
not significant to the Company's financial position.

o Martin Kagan Litigation.

During July 1998, the Company was served with a summons and complaint for a case
in Circuit  Court of  Multnomah  County,  Oregon,  styled  Martin  Kagan v. ITEX
Corporation.  The complaint  alleges breach of a stock option agreement  between
the Company and Kagan and seeks to set aside a settlement  agreement between the
parties dated January 14, 1997. The Company  answered the complaint  denying its
material  allegations.   Subsequently,  the  plaintiff  filed  a  first  amended
complaint  adding  Graham H. Norris,  the Company's  former  President and Chief
Executive Officer, as an additional party and modifying somewhat the allegations
of the original complaint.  The Company and Mr. Norris have answered the amended
complaint and denied all  allegations.  The Company has vigorously  defended the
action.  Trial before a court appointed referee was held on November 4, 8 and 9,
1999. On April 12,2000,  the referee issued a decision dismissing all of Kagan's
claims  except his claim for  unlawful  sale and  purchase  of  securities.  The
referee awarded Kagan $400,000 plus interest from July 14, 1998, plus reasonable
attorneys'  fees. To be effective,  the referee's  decision must be confirmed by
the Multnamah  County  Circuit Court  Judgment has been entered and a bond filed
for  $550,000.  The company has bonded the  judgment  that has been  entered and
guaranteed the bond with a certificate of deposit for $550,000.  The company has
appealed and has been advised by its counsel that it has a reasonable chance for
success in overturning the decision.

o IBTEX, A.G. Litigation.

During September 1998, the Company was served with a summons and complaint for a
case in the Circuit Court of Multnomah  County,  Oregon,  styled IBTEX,  A.G. v.
ITEX  Corporation,  Donovan Snyder and Graham Norris,  Sr. The complaint alleges
breach of contract, breach of duty of good faith and fair dealing and violations
of the Oregon Franchise Act.

The  defendants  have answered the complaint  denying its material  allegations,
demanding that the disputes between IBTEX and the Company be arbitrated pursuant
to an arbitration agreement between the parties and requiring that the action be
stayed until such time as the  arbitration is complete.  The proceeding has been
abated and no  arbitration  has been set and the case has been  dormant for many
months.

o Wade Cook Financial Corporation Litigation.

During February 1998, an action was filed in Washington (Seattle) State Court by
Associated  Reciprocal  Traders,  Ltd., ("ART") an ITEX wholly owned subsidiary,
based on Wade Cook Financial  Corporation's ("WCFC") refusal to permit transfer,
without  restricted  legend, of WCFC stock issued to ART in exchange for a media
due bill. ART filed a Motion for Replevin and Preliminary  Injunction requesting
delivery  and  transfer  of the  certificates  of WCFC  stock to ART based  upon
compliance by ART with the  requirements  of Rule 144 of the  Securities  Act of
1933. After two separate hearings,  on October 2, 1998, the Court ruled that the
requirements of Rule 144 had been met, but that issues raised by WCFC concerning
the radio spots, pursuant to the due bill, required a trial of the merits of the
action.  During August 1999, the matter was settled. WCFC has agreed that ART is
the owner of 1,400,000  shares of WCFC  unrestricted  stock which may be sold by
ITEX at no more than 100,000 shares a month,  at current market prices,  subject
to a ight of first refusal by WCFC. The  settlement  agreement also provided for
the  transfer  of 300,000  ITEX trade  dollars to WCFC,  which the  Company  has
completed. As of April 28, 2000, the Company had realized approximately $176,000
from the sale of approximately 451,000 shares of its Wade Cook common stock.

o "John Doe" Litigation.

In July 1998,  the Company filed an action in Multnomah  County,  Oregon,  State
Court against 100 John Doe defendants,  that is,  individuals  whose  identities
were, at the time of filing,  unknown to the Company.  The Complaint  arose from
certain   anonymous   postings  on  the  Internet  which  the  Company  believed
constituted intentional  interference with the Company's economic relationships,
unfair trade practices,  civil conspiracy and, with respect to then President of
the Company Graham H. Norris,  defamation. The Complaint sought monetary damages
and injunctive relief. After filing the Complaint, the Company subpoened certain
Internet  Service  Providers to  determine  the true  identity of the  anonymous
posters.   Various  amendments  to  the  Complaint  were  filed  naming  certain
defendants  until the Company's Fifth Amended  Complaint was filed naming Leslie
L.  French and adding a claim for breach of a  settlement  agreement  previously
entered  into  between  Mr.  French  and the  Company in  connection  with other
litigation  in 1997.  Mr.  French  has  answered  the  Fifth  Amended  Complaint
essentially  denying  all of the  allegations  of the  Complaint  and  asserting
counterclaims  against  the  Company  for (1)  breach of  contract  related to a
Settlement Agreement previously entered into between French and the Company; (2)
fraud in the  inducement  in  connection  with  the  Settlement  Agreement;  (3)
securities  fraud;  and (4) unlawful  trade  practices.  The Company  denied the
allegations  of the  counterclaims.  In April 2000 the  parties  agreed upon and
executed a  settlement  of the matter,  which  resulted in the  dismissal of the
entire action.  The amount for which the matter was settled was not  significant
to the Company's financial position.

o Desert Rose Foods Litigation.

On April 28, 2000, ITEX Corporation was served with summons and complaint for an
action in the Circuit Court of Fairfax County, Virginia style Desert Rose Foods,
Inc. v. ITEX  Corporation  and ITEX USA,  Inc. The complaint  alleges  Breach of
Contract,  Fraud,  and  violations of federal law.  Plaintiff  asks for $750,000
compensatory damages,  punitive damages,  other statutory damages,  interest and
attorneys fees.  Plaintiff entered into a contract with the Company for delivery
of goods  valued at  approximately  $120,000.  The  Company has  retained  local
counsel in this case.  and is  vigorously  defending  the  matter.  The  Company
believes  Plaintiff's  complaint  is  frivolous.  The Company  has  successfully
defended  similar  actions.   The  Company  does  not  believe  this  action  is
significant to the Company's financial position.  The matter is set for trial in
April 2001.

o Antelope Company v. Zoring.

The  Company was served with a summons  and  complaint  on June 1, 2000,  in the
matter  of  Antelope  Company  v.  Zoring  International  Incorporated  and ITEX
Corporation,  filed in the  District  Court of the City and  County  of  Denver,
olorado. The complaint alleges that in December 1997, the plaintiff entered into
a lease with Zoring of certain office space in Denver,  Colorado,  and that ITEX
guaranteed  the lease.  Zoring is alleged to have defaulted on the lease and the
plaintiff is seeking to enforce the lease guaranty.  The Company agrees that the
lease was  breached,  but  contends  that the  plaintiff  failed to mitigate its
damages.  The Company  intends to defend the action and has set up a reserve for
loss in the event that the  plaintiff  is  successful.  The matter is  presently
pending the assignment of a trial date and the completion of discovery.

o Metro Sales v ITEX.

On May 28, 2000,  the Company was served with a summons and complaint out of the
Circuit Court of Multnomah County, Oregon, in the matter of Metro Sales v. ITEX.
The  complaint  alleges  breach of contract and  violation of an Oregon Blue Sky
statute. The Company denies all the allegations and intends to vigorously defend
this action.

o Skiers Edge Litigation.

On June 19, 2000, the Company was served with a summons and complaint out of the
District  Court for  Summit  County,  Colorado,  in the  matter  of Skiers  Edge
Condominium  Association v. George Owens. The complaint alleges that the Company
owes plaintiff association fees relating to interval timeshares that the Company
is alleged to own. The Company is defending this matter and does not foresee any
material impact from this matter.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


                                     PART II

ITEM 5. MARKET PRICE OF AND  DIVIDENDS  ON THE  REGISTRANT'S  COMMON  EQUITY AND
RELATED STOCKHOLDER MATTERS

Public  trading of the  Company's  stock was  initiated  on June 11,  1992.  The
Registrant's  common stock currently trades in the United States on the National
Quotation Bureau "Pink Sheets" under the symbol "ITEX".  The stock was de-listed
by the NASD from the Nasdaq  Small Cap stock  market on December 22, 1998 due to
the  Company's  inability to file its Form 10-K on a timely basis and for public
policy  concerns.  The Company  intends to file for re-listing  when it achieves
current  status  with its  Securities  and  Exchange  Commission  filings and is
otherwise eligible to do so. (See Item 1, Business Risks)

Previously,  the  Registrant's  common  stock traded  "over-the  counter" in the
United  States via the NASD  Bulletin  Board and on the NASD  Small Cap  market,
under the symbols "ITXE" and "ITEX", respectively.

The following  are the Company's  common stock high and low closing sales prices
for fiscal years 2000 and 1999:
                                                   Sale Prices
                                             ------------------------
                                                High          Low
                                             ---------    ------------
      Fiscal 2000
-------------------------------
Fiscal quarters ended:
   July 31, 2000                                $0.60          $0.42
   May 7, 2000                                   1,78           0.35
   February 12, 2000                             0.72           0.22
   November 20, 1999                             0.40           0.22

     Fiscal 1999
------------------------------
Fiscal quarters ended:
   July 31, 1999                                $ .88          $ .63
   May 7, 1999                                   1.00            .75
   February 12, 1999                             1.00            .63
   November 20, 1998                             2.00           1.81

As of July 31,  2000 there  were  approximately  4,000  holders of record of the
Company's common stock.

The Company has not  declared  any  dividends  since its  inception.  Management
anticipates  that any future  profits  will be  retained  to  finance  corporate
growth.




ITEM 6.    SELECTED CONSOLIDATED DATA

The following table sets forth a summary of selected consolidated financial data
for the Company as of the dates and for the periods  indicated.  The data should
be read in conjunction with the Consolidated  Financial Statements and the Notes
thereto and  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations."
<TABLE>
<CAPTION>

                                                            For the fiscal years ended July 31,
                                         -------------------------------------------------------------------
                                            2000          1999           1998         1997          1996
                                         ------------   ----------    ----------    ----------   -----------
                                                            (in thousands, except per share data)
<S>                                      <C>            <C>           <C>           <C>          <C>

Total revenue ...............               $13,642      $ 19,173     $ 11,389      $ 11,602     $ 13,526

Loss from operations ........                  (973)       (9,649)      (6,357)       (2,212)        (757)

Net income (loss) .............               1,455       (10,023)      (4,777)       (1,894)      (2,402)

Net income (loss)
loss per common share
  Basic  ....................                  0.11         (0.87)       (0.61)        (0.27)       (0.37)
  Diluted ....................                 0.09         (0.87)       (0.61)        (0.27)       (0.37)

Total assets ................                 8,533         6,629       12,956         8,144        7,466

Working capital (deficit) ...                 1,610        (4,672)        (687)        2,050        1,363

Long-term debt and capital
 lease obligations, including
 current portion ............                   571         1,398          359           164          330

Stockholders' equity
 (deficiency) ...............                 3,630           174        9,211         6,922        6,055
</TABLE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (in thousands, except per share amounts)

Overview

ITEX Corporation and subsidiaries  ("ITEX" or the "Company") was incorporated in
October  1985 in the  State of  Nevada.  The  Company  operates  a retail  trade
exchange and acts as third-party  recordkeeper for transactions  between members
of the exchanges.  The Company charges association fees for each of 13 four-week
accounting  cycles each year, as well as commissions on transactions.  ITEX also
receives  fees  paid in ITEX  trade  dollars,  which the  Company  uses to pay a
portion of its own operating  expenses and to provide  merchandise  for sale for
trade dollars to trade exchange members.

The BXI trade  exchange was  acquired by the Company on June 25,  1998.  The BXI
trade  exchange  operations  are included in the  financial  statements  for the
period of June 25, 1998 to July 31, 1999. On January 18, 2000 the net assets and
business of BXI Corporation were sold to TAHO Enterprises, Inc., a Massachusetts
corporation, for $4,000 cash.

Additionally,  in recent  years the  Company  has  engaged in the  operation  of
several new businesses  outside its core business of operating trade  exchanges.
These new businesses  have not been  profitable and commencing in March 1999 the
Company began the process of discontinuing these businesses and, where possible,
liquidating them. A significant  amount of the original  investments will not be
recovered.  It is the intent of the Company not to engage in business activities
or ventures that are not related to the Company's core business of operating the
ITEX Retail Trade Exchange.

Although  the  Company has  incurred  operating  losses from its trade  exchange
operations  for the  fiscal  years  ended  July 31,  2000,  1999 and  1998,  the
operating  loss for  fiscal  2000 was  greatly  reduced  from those of the prior
years.  The prior  year  losses  were  increased  by costs  associated  with the
discontinued operations discussed above and costs and expenses of regulatory and
litigation  matters  connected  with disputes  about the  acquisition of the BXI
trade exchange, an SEC investigation, and other legal and regulatory matters.

Results of Operations

The following table sets forth, for the periods indicated, selected consolidated
financial  information  of  the  Company,  with  amounts  also  expressed  as  a
percentage of net revenues:
<TABLE>
<CAPTION>
                                       Fiscal Years Ended July 31,
                                       ---------------------------
                                2000               1999                1998
                                ----               ----                ----
                          Amount   Pct*      Amount    Pct*   Amount     Pct*
                          ------   ----     -------    ----   ------     ----
<S>                       <C>      <C>      <C>        <C>    <C>        <C>
Revenue:
 Trade exchange:
  Association   fees           $ 4,074    30%     $ 4,998    26%    $ 2,825    25%
  Transaction  fees              9,568    70%      13,875    72%      6,690    59%
  License fees                     --     --          300     2%        150     1%
                               -------   -----    -------   ------  -------  ------
                                13,642   100%      19,173   100%      9,665    85%
                               -------   -----    -------   ------  -------  ------
                                13,642   100%      19,173   100%     11,389   100%
                               -------   -----    -------   ------  -------  ------
Costs and expenses:
 Trade exchange                  7,075    52%      12,953    68%      6,519    57%
 Corporate trading                 --     --         --      --       1,589    14%
 Selling, general and
   administrative                7,211    53%       7,277    38%      5,587    49%
 Discontinued operations            49    --        2,318    12%      1,693    15%
 Regulatory and litigation         569     4%       1,770     9%      1,584    14%
 Writedowns (BXI and Samana)       --     --        2,508    13%        --     --
 Change in estimate for loss
    on disposal of BXI            (785)   (6%)       --      --         --     --
Depreciation and amortization      496     3%       1,996    10%        774     7%
                               -------   -----    -------   ------  -------  ------
                                14,615   107%      28,822   150%     17,746   156%
                               -------   -----    -------   ------  -------  ------
Loss from operations              (973)   (7%)     (9,649)  (50%)    (6,357)  (56%)
Other income (expense)             543     4%        (369)   (2%)     3,417    30%
                               -------   -----    -------   ------  -------  ------
Loss before taxes                 (430)   (3%)    (10,018)  (52%)    (2,940)  (26%)
Tax provision (credit)          (1,885)  (14%)          5    --       1,837   (16%)
                               -------   -----    -------   ------  -------  ------
Net income (loss)               $1,455    11%    ($10,023)  (52%)  $ (4,777)  (42%)
                               =======   =====    =======   ======  =======  ======
* Percent of Total Revenue

</TABLE>









The following table sets forth selected  consolidated  financial  information of
the Company on a pro forma basis,  excluding revenue, costs and expenses related
to BXI  Corporation,  whose net assets and business  were sold by the Company on
January 18, 2000, with amounts also expressed as a percentage of net revenues:
<TABLE>
<CAPTION>


                                                  Fiscal Years Ended July 31,
                                                       2000          1999
                                                       ----          ----
                                                 Amount   Pct*    Amount    Pct*
                                                 ------   ----    ------    ----
<S>                                              <C>      <C>     <C>       <C>
Revenue:
 Trade exchange:
  Association   fees                            $ 3,384     30%  $ 2,680     25%
  Transaction  fees                               6,917     70%    7,911     72%
  License fees                                     --       --       300      3%
                                                -------    ----- -------   -----
                                                 10,301    100%   10,891    100%
 Corporate trading                                 --       --       --      --
                                                -------    ----- -------   -----
                                                 10,301    100%   10,891    100%
                                                -------    ----- -------   -----
Costs and expenses:
 Trade exchange                                   4,454     43%    6,729     62%
 Selling, general and
   administrative                                 5,365     52%    5,387     49%
 Discontinued operations                             49     --     2,318     21%
 Regulatory and litigation                          609      6%    1,770     17%
 Writedowns (BXI and Samana)                       --       --     2,508     23%
Depreciation and amortization                       496      4%      564      5%
                                                -------    ----- -------   -----
                                                 10,973    106%   19,276    177%
                                                -------    ----- -------   -----
Loss from operations                               (627)    (6%)  (8,385)   (77%)
Other income (expense)                              543      6%     (437)    (4%)
                                                -------    ----- -------   -----
Loss before taxes                                (1,215)   (12%)  (8,822)   (81%)
Tax provision (credit)                           (1,885)   (18%)       5     --
                                                -------    ----- -------   -----
Net income (loss)                                $  670      6%  ($8,827)   (81%)
                                                =======    ===== =======   =====
* Percent of Total Revenue
</TABLE>

Trade exchange revenue and costs

Total trade exchange revenue  increased  $9,508,  or 98%, from $9,665 in 1998 to
$19,173 in 1999.  Total trade  exchange  revenue  included  revenue from the BXI
trade  exchange  of $569  in  1998  (from  one  month  of  operation  after  the
acquisition of BXI on June 25, 1998) and $8,588 from a full year of operation of
BXI in 1999.  In May  1999,  the  Company  decided  to sell the net  assets  and
business of BXI Corporation, which sale was completed in January 2000.

Total trade exchange revenue  decreased  $5,531, or 29%, from $19,173 in 1999 to
$13,642 in 2000.  Total trade  exchange  revenue  included  revenue from the BXI
trade exchange of $8,588 in 1999 from the full-year  operation of BXI and $3,341
in 2000 from  operation  of BXI from  August 1, 1999 until the  disposal  of the
business and net assets of BXI Corporation on January 18, 2000.

Following are the components of association fees and transaction fees applicable
to the ITEX trade exchange, which are included in the above consolidated totals:

                                       2000      1999        1998
                                     --------   -------     ------

 Association fees                    $  3,384    $2,680     $2,632
 Transaction fees                       6,917     7,911      6,314
                                     --------    ------     ------
   Total                               10,301    10,591      8,946
                                     ========    ======     ======

The average  number of members of the ITEX trade  exchange  during  fiscal 1999,
1998 and 1997 and the average trade exchange revenue per member were as follows:

                                       2000      1999        1998
                                     --------   -------     ------

 Average number of members            13,927     13,746     13,495
 Average annual revenue per member      $740       $770       $663

Total costs of trade  exchange  revenue as a percentage of total trade  exchange
revenue were 52%, 68%, and 67% in fiscal 2000, 1999 and 1998, respectively.  The
increase  from 1998 to 1999  resulted  primarily  from the inclusion of the full
year of operation in 1999 of the BXI trade  exchange  (which has a higher broker
commission  structure  that the ITEX trade  exchange.  The decrease from 1999 to
2000 resulted from  operation of the BXI trade  exchange for only part of fiscal
2000 up to January 18, 2000 and also from lower independent  broker  commissions
in the  ITEX  trade  exchange  resulting  from  the  Company's  acquisition  and
operation of the formerly  independent  brokerages in Sacramento,  Seattle,  and
Houston.

Corporate trading revenue and costs

Corporate trading revenue relates to transactions in which the Company has acted
as a principal  in the  purchase  and sale of goods.  These  transactions  often
involve a mixture  of cash and trade  credits.  Only the cash  portions  of such
transactions are included in the consolidated  financial  statements as there is
no persuasive evidence that the fair market value of the goods exchanged exceeds
the  monetary   consideration  received  for  these  goods.  Profit  margins  on
individual corporate trading transactions vary widely.

Management has not  emphasized  the corporate and  industrial  trading market in
recent years, nor will it be in the future,  other than those  transactions that
will benefit the retail trade exchanges.  As a result,  no revenue or costs were
incurred in fiscal 1999 and 2000.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased $66 from 1999 to 2000. A
decrease of $1,024  resulted from the operation of the BXI trade  exchange for a
full year in 1999 as  compared  to only part of fiscal  2000 up to  January  18,
2000.  In  2000,  the  consolidated   total  included  $768  and  in  1999,  the
consolidated total includes $1,792 in selling general and  administrative  costs
related to  operation of the BXI trade  exchange.  This  decrease was  primarily
offset by costs of Company  owned and  operated  brokerages  that were  acquired
during fiscal 2000.  The decrease was further  offset by an increase in salaries
of approximately $___________. This increase is due to an increase in the number
of employees  as well as a new officer  bonus plan  implemented  in fiscal 2000.
During fiscal 2000, there was $339 in expenses related to this plan.

Selling, general and administrative expenses increased $1,690 from 1998 to 1999.
An increase of $1,605  resulted from the operation of the BXI trade exchange for
a full  year in 1999 as  compared  to only  one  month in  1998.  In  1998,  the
consolidated  total included $187 and in 1999, the  consolidated  total includes
$1,792 in selling general and  administrative  costs related to operation of the
BXI trade exchange.

Costs and expenses of discontinued operations

During 1999 and 1998,  the  Company  incurred  costs and  expenses of $2,318 and
$1,693, respectively, in connection with activities that have been discontinued.
Following  is a summary of the costs and  expenses  charged in the  statement of
operations in fiscal 1999:

o Start-up expenses of $542 relating to Zoring International,  Inc. ("Zoring") a
  51%-owned  subsidiary.  The Company is no longer  funding this operation which
  represented the  Company  and  other  U.S.   franchisers   seeking  to  expand
  internationally.

o Start-up  expenses of $375  relating  to a national  sales  organization.  The
  national sales organization was discontinued approximately  eight months after
  start-up. Expenses consisted primarily of salaries and related costs.

o Writeoffs totaling $567 of foreign licensing rights, capitalized software, and
  other costs related  to  a  program  of  international  expansion,  which  was
  discontinued in March 1999 by new management of the Company.  In this respect,
  the Company also  wrote  off an  investment  of $233 in  IBNET (a  program  of
  expansion through worldwide chambers of commerce), which had been made in
  early fiscal 1999.

o Writeoff of $200 of an investment in GlobalTel,  a telecommunications  company
  that had been pursuing an initial public offering, upon determination in March
  1999 that the investee was no longer financially viable.

o Writedown of $119 of the Company's interest in mining claims to estimated net
  realizable value of $50.

o General and  administrative  and other expenses of $282 incurred in connection
  with the above operations are included in costs and  expenses of  discontinued
  operations.





Following  is a summary of the costs and  expenses  charged in the  statement of
operations in fiscal 1998:

o A $500 investment in Avenir Internet Solutions, Inc., an Internet commerce
  company based in Waterloo, Ontario, Canada.

o Start-up expenses of $351 relating to Zoring International,  Inc. ("Zoring") a
  51% owned  subsidiary.  The Company is no longer  funding this operation which
  represented   the  Company  and  other  U.S.   franchisers   seeking to expand
  internationally.

o Start-up  expenses of $500  relating  to a national  sales  organization.  The
  national sales  organization was discontinued approximately eight months after
  start-up. Expenses consisted primarily of salaries and related costs.

o General and  administrative  and other expenses of $342 incurred in connection
  with the above  operations  are included in costs and expenses of discontinued
  operations.

Costs and expenses of regulatory and litigation matters.

For the past four years,  the Company has was subject to an investigation by the
Securities  and Exchange  Commission  including  the  Company's  accounting  for
trading  transactions.  See Item 3. Legal  Proceedings  for a discussion  of the
settlement  of these matters  between the Company and the SEC. In addition,  the
Company has been involved in various  litigation matters as discussed in Item 3.
Legal  Proceedings.  Costs and expenses of  regulatory  and  litigation  matters
consists of costs of settlement and legal and other  professional  costs related
to these matters.

Change in estimate for loss on disposal of BXI.

Upon  completion of the sale of the net assets and business of BXI  Corporation,
the  Company  determined  that the  actual  loss on  disposal  was  $1,515  and,
accordingly, in 2000, the Company recorded a change in estimate to eliminate the
remaining  balance  in the  reserve  of $485,  which is  shown  separately  as a
reduction of costs and expenses in the statement of operations. The Company also
reversed an additional  liability of $100 that was no longer necessary after the
disposal of BXI, increasing the gain on change in estimate to $585.

Depreciation and amortization.

Depreciation  and  amortization  decreased  to $496 in 2000 from  $1,996 in 1999
primarily as a result of depreciation  and  amortization in 1999 related to BXI.
The net assets and business of BXI  Corporation  were disposed of on January 18,
2000.  Depreciation and amortization for 2000 includes $192 related to the newly
purchased  assets  of  the  Sacramento  headquarters  office  building  and  the
independent  brokerages in Sacramento,  Houston, and Seattle. Total depreciation
and  amortization  was also decreased in 2000 by certain customer lists becoming
fully amortized.

Other income (expense).

Interest  (expense)  was ($271) in 2000 as compared to ($302) in 1999. In fiscal
2000, the Company  accrued  interest income of $331 related to income tax refund
receivable. In 2000, the Company realized gains on sales of portions of its Wade
Cook stock, realizing $235, all of which has been recognized as gain because the
stock had no  carrying  value in the  financial  statements.  Also in 2000,  the
Company  realized  a gain of $100  from the sale of the  rights to  publish  its
barter  industry  magazine and another  gain of $100 from an extension  fee with
regard to the sale of the assets and business of BXI Corporation.  Additionally,
in 2000 the  Company  received  a net fee of $150 for the  transfer  of  certain
marketing information to a third party.

In 1999, other expense consists primarily of net interest expense of $302.

During 1998, the Company sold securities of other companies, primarily Wade Cook
Financial  Corporation  ("WCFC"),  realizing  cash  proceeds  of $3,315.  In the
Company's financial statements the gain on sale of these securities was equal to
the entire amount of proceeds of $3,315. The securities were purchased with ITEX
trade dollars and assets  obtained in barter  transactions  with zero accounting
basis.  Substantially  all the securities were both purchased and sold in fiscal
1998.

Liquidity and Capital Resources

During  fiscal  2000,  the Company  reported  net cash (used in)  operations  of
($1,187) in the consolidated  statements of cash flows, as compared to cash used
in   operations  of  ($1,535)  and  (3,302)  in  fiscal  years  1999  and  1998,
respectively.   Factors   contributing   to  the  negative   cash  flow  include
unprofitable operations,  discontinued  operations,  settlements of disputes and
litigation  and  legal  and  accounting   costs  connected  with  the  Company's
regulatory  matters and  expenditures.  Currently  management  is  attempting to
reduce such negative cash flows by discontinuing and liquidating,  to the extent
possible,  assets  and  operations  outside  the  Company's  core  business.  To
facilitate  this  effort,  management  is  refocusing  capital  resources on its
primary business of operating trade exchanges and related  activities.  However,
there can be no assurance that the Company will be successful in its efforts.

During the years ended July 31, 2000,  1999 and 1998,  the Company  raised funds
and capital as follows:

o At July 31,  1999,  the  Company's  working  capital  ratio  was 0.3 to 1.0 as
compared to 0.8 to 1.0 at July 31, 1998.  This decrease in working capital ratio
was  indicative of a continued  decrease in the  liquidity of the Company.  As a
result,  management  believed that it would be difficult for the Company to meet
its operating cash  requirements  and fiscal 1999 capital  requirements  through
existing  cash   balances,   cash  provided  by  operations  and  its  borrowing
arrangements.  To finance  future  expansion of the  Company's  core business of
operating the ITEX retail trade exchange and to retire  certain notes  described
below,  the Company  concluded the sale,  for $4,000 cash, of the net assets and
business of its wholly-owned subsidiary, BXI Corporation, which operated the BXI
trade exchange from June 25, 1998 to January 18, 2000.

o During April 1998, the Company sold 53.5 shares of Series A preferred stock to
a small  number  of  non-U.S.  persons  in a  non-registered  private  placement
pursuant to  Regulation  S under the  Securities  Act of 1933,  as amended.  The
Company  realized  gross  proceeds of $5,350 and net proceeds,  after costs,  of
approximately  $4,730.  During  July  1998 the  Series  A  preferred  stock  was
converted  into 3,564  shares of common  stock.  Also during  fiscal  1998,  the
Company sold a portion of its available for sale  securities  for cash realizing
proceeds of $3,315. Cash realized from the Series A preferred stock and from the
sale of  available  for  sale  securities  was  primarily  used to  acquire  the
remaining  50% interest in the BXI trade  exchange,  funding of  investments  in
businesses or operations that have now been  discontinued,  and in the Company's
operations.

o In November  1998 the Company  completed a  Regulation  D private
placement of  promissory  notes  totaling  $1,625 at face value.  The notes bear
interest  at the rate of 4% and were issued at a 20%  discount.  The Company has
the right to repay the notes and accrued  interest in cash or in common stock of
the Company.  The maturity  date of the notes is November 30, 2000.  The Company
realized net proceeds of $1,100, which were used for working capital and general
corporate purposes.  In July 1999 the Company retired $313 of the above notes at
the  discounted  amount of $250 and in January 2000 retired an additional $63 by
payment of $50. In April 2000, the Company retired the balance of these notes of
$1,250 by converting $675 plus accrued into 1,133,659 shares of common stock and
payment of $575,000 plus accrued interest in cash.

At July 31, 1999 the Company had  outstanding  bank loans totaling $200 pursuant
to bank  lines of credit.  These  outstanding  balances  have been paid in their
entirety.  As of April 2000, the Company does not have a line of credit with any
bank.

In July 1999, when the Company needed working capital,  an individual who was at
that time  Chairman of the Board of  Directors,  and another  individual  who is
President,  CEO and a  Director  of the  Company,  loaned a total of $480 to the
Company.  The transactions were structured as convertible notes bearing interest
at 10% per annum.  The Company  paid those notes in full  together  with accrued
interest in January 2000.  The  conversion  privilege was never  exercised.  The
offering was made in reliance on Section 4(2) of the  Securities  Act of 1933 on
the basis of the  offering  having been made to officers  and  directors  of the
Company who had access to sufficient  information to make an informed investment
decision.

To finance future  expansion of the Company's core business,  provide  operating
capital for the ITEX retail  trade  exchange  and to retire the notes  described
above,  the  Company  sold  net  assets  and the  business  of its  wholly-owned
subsidiary, BXI Corporation, which operated the BXI trade exchange from June 25,
1998 until the sale of the  exchange  assets on January  18,  2000.  The Company
realized cash of $4,000 from the sale.

Trade dollars earned and expended

The Company earns ITEX and BXI (from June 25, 1998 until January 18, 2000) trade
dollars as compensation for management of the trade exchanges and as a result of
transactions entered into by the Company as a member of the exchanges.

At July 31,  2000,  the  Company  had a total of 698  trade  dollars  that  were
available for future expenditures. In fiscal 2000, the Company earned a total of
12,773 trade dollars and expended a total of 13,284 trade dollars.

At July 31,  1999,  the  Company had a total of 1,209  trade  dollars  that were
available for future expenditures. In fiscal 1999, the Company earned a total of
12,745 trade dollars and expended a total of 15,566 trade dollars.

At July 31,  1998,  the  Company had a total of 4,030  trade  dollars  that were
available for future expenditures. In fiscal 1998, the Company earned a total of
13,145 trade dollars and expended a total of 9,901 trade dollars Inflation

Since  inflation  has been  moderate in recent  years,  inflation  has not had a
significant impact on the Company.  Inflation is not expected to have a material
future effect.

Inflation may be a factor within the ITEX Retail Trade  Exchange.  The viability
of the ITEX Retail  Trade  Exchange is  maintained  by the  confidence  that the
members of the exchange  have in the  strength  and  stability of the ITEX Trade
Dollar.  To  maintain  such  confidence  it is  necessary  that the  exchange be
operated in a sound and economic  manner.  Toward this end, the Company  intends
from time to time to take actions to decrease  the number of ITEX Trade  Dollars
in the exchange by transferring some of its own holdings of trade dollars to the
Exchange.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has not had  significant  exposure to interest  rate risk  primarily
because of having had  limited  borrowing  activities.  The Company has not used
derivative financial  instruments to hedge its limited borrowing risks. There is
inherent  rollover risk for borrowings as they mature and are renewed at current
market rates. The extent of this risk is not quantifiable or predictable because
of the variability of future interest rates and business financing requirements.

At July 31, 1998,  the Company's  market risk  sensitive  instruments  primarily
included a bank line of credit  agreement that totaled $208.  Based on borrowing
rates  currently  available  to  the  Company,   the  carrying  amount  of  debt
approximates fair value.

During November 1998, the Company issued  convertible  promissory notes totaling
$1,625 at face  value.  The notes bear  interest  at a fixed rate of 4% and were
issued at a 20% discount.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated  financial  statements of the Company at July 31, 2000 and 1999
and for the three fiscal years ended July 31, 2000,  and the report of Ehrhardt,
Keefe, Steiner & Hottman,  P.C.,  independent public accountants are included as
listed in Item 14 of this Form 10-K.





<PAGE>


                                     PART V

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
           FORM 8-K

The following documents are filed as part of this Report:

(a)   1.   Financial statements.

           Report of Ehrhardt Keefe Steiner & Hottman PC, Independent Public
            Accountants

           Consolidated balance sheets at July 31, 2000 and 1999

           Consolidated statements of operations for the fiscal years ended
            July 31, 2000, 1999 and 1998

           Consolidated  statements of stockholders' equity for the fiscal years
            ended July 31, 2000, 1999 and 1998

           Consolidated statements of cash flows for the fiscal years ended July
            31, 2000, 1999 and 1998

           Notes to consolidated financial statements

2. Financial  statement  schedules.  All schedules have been omitted because the
information  required to be set forth  therein is not  applicable or is shown in
the consolidated financial statements or notes thereto.

3. Exhibits.  The Exhibits listed in the accompanying Exhibit Index are filed or
incorporated by reference as part of this Report.

(b) Reports on Form 8-K.  The  registrant  did not file any  reports on Form 8-K
    during the fourth quarter of fiscal 1999.







                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

Date:  October 30, 2000
                                ITEX CORPORATION

October 30, 2000               /s/ Collins M. Christensen
                                --------------------------

                                Collins M. Christensen, Director, President
                                and Chief Executive Officer (principal
                                executive officer and director)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the  following  persons on behalf of the Company and in
the capacities and on the dates indicated.


/s/ Collins M. Christensen                                 October 30, 2000
--------------------------
Collins M. Christense, Director, President
and Chief Executive Officer (principal
executive officer and director)

/s/ Dr. Evan B. Ames                                       October 30, 2000
--------------------
Dr. Evan B. Ames, Director

/s/ Robert Nelson                                          October 30, 2000
-----------------
Robert Nelson, Director

/s/ Dr. Charles Padbury                                    October 30, 2000
-----------------------
Dr. Charles Padbury, Director





                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
Itex Corporation
Portland, Oregon

We have audited the accompanying consolidated balance sheets of Itex Corporation
as of July  31,  2000 and  1999,  and the  related  consolidated  statements  of
operations,  stockholders'  equity  and cash  flows for each of the three  years
ended  July  31,  2000.  These   consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Itex Corporation as
of July 31, 2000 and 1999,  and the results of their  operations  and their cash
flows for each of the three year period ended July 31, 2000 in  conformity  with
generally accepted accounting principles.

                                    /s/Ehrhardt Keefe Steiner & Hottman PC
                                       Ehrhardt Keefe Steiner & Hottman PC

October 10, 2000
Denver, Colorado















<PAGE>




ITEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>


                                                                                  July 31,
                                                                            --------------------
                                                                              2000        1999
                                                                            --------    --------
<S>                                                                         <C>         <C>
                                   Assets
Current assets:
     Cash and equivalents ...............................................   $    960    $    203
     Restricted cash ....................................................        556        --
     Accounts receivable ................................................        659       1,143
     Income tax refund and related interest receivable ..................      2,216        --
     Prepaids and other current assets ..................................        117         228
                                                                            --------    --------
         Total current assets ...........................................      4,508       1,574

Property and equipment, net of accumulated depreciation of
  $772 and $635 .........................................................      2,698         523

Goodwill and purchased member lists, net ................................        792       3,866

Note receivable from sale of Investment in Samana Resort ................        350         518
Available for sale securities ...........................................        113        --
Other assets ............................................................         72         148
                                                                            --------    --------

               Total assets .............................................   $  8,533    $  6,629
                                                                            ========    ========

                Liabilities and stockholders' equity and Current liabilities:
     Bank lines of credit ...............................................       --      $    200
     Long-term debt and capital lease obligations, current portion ......         66       1,189
     Accounts payable ...................................................        723         675
     Accounts payable to brokers ........................................        813       1,167
     Accrued incentive compensation .......................................      339         --
     Deferred revenue ...................................................       --           586
      Notes payable to related parties ..................................       --           480
     Other current liabilities ..........................................        957       1,949
                                                                            --------    --------
         Total current liabilities ......................................      2,898       6,246
                                                                            --------    --------

Long-term debt and capital lease obligations ............................        505         209
                                                                            --------    --------
Total liabilities .......................................................      3,403       6,455
                                                                            --------    --------
Common stock subject to a put (333,333 shares outstanding) ..............      1,500        --
                                                                            --------    --------

Commitments and contingencies ...........................................       --          --
                                                                            --------    --------


Stockholders' equity:
     Common stock, $.01 par value; 50,000 shares authorized;
      15,838 and 11,762 shares issued and outstanding ...................        159         118
     Additional paid-in capital .........................................     28,977      27,130
     Unrealized gain on marketable securities ...........................        113
     Treasury stock, at cost (2 shares in 2000 and 1999) ................        (10)        (10)
     Accumulated deficit ................................................    (25,609)    (27,064)
                                                                            --------    --------
         Total stockholders' equity .....................................      3,630         174
                                                                            --------    --------

                Total liabilities and stockholders' equity ..............   $  8,533    $  6,629
                                                                            ========    ========
</TABLE>


    The accompanying notes are an integral part of the consolidated financial
                                  statements.






ITEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                     For the fiscal years ended July 31,
                                                      --------------------------------
                                                       2000         1999        1998
                                                      --------    --------    --------
<S>                                                   <C>         <C>         <C>

 Revenue:
     Trade exchange revenue .......................   $ 13,642    $ 19,173    $  9,665
     Corporate trading revenue ....................       --          --         1,724
                                                      --------    --------    --------
                                                        13,642      19,173      11,389
                                                      --------    --------    --------
 Costs and expenses:
     Costs of trade exchange revenue ..............      7,075      12,953       6,519
     Costs of corporate trading ...................       --          --         1,589
     Selling, general and administrative ..........      7,211       7,277       5,587
     Costs and expenses of discontinued
      activities ..................................         49       2,318       1,693
     Costs and expenses of regulatory and
      litigation matters ..........................        569       1,770       1,584
      Writedowns of BXI and Samana ................       --         2,508
      Change in estimate for loss on BXI disposal .       (785)       --          --
      Depreciation and amortization ...............        496       1,996         774
                                                      --------    --------    --------
                                                        14,615      28,822      17,746
                                                      --------    --------    --------

 Loss from operations .............................       (973)     (9,649)     (6,357)
                                                      --------    --------    --------

 Other income (expense):
   Interest income on tax refunds .................        331        --          --
   Other interest income (expense), net ...........       (271)       (302)         86
   Gain on sale of securities .....................        235        --         3,315
   Miscellaneous, net .............................        248         (67)         16
                                                      --------    --------    --------
                                                           543        (369)      3,417
                                                      --------    --------    --------

 Income (loss) before income taxes ................       (430)    (10,018)     (2,940)

 Income taxes (benefit) expense ...................     (1,885)          5       1,837
                                                      --------    --------    --------

 Net income (loss) ................................   $  1,455    $(10,023)   $ (4,777)
                                                      ========    ========    ========


Average common and equivalent shares:
  Basic ...........................................     13,840      11,585       7,912
                                                      ========    ========    ========

            Diluted                                     15,775
                                                      ========


           Net income (loss) per common share:
             Basic                                    $   0.11     $ (0.87)  $   (0.61)
                                                      ========     =======   =========

             Diluted                                  $   0.09     $ (0.87)  $   (0.61)
                                                      ========     =======   =========
</TABLE>

    The accompanying notes are an integral part of the consolidated financial
                                  statements.






ITEX CORPORATION
CONSOLIDATED  STATEMENTS OF STOCKHOLDERS' EQUITY For the fiscal years ended July
31, 1999, 1998 and 1997 (in thousands)


<TABLE>
<CAPTION>


                                                                                        Unrealized
                                 Common Stock           Preferred Stock     Additional   Gain on
                              --------------------    --------------------    paid-in   Marketable  Accumulated  Treasury
                               Shares      Amount      Shares      Amount     Capital   Securities   Deficit     Stock     Total
                              --------    --------    --------    --------   ---------- ----------  --------   -------   --------
<S>                           <C>         <C>         <C>         <C>        <C>         <C>      <C>        <C>       <C>


Balance, July 31, 1997 ......      7,207    $     72        --          --     $   19,114  $    --    $ (12,264)     --   $  6,922

Common stock sold for cash ..        150           2        --          --            598       --         --        --        600

Preferred stock sold for cash         --          --        54           1          4,729       --         --        --      4,730

Stock, options and warrants
  issued for goods and
  services ..................        237           2        --          --            744       --         --        --        746

Stock for warrants swap .....        250           2        --          --            998       --         --        --      1,000

Preferred stock conversion ..      3,564          36       (54)         (1)           (35)      --         --        --         --

Treasury stock purchased             --           --        --          --             --       --         --        (10)      (10)

Net loss ....................        --           --        --          --             --       --       (4,777)     --     (4,777)
                                --------    --------    --------    --------   ----------  ---------  --------   -------   --------

Balance, July 31, 1998 ......     11,408         114        --          --         26,148       --      (17,041)     (10)    9,211

Common stock sold for cash ..         10          --        --          --             10       --          --       --        (10)

Stock, options and warrants
  issued for goods and
  services ..................         19           1        --          --           235        --          --        --        236

Stock for warrants swap .....        325           3        --          --           737        --          --        --        740

Net loss ....................        --           --        --          --            --        --      (10,023)      --    (10,023)
                                --------    --------    --------    --------   ----------  ----------  --------   -------   --------

Balance, July 31, 1999 ......     11,762         118        --          --        27,130        --      (27,064)     (10)       174

Acquisition of Houston,
  Seattle, and Sacramento
  brokerages and
  Sacramento building ......       2,309          24        --          --           917        --          --        --        941

Common stock issued to pay
  convertible promissory
  notes ....................       1,134          11        --          --           702        --          --        --        713

Stock, options and warrants
  issued for goods and
  services .................         633           6        --          --           228        --          --        --        234

Increase in unrealized
 gain ......................          --          --        --          --            --        113                             113

Net income ..................         --          --        --          --            --         --      1,455        --      1,455
                                --------    --------    --------    --------   ----------  ---------   --------   -------   --------


Balance, July 31, 2000 ......     15,838    $    159    $   --      $   --     $  28,977   $    113    $(25,609)  $  (10)   $ 3,630
                                ========    ========    ========    ========   ==========  =========   ========   =======   ========

</TABLE>





    The accompanying notes are an integral part of the consolidated financial
                                  statements.



ITEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>

                                                          For the fiscal years ended July 31,
                                                          --------------------------------
                                                            2000        1999        1998
                                                          --------    --------    --------
<S>                                                       <C>         <C>         <C>
Cash flows from operating activities
  Net income (loss) ...................................   $  1,455    $ (10,023)  $ (4,777)
  Items to reconcile to net cash (used in) operations:
   Depreciation and amortization ......................      1,265       1,996
                                                                                       774
   Writeoffs and writedowns ...........................       --         3,481        --
   Gain on sales of securities ........................       (235)       --        (3,315)
   Stock and options given for goods and services .....        234         976       1,746
   Costs charged to reserve for loss on BXI disposal ..       (769)       --          --
   Change in estimate for loss on BXI disposal ........       (785)       --          --
 Changes in operating assets and liabilities:
    Accounts and notes receivable .....................       (144)        215        (159)
     Income tax refund receivable .....................     (2,216)        254        (254)
     Deferred taxes ...................................       --          --         1,224
    Prepaids and other assets .........................        (55)        367        (131)
    Accounts payable and other liabilities ............       (115)      1,212         376
    Accounts payable to brokers .......................        178          48         567
    Deferred revenue ..................................       --           (61)        647
                                                          --------    --------    --------
      Net cash (used in) operating activities .........     (1,187)     (1,535)     (3,302)
                                                          --------    --------    --------

Cash flows from investing activities:
    Proceeds from disposal of BXI .....................      4,000        --          --
    Payments received on disposal of Samana ...........        168        --          --
    Sacramento building and purchased brokerages ......       (400)
    Proceeds from sales of securities .................        235        --        (3,315)
    BXI Corporation acquisition .......................       --          --        (3,585)
    Investments in Samana and other entities ..........       --          --        (1,726)
    Equipment, information systems and other ..........       (125)       (420)       (302)
                                                          --------    --------    --------
     Net cash provided by (used in) investing
      activities ......................................      3,878        (420)     (2,298)
                                                          --------    --------    --------

Cash flows from financing activities:
  Proceeds from sales of stock ........................       --            10       5,320
  (Payments) proceeds of related party notes payable ..       (480)        480        --
  Proceeds from third party indebtedness ..............       --         1,140         403
  Repayments of third party indebtedness ..............       (898)       (408)       --
                                                          --------    --------    --------
    Net cash provided by (used in) financing activities     (1,378)      1,222       5,723
                                                          --------    --------    --------
Net increase (decrease) in cash and equivalents .......      1,313        (733)        123
Cash and equivalents at beginning of period ...........        203         936         813
                                                          --------    --------    --------
Cash and cash equivalents at end of period ............   $  1,516    $    203    $    936
                                                          ========    ========    ========

Supplemental cash flow information
   Cash paid for interest                                 $    289    $     82    $     14
   Cash paid for income taxes                                 ---            5         867

Supplemental  noncash  investing  and  financing
   Stock issued for  purchases of Sacramento, Houston
   and Seattle brokerages and Sacramento office
   building, including common stock subject to a put
   of $1,500                                              $  2,441    $     ---   $   ---

Debt and preferred stock converted to common stock             713          ---      4,730

</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.


ITEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company.  ITEX  Corporation  ("ITEX" or the "Company") was  incorporated  in
October  1985 in the  State of  Nevada.  The  Company  operates  a retail  trade
exchange  for  which it acts as  third-party  recordkeeper  and in many  cases a
broker for  transactions  between  members of the exchange.  The Company charges
monthly  membership  fees, as well as  commissions  on  transactions.  ITEX also
provides merchandise for sale to its members for trade dollars.

A summary of significant  accounting  policies applied in the preparation of the
accompanying consolidated financial statements follows:

Revenue Recognition.  For financial reporting purposes,  the Company records its
barter and ITEX trade  dollar  transactions  based on a measure of fair value of
the goods or services involved.  The Company participates in numerous barter and
ITEX trade dollar transactions that are described below. The Company enters into
these  transactions  primarily to generate cash transaction fees for the benefit
of the Company.  The Company recognizes cash membership and transaction fees and
commissions on transactions as the related services are performed.

Accounting for Membership and  Transaction  Fees Received in ITEX Trade Dollars.
In addition to receiving cash membership and transaction  fees, the Company also
receives  ITEX trade  dollars from members of the trade  exchange in  connection
with its services in operating the exchange. These trade dollars are utilized by
the Company for either the  acquisition of goods and services that are then made
available for purchase by members of the exchange  (enabling the Company to earn
cash transaction fees) or for use by the Company in its operations.  The Company
does not record revenue at the time of earning these trade credits because there
is no persuasive evidence that the value of the services provided by the Company
exceeds the amount of monetary consideration received. Further, the Company does
not record  revenue at the time of receiving the ITEX trade dollars  because not
all of the Company's performance  obligations have been completed;  that is, the
Company must continue to successfully  operate the exchange in future periods in
order to be able to utilize the ITEX trade dollars.

Accounting  for ITEX Trade  Dollars  Spent by the Company for Goods and Services
Used in the Company's  Operations.  When ITEX trade dollars are exchanged by the
Company  for  goods  and  services  that  are  used  by the  Company  in its own
operations,  the Company  records an expense or asset equal to the fair value of
the  underlying  goods  or  services  received.   The  Company  also  records  a
corresponding  revenue amount equal to the fair value of the underlying goods or
services  received  because  at  that  point,  the  Company  has  completed  its
performance obligations.  Fair value is determined by determining estimated cash
prices  for the sale of  similar  goods  and  services.  If the  Company  cannot
determine a fair value,  no value is assigned to the  transaction  for financial
reporting  purposes.  The Company also assigns zero value to ITEX trade  dollars
that are  exchanged  in  transactions  in which  cash is also paid and for which
there is no  persuasive  evidence  that the fair value of the goods or  services
received exceeds the amount of monetary consideration paid.

Historically,  a significant portion of ITEX trade dollars expended has been for
advertising  in  various  forms.  The  Company  historically  has not  conducted
significant  advertising  transactions  in cash;  therefore,  ITEX trade dollars
expended for these  advertising  items are not  reflected as revenue or costs in
the accompanying  financial statements.  In implementing its accounting policies
and procedures, the Company has considered the guidance of EITF Issue No. 99-17,
"Accounting  for  Advertising  Barter  Transactions",  which was  written in the
context of Internet  companies  bartering with one another for web  advertising,
but applies to other industries as well. Issue 99-17 was initially considered by
the  EITF in  November  1999 and was  concluded  in  January  2000.  EITF  99-17
specifically  addresses  advertising  barter  transactions for which there is no
ultimate realization in cash. It tentatively concludes that revenue and expenses
from such  transactions  should be recognized in financial  statements  (at fair
value) only if an entity has a  historical  practice of receiving or paying cash
for similar  transactions.  The EITF  indicated that the notion of a "historical
practice" should be similar to the guidance in EITF Issue 93-11, "Accounting for
Barter  Transactions  Involving  Barter  Credits." EITF 93-11  establishes  high
thresholds in accounting  for barter  transactions  such as " . . . if an entity
can convert the barter  credits  into cash in the near term,  as  evidenced by a
historical  practice  of  converting  barter  credits  into cash  shortly  after
receipt, or if independent quoted market prices exist for items to be received .
 . ." The Company's barter transactions  denominated in ITEX trade dollars do not
meet the high  thresholds  contemplated in EITF 93-11 as applied with respect to
EITF 99-17 of cash  equivalency or  convertibility  to cash.  Also, they are not
transactions  for which the Company has a  historical  practice of  receiving or
paying cash for similar transactions.  Accordingly, the Company has not recorded
transactions  denominated  in ITEX trade dollars.  If there are any  significant
transactions  in the future that meet these high  thresholds,  the Company  will
report them in the financial statements at fair value in accordance with Opinion
29.

Acquisition  and  Disposition of Barter-Type  Commodities.  The Company does not
record in its financial statements  transactions for acquisition and disposition
of barter-type  commodities such as hotel room nights, media due bills and other
barter-type commodities (in exchange for ITEX trade dollars or other barter-type
commodities)  because  additional   performance  by  the  Company  is  required.
Typically,  the Company  must  arrange one or more other large ITEX trade dollar
transactions  to enable the  provider  of the  commodities  to utilize the trade
dollars  received by the  provider.  Also,  the  provider  typically  must still
fulfill by shipping or otherwise  providing the  barter-type  commodities to the
ultimate  users.  The  culmination  of  this  process  occurs  and  revenue  for
transaction  fees is recognized by the Company when the commodities are provided
to the  ultimate  users and the Company  earns its cash  transaction  fees.  The
Company  does  not  report  the  commodities  in  its  financial  statements  as
inventories  because  these  transactions  only  represent  commitments  by  the
provider and the Company to perform in the future.

IRS  Requirements.  While the accounting  policies  described above are used for
financial  reporting  purposes,  the  Internal  Revenue  Service  requires,  for
purposes of taxation, that the Company recognize revenues, expenses, assets, and
liabilities for all  transactions in which the Company either receives or spends
ITEX trade Dollars using the ratio of one U.S. dollar per ITEX trade dollar. The
Company  internally  accounts for ITEX trade  dollars,  in addition to cash,  in
statements to clients and brokers and in other ways  necessary for the operation
of the trade  exchanges and the business of the Company,  including  payment for
certain operating expenses of the Company.

Trade Dollar Activity.  The following table summarizes the trade dollar activity
of the Company for each of the fiscal years ended July 31,  2000,  1999 and 1998
(unaudited):

                                     Fiscal years ended July 31,
                                    -----------------------------
                                      2000      1999       1998
                                    -------    -------    -------

Trade dollars earned ............    12,773     12,745     13,145
Trade dollars expended ..........    13,284     15,566      9,901
                                    -------    -------    -------
Net (decrease) increase .........      (511)    (2,821)     3,244
                                    =======    =======    =======
 Trade dollars at fiscal year end       698      1,209      4,030
                                    =======    =======    =======

The Company  does not  guarantee  the  utilization  of, or market for ITEX Trade
Dollars.  In addition,  the Company can expend trade  dollars in excess of those
credited to the Company's account.

Principles of Consolidation.  The consolidated  financial statements include the
accounts of the  Company and its  wholly-owned  subsidiaries.  All  intercompany
accounts and transactions have been eliminated.

Net  Revenue  and  Deferred  Revenue.  The  Company  charges  each  client  cash
membership fees and individual cash  transaction fees from the buyer and seller.
Members of the ITEX retail trade exchange pay a monthly  membership fee. Members
of the BXI retail  trade  exchange,  which was owned and operated by the Company
from June 25, 1998 to January 18,  2000,  pay an annual fee at the  beginning of
the membership year. The Company deferred the BXI membership fees and recognized
the related revenue ratably over the applicable one-year period. If a BXI member
decided to discontinue membership, there was no refund of membership fees paid.

Cash and  Equivalents.  Cash and cash  equivalents  includes all cash and highly
liquid investments with maturities at the date of purchase of 90 days or less.

Concentrations  of Credit Risk.  At July 31, 2000,  the Company  maintained  its
major cash balances at one financial  institution  located in Portland,  Oregon.
The  balances are insured by the Federal  Deposit  Insurance  Corporation  up to
$100. At July 31, 2000, the Company's uninsured cash balances totaled $647.

Property and  Equipment.  Property and  equipment are stated at cost and include
those  additions  and  improvements  that add to  productive  capacity or extend
useful life. When property or equipment are sold or otherwise retired,  the cost
and related  accumulated  depreciation are removed from the respective  accounts
and the resulting gain or loss is recorded in the statement of  operations.  The
costs of repair and maintenance are charged to expense as incurred. Depreciation
is computed  using the  straight-line  method over useful lives of three to five
years  for  furniture  and  equipment  and 20  years  for  buildings.  Leasehold
improvements  are  amortized  on a  straight-line  basis over the shorter of the
asset life or lease term.

Vehicle and equipment  capital leases have been recorded at the present value of
the  net  minimum  lease   payments.   These  assets  are  amortized  using  the
straight-line method over lease terms of three to five years.

Intangible  Assets.  The Company  amortizes  costs of customer lists acquired in
business  combinations over four years. The Company amortizes the excess of fair
value of net assets acquired  (goodwill) using the  straight-line  method over a
period not to exceed 10 years.

Valuation of Investment in Samana  Resort.  At July 31, 1998, the carrying value
of the  investment in the Samana  resort  property was equal to its cash cost of
$1,026.  During the  fiscal  year ended July 31,  1999,  new  management  of the
Company  decided  to  liquidate  this  investment  instead  of  holding  it  for
development  or other means of  realizing  value.  In fiscal  2000,  the Company
liquidated this investment by selling the property back to the parties from whom
the Company  had  originally  purchased  the  property.  At July 31,  1999,  the
investment in the Samana resort was carried at its net realizable value of $518,
based on the selling  price of $550,  less related costs of $32. The Company has
received  cash of $200 from the buyers (from which the Company paid its costs of
the  transaction).  The  buyers  have not paid the  remaining  amount of $350 in
accordance with the terms of the sale agreement and such payment is overdue. The
Company  is  contemplating  legal  action  to  enforce  the  terms  of the  sale
agreement.  In any event,  the Company has  retained  title to the  property and
believes  that it will recover the  remaining net book value of $350 either from
the current debtors or from resale of the property to another party.

Long-Lived  Assets.  The Company  reviews its  long-lived  assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recovered.  The Company looks primarily to the undiscounted
future cash flows in its  assessment  of whether or not  long-lived  assets have
been  impaired.  At July 31, 2000,  the Company  determined  no  impairment  was
appropriate.

Other Assets.  The Company  accounts for holdings of equity  securities of other
companies  pursuant to  Statement  of Financial  Accounting  Standards  No. 115,
"Accounting for Certain  Investments in Debt and Equity  Securities" (SFAS 115).
The Company's equity  securities  generally qualify under the provisions of SFAS
No. 115 as available for sale.

Income Taxes. The Company accounts for income taxes in accordance with Statement
of  Financial  Accounting  Standards  No. 109.  Under SFAS No. 109, an asset and
liability  approach is required.  Such approach  results in the  recognition  of
deferred tax assets and liabilities for the expected future tax  consequences of
temporary  differences  between the book  carrying  amounts and the tax basis of
assets and liabilities.

Income  (Loss) Per Share.  The Company  prepares  its  financial  statements  in
accordance  with the provisions of Statement of Financial  Accounting  Standards
No. 128,  "Earnings per Share",  which requires  presentation on the face of the
statement of  operations  of 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.

Fair Value of Financial Instruments.  All of the Company's significant financial
instruments are recognized in its balance sheet. The carrying value of financial
assets and liabilities generally approximates fair value as of July 31, 2000.

Estimates  and  Assumptions.   Management  uses  estimates  and  assumptions  in
preparing financial  statements in accordance with generally accepted accounting
principles.  Those  estimates  and  assumptions  affect the reported  amounts of
assets,  liabilities,  revenue, expenses, gains and losses, and also disclosures
about contingent assets and liabilities.  Significant estimates include the fair
value of non-monetary transactions, various litigation matters described herein,
collectibility of notes receivable and the  recoverability of certain intangible
assets. Actual results may vary from estimates and assumptions that were used in
preparing the financial statements.

Reclassifications.  Certain  reclassifications  have been made to the  financial
statements  of prior  years to conform to the July 31, 2000  presentation.  Such
reclassifications  had no effect on the results of operations  or  stockholders'
equity.

NOTE 2 - ACQUISITION AND DIVESTITURE OF BXI CORPORATION

During January 1996, the Company acquired the common stock of SLI, Inc. ("SLI"),
a Nevada  corporation  now known as IME,  Inc., in exchange for 60 shares of the
Company's  common stock  valued at  approximately  $645 and cash of $1,750.  The
Company also made a loan to SLI of $300.

During  January  1996,  SLI  purchased a 50% common  stock  interest in Business
Exchange  International  Corporation  ("BXI"),  a barter exchange with corporate
headquarters in Burbank,  California. SLI paid $1,750 in cash and loaned $300 to
BXI.

During June 1998,  the Company  completed the  acquisition  of the remaining 50%
interest  in BXI for  $3,725 in cash.  In  connection  with this  purchase,  the
Company agreed to make certain  shares of common stock and options  available to
BXI Brokers who will  continue as BXI brokers for a three-year  period after the
date of  closing.  The  warrants  will be  exercisable  for  three  years  after
distribution  to the  brokers.  These  securities  have  been  valued at $150 in
accounting for the acquisition.

The total cost of the acquisition of BXI, including amounts paid for the initial
50% interest, as well as the remaining 50% interest,  and ancillary costs of the
acquisition,  totaled  $6,749.  The transaction has been accounted for using the
purchase  method of  accounting  and the net assets and results of BXI have been
included in the consolidated  financial statements since June 25, 1998, the date
of  completion of the  acquisition.  The amount of purchase  price  allocated to
customer  lists was $5,000 and the amount  allocated  to excess of cost over net
assets  acquired  (goodwill)  amounted to $2,511.  The customer  lists are being
amortized  over a four-year  period and the goodwill is being  amortized  over a
10-year period.

The  following  unaudited  pro  forma  information  represents  the  results  of
operations of the Company as if the acquisition of BXI had occurred on August 1,
1997,  after giving effect to  amortization of the cost of the customer list and
acquisition   cost  in  excess  of  the  fair  value  of  net  assets  acquired,
depreciation  of acquired  property and  equipment  and the assumed  issuance on
August  1,  1997 of 2,808  shares  of  common  stock  (in  conjunction  with the
preferred stock  conversion).  The shares  represent the pro rata portion of the
total number of shares of common stock issued in the Company's private placement
during the  fiscal  year ended  July 31,  1998  which  provided  funds to enable
completion of the acquisition.

                            Year ended
                             July 31,
                              1998
                            --------

Revenue .................   $ 19,169

Net loss ................     (6,173)

Net loss per common share      (0.90)


The  unaudited  pro forma  information  does not purport to be indicative of the
results which would actually have been achieved had the acquisitions occurred as
of the date of the period indicated or which may be obtained in the future.

In May 1999, the Board of Directors  decided to sell the net assets and business
of BXI Corporation. On January 18, 2000, the Company consummated the sale of the
net assets and  business  of BXI  Corporation  to an  unrelated  third party for
$4,000,  which was paid by the  buyer in cash.  On the  measurement  date in May
1999,  the Company  recorded an  estimated  loss on the disposal of $2,000 which
included an estimated loss from  operations and  disposition of BXI  Corporation
from the period May 31,  1999 to January  18, 2000 of  approximately  $780.  The
primary assets  included in the  consolidated  balance sheet as of July 31, 1999
and 1998,  with  respect to BXI  Corporation  consisted  of  customer  lists and
goodwill,  with net book  values of $3,646  and  $2,106  for 1999 and $5,000 and
$2,316 for 1998,  respectively  and accounts  receivable  with net book value of
approximately  $730.  These  amounts  were  further  reduced by the  reserve for
estimated loss on the disposal of BXI of $2,000 at July 31, 1999.

During the period from August 1, 2000 to January 18,  2000,  $769 was charged to
the reserve of $2,000 that was  established  during  fiscal 1999. On January 18,
2000,  the Company  sold the assets and business of BXI  Corporation  for $4,000
cash. Upon  completion of the sale, the Company  determined that the actual loss
on  disposal  was $1,515  and,  accordingly,  the  Company  recorded a change in
estimate to eliminate  the  remaining  balance in the reserve of $585,  which is
shown  separately  as a  reduction  of costs and  expenses in the  statement  of
operations.

NOTE 3 - SALES OF OTHER ASSETS

Samana. During fiscal 2000, the Company sold its investment in the Samana resort
property to the  parties  from whom the Company  had  originally  purchased  the
property for $550.  The property was  previously  written down in fiscal 1999 to
$518,  based on the selling price less related costs of $32. The purchasers have
paid a total of $200.  The  remaining  balance  due of $350 has not been paid in
accordance  with the terms of the sale and the  Company is  contemplating  legal
action to enforce the terms of the sale agreement.  The Company believes that it
will recover the unpaid balance of $350 either from the current  debtors or from
resale of the property to another party.

Magazine  Publishing Rights.  During fiscal 2000, the Company sold the rights to
publish its magazine  related to the commercial  barter industry for $100, which
was received in cash.  There were no assets with book value in the balance sheet
with  respect  to the  magazine  publishing  rights.  The  gain of $100 has been
included in other income.

Marketing  Information.   During  fiscal  2000,  the  Company  conveyed  certain
marketing  information  to a third  party for a net fee of $150,  which has been
included in other income as these were no assets with book value included in the
balance sheet.

NOTE 4 - PURCHASE OF SACRAMENTO OFFICE BUILDING

In  February  2000,  the Company  purchased  an office  building in  Sacramento,
California and moved its corporate  headquarters  to that location in June 2000.
The  consideration  paid consisted of: (a) $200 cash, (b) a promissory  note for
$300 with interest at 10%, with only monthly interest only payments until August
29,  2001 at which time the entire  principle  is due,  (c) 333 shares of common
stock of the Company that will be increased,  if necessary,  at a future date to
enable the seller to realize $1,500 from the sale of the stock, and (d) 200 ITEX
Trade  Dollars.  The Company has  recorded the building at the total of the cash
paid, the promissory  note, and the value of the stock of $1,500 to be provided,
altogether  totaling  $2,000.  The  arrangement  provides  that if the seller is
unable to sell the stock,  the  Company may satisfy  this  obligation  by paying
cash.  In the event that the stock  cannot be sold and the Company  does not pay
cash,  the seller may  foreclose on the  building.  The Company has recorded the
arrangement  with respect to the stock as "common stock subject to a put" in the
balance sheet, which is classified outside of stockholders' equity.

NOTE 5- PROPERTY AND EQUIPMENT

Depreciation  expense for property and equipment was $137, $94 and $122, for the
fiscal years ending July 31, 2000, 1999 and 1998, respectively.

At July 31,  2000  and  1999,  assets  held  under  capitalized  leases  include
computers and other equipment totaling $471 and $423, respectively. Depreciation
expense for  capitalized  equipment  leases was $69,  $68 and $60 for the fiscal
years ended July 31, 2000, 1999 and 1998, respectively.

NOTE 6 - GOODWILL AND PURCHASED MEMBER LISTS

At July 31, 2000, the cost of acquired member lists was $2,499, less accumulated
amortization  of  $1,707,  for a net  carrying  value  of  $792.  These  amounts
primarily  include  the  new  member  lists  acquired  in the  purchases  of the
Sacramento, Houston and Seattle brokerages.

At July 31,  1999,  the excess of the total BXI  acquisition  cost over the fair
value of the net assets acquired  (goodwill)  totaled $2,362,  less  accumulated
amortization of $256, for a net carrying value of $2,106.  At July 31, 1999, the
cost of the BXI acquired member list was $5,000,  less accumulated  amortization
of $1,354,  for a net carrying  value of $3,646.  At July 31, 1999, the carrying
value of goodwill  and  purchased  member lists has been reduced by a reserve of
$2,000  related  to the  estimated  loss on the  disposal  of the net assets and
business of BXI. The remaining  balances of  intangible  assets at July 31, 1999
consisted  principally  of the cost of member  lists from  acquisitions  made in
prior years, with total cost of $1,634, less accumulated amortization of $1,520,
for a net carrying value of $114.

NOTE 7 - OTHER ASSETS

Other assets consists of the following:

                                       July 31,
                                  -----------------
                                    2000     1999
                                  -------   -------
Natural resource interests of
 four mineral properties located
 in the State of Washington ....   $ 50      $ 50

Other ..........................     22        98
                                   ----      ----
                                   $ 72      $148
                                   ====      ====

During the fiscal year ended July 31, 1999, the  investment in natural  resource
interests were written down from $169 to $50 and the capitalized  software costs
of $278 and  foreign  licensing  rights of $386 were  written  off.  The  events
causing  writedown  and  writeoffs  were  the  decision  of  the  Company's  new
management  in  March  1999 to offer  the  mineral  properties  for sale and the
decision to suspend  international  expansion in order to focus on the Company's
domestic  trade  operations.  In  addition,  a note  receivable  from  GlobalTel
totaling  $200, a start up company  planning to attempt a public  offering,  was
written  off in  fiscal  1999  upon  the  determination  that  it was no  longer
financially viable.


NOTE 8 - BANK LINES OF CREDIT

The Company had a line of credit  arrangement with its primary bank payable upon
demand.  Pursuant  to the line of credit,  the  Company was able to borrow up to
$250 on a short-term  basis for working  capital  purposes.  The  interest  rate
applicable to borrowings  pursuant to the facility was equal to the bank's prime
rate of interest  plus 1.5%.  Borrowings  were  collateralized  by the Company's
accounts  receivable,  fixed  assets and  inventory.  As of July 31,  1999,  the
Company had  outstanding  borrowings of $150 under the line of credit and a bank
loan of a  majority-owned  subsidiary  of $50 was also  outstanding.  All  these
outstanding  bank  loans  were  repaid  in fiscal  2000.  The  Company  does not
currently have a line of credit with any bank.

NOTE 9 - NOTES PAYABLE TO RELATED PARTIES

In July 1999, when the Company needed working capital,  an individual who was at
that time  Chairman of the Board of  Directors,  and another  individual  who is
President,  CEO and a  Director  of the  Company,  loaned a total of $480 to the
Company.  The transactions were structured as convertible notes bearing interest
at 10% per annum.  The Company  paid those notes in full  together  with accrued
interest in January 2000. The conversion privilege was never exercised.



NOTE 10 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

In November  1998 the Company  completed a  Regulation  D private  placement  of
promissory notes totaling $1,625 face value realizing approximately $1,100 after
a 20%  discount  and issuance  costs.  The notes had stated  interest at 4%. The
Company  had the right to repay the notes  and  accrued  interest  in cash or in
common  stock of the Company.  The  maturity  date of the notes was November 30,
2000.

In July  1999 the  Company  retired  $313 of the above  notes at the  discounted
amount of $250 and entered into an agreement to retire an additional  $62 by the
payment of $50,  which was  completed in fiscal 2000.  During  fiscal 2000,  the
holder of the remaining outstanding  convertible debentures requested conversion
of one-half of the  outstanding  amount into common stock  pursuant to which the
Company  issued 1,134 shares of common stock.  At that time,  the Company repaid
the remaining amount  outstanding of $673,  resulting in complete  retirement of
the convertible debentures.

Warrants  to  purchase  195 shares of stock at an  average  price of $3 a share,
issued in  connection  with this  financing,  remain  outstanding.  The  Company
deferred approximately $130 of debt acquisition costs based on the fair value of
the warrants,  which were  initially  amortized and then charged off  completely
upon payments of the debentures and conversion to common stock

At July 31, 1999, the Company was in default of certain  covenants  contained in
the promissory note agreement. Therefore, the total amount owed at July 31, 1999
of $1,057 was classified as a current liability in the balance sheet.


Long-term debt and capital lease obligations consist of the following:
<TABLE>
<CAPTION>

                                                                     July 31,
                                                              ----------------------
                                                                2000           1999
                                                              -------         ------
<S>                                                           <C>             <C>
   Convertible  promissory  notes,
    less unamortized discount
    bearing interest at 4%                                   $   ---          $ 1,057

   Note payable from purchase of
     Sacramento office building bearing interest at
     10% with interest only payments of $2,500 per
     month until maturity all principle, due August 2001         300              ---

  Note payable from purchase of
   Houston brokerage no interest
   due August 2001 or when certain
   operational levels have been achieved.                         50              ---

   Note payable at $5 per month,
    including interest at 10% per
    annum                                                        ---             130

   Capital leases                                                221             211
                                                              -------         ------
                                                                 571           1,398
Less, current portion                                            (66)         (1,189)
                                                              -------         ------
                                                              $  505          $  209
                                                              =======         ======
</TABLE>


The annual  maturity of  long-term  debt and capital  lease  obligations  are as
follows:

            Fiscal year ending July 31,
                 2001                                         $    432
                 2002                                               96
                 2003                                               76
                 2004                                               29
                 2005                                              ---
                 Thereafter                                        ---
                                                              --------
                                                                   633
            Less, imputed interest on capital leases
                and unamortized discount on  promissory
                note agreements                                    (62)
                                                               -------
            Present value of minimum lease payments                571
            Less, current portion                                  (66)
                                                               -------
                                                               $   505
                                                               =======


NOTE 11 - COMMITMENTS AND CONTINGENCIES

The Company conducts a portion of its business  utilizing  leased  facilities in
various  cities in which it  operates.  Certain  lease  agreements  provide  for
payment  of  insurance,  maintenance  and other  expenses  related to the leased
property. Certain lease agreements also provide an option for renewal at varying
terms.  The aggregate future minimum  commitments  under operating leases are as
follows:

            Fiscal year ending July 31,
                 2001                                        $    314
                 2002                                             149
                 2003                                              23
                 2006                                               4
                 2007                                             ---
                 Thereafter                                       ---
                                                              --------
                                                              $   490
                                                              ========

Rent  expense for the periods  ended July 31,  2000,  1999 and 1998  amounted to
$359, $613 and $250, , respectively.

In fiscal  year  2000,  the  Company  adopted a bonus plan for  officers  of the
Company. Pursuant to the Plan, officers will be paid a total of 30% of quarterly
net revenues as defined by the Plan. For fiscal 2000, $339,000 was accrued under
the terms of the Plan.

In the ordinary course of its business, the Company may be subject to litigation
matters  and claims  that are normal for its  operations.  While the  results of
litigation and claims cannot be predicted with certainty,  management  believes,
based on advice of counsel,  the final  outcome of such  matters will not have a
materially adverse effect on the consolidated financial position.

NOTE 12 - STOCKHOLDERS' EQUITY

Private Placements.  The Board of Directors authorized up to 65 shares of Series
A convertible  preferred stock ("Series A preferred stock") for sale at $100 per
share.  During April 1998,  the Company closed the sale of 54 shares of Series A
preferred stock in a non-registered  private placement  pursuant to Regulation S
under the  Securities  Act of 1933,  as  amended.  The  Company  realized  gross
proceeds of $5,350 and net proceeds,  after costs,  totaling $4,730. The primary
use of the proceeds was for the  acquisition  of the remaining 50% common equity
interest in BXI (see note 2).  During the fiscal year ended July 31,  1998,  all
Series A preferred stock was converted into 3,564 shares of the Company's common
stock.

Stock Options.  During the five years ended July 31, 1998,  the Company  adopted
the  following  incentive  stock  option  plans under which  common stock may be
granted to employees,  officers,  directors and consultants of the Company.  All
option prices are at market price at the date of grant.
<TABLE>
<CAPTION>

                                    Number of
          Date of                    Shares                                                 Date of
      Plan Adoption                 Authorized              Grant Period              Shareholder Approval
--------------------------       ---------------         -----------------         -------------------------
<S>                              <C>                     <C>                       <C>
February 11, 1994                      200                    10 years              February 10, 1995
October 26, 1994                       750                    10 years              February 10, 1995
December 15, 1995                    1,250                    10 years              May 3, 1996
December 27, 1996                    1,000                     5 years              February 9, 1999
January 1, 1997                        755                    10 years              February 9, 1999
September 3, 1997                      965                    10 years              February 9, 1999
</TABLE>

The  following  summarizes  activity  for the three  fiscal years ended July 31,
2000:

                                  Number of Options
                             ------------------------         Option Price
                             Available       Granted            Per Share

                             --------         -------         -------------
Balance, August 1, 1997        1,442           2,196          $1.00 - $6.13
   New plan                      965             ---               ---
   Granted                    (1,005)          1,005          $1.00 - $6.13
   Exercised                     ---             (91)         $1.00 - $3.38
                             --------         -------
Balance, July 31, 1998         1,402           3,110          $1.00 - $6.13
   Granted                    (1,273)          1,273          $ .63 - $ .75
   Exercised                     ---             (10)         $1.00
   Cancelled                     531            (531)         $3.19 - $3.75
                             --------         -------
Balance, July  31, 1999          660           3,842
   Granted                      (790)            790          $0.75 - $1.50
   Cancelled                     475            (475)         $0.63 - $6.13
                             --------         -------
Balance, July  31, 2000          345           4,152
                             =======          =======

Prior to July 1999, options granted became exercisable  immediately and were not
cancelled if  unexercised  within 90 days of  termination.  Effective July 1999,
options granted become exercisable over a period of time,  typically four years,
and are forfeited by the employee if not exercised within 90 days of termination
of employment.  In October 1999 the Company informed terminated employees of its
intent to follow the  provisions  of the option  plans as to the  expiration  of
options  of  terminated  employees,  if it had the  contractual  right to do so.
Depending on the former  employee's  length of employment,  effective October 1,
1999, the Company has given  terminated  employees from four months to two years
to exercise their options.

The weighted average  contractual life of options granted through July 31, 2000,
is 10 years. The weighted average exercise prices for the options outstanding at
July 31, 2000 are as follows:

                                                                Weighted
                                                                 Average
               Exercise                 Common Stock             Exercise
             Price Range                  Options                Prices
            ------------               --------------          -----------
            $0.63 - $1.50                 1,573                    $0.82
            $1.94 - $3.75                 1,415                     3.35
            $5.50 - $6.13                   669                     6.02
                                          ------
                                          3,657
                                          ======

Warrants.  As of July 31, 2000, the following  warrants to purchase common stock
were outstanding:


                 Number of           Exercise
                  Shares            Per Share          Expiration Date
              --------------     ---------------    ----------------------
                   20                $3.50            January 27, 2002
                  129                $3.75            June 16, 2003
                    2                $5.25            April 1, 2001
                   67                $2.00            September 30, 2003
                   67                $3.00            September 30, 2003
                   67                $4.00            September 30, 2003

Repurchase of Outstanding  Options and Warrants.  On March 30, 1998, the Company
agreed to issue 250 shares of  unregistered  common  stock in  exchange  for the
retirement of outstanding warrants to purchase 1,011 shares of common stock. The
warrants to be retired had exercise prices ranging from $3.50 per share to $6.12
per share,  with expiration  dates ranging from June 29, 2000 to April 11, 2006.
The warrants were held by Wycliff Fund,  Inc.  ("Wycliff") and The Bailey Mutual
Fund, Inc. ("Bailey"). Mr. Terry Neal, the founder of the Company and its former
Chairman  and Chief  Executive  Officer  represented  Wycliff and Bailey in this
transaction.  The  transaction was completed and the shares of common stock were
issued on July 22, 1998.

In November  1998,  the Company  issued 275 shares of common stock pursuant to a
settlement  agreement in order  cancel  options to purchase 600 shares of common
stock that had been issued in a prior year.

Stock-Based  Compensation.  The Company accounts for stock-based compensation in
accordance   with.   FASB  Statement  No.  123,   "Accounting   for  Stock-Based
Compensation."  Statement  123 allows for the  Company to account  for its stock
option plans in accordance with APB Opinion No. 25, "Accounting for Stock Issued
to Employees"  using the intrinsic value method.  The Company granted options to
purchase 750,  1,293 and 1,005 shares of common stock to employees and directors
during the years ended July 31, 2000, 1999 and 1998, respectively.

The  following  table  summarizes  the  difference  between  the fair  value and
intrinsic  value  methods  and the pro forma net income and net income per share
amounts for the years ended July 31, 2000, 1999 and 1998 had the Company adopted
the fair value-based method of accounting for stock-based compensation.

                                                    Years ended July 31,
                                              --------------------------------
                                                2000         1999       1998
                                              --------     --------   --------
Difference between fair value and intrinsic
  value methods (additional compensation
  expense)                                      $  68       $  840    $  1,647

Net income (loss)                               1,249      (10,863)     (6,424)

Net income (loss) per share - basic               .09        (0.94)      (0.82)

Net income (loss) per share - diluted             .08        (0.94)      (0.82)

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model,  with  the  following  weighted  average
assumptions  used for grants in fiscal 2000,  1999 and 1998:  dividend  yield of
zero,  expected  average  annual  volatility of 63%,  average  annual  risk-free
interest  rate of 6.0%,  and  expected  lives  of four  years  and  nine  years,
respectively.

Statement 123 also applies to  transactions in which an entity issues its equity
instruments to acquire goods or services from  non-employees.  Accordingly,  the
implementation  of  Statement  123 may have a material  effect on the  Company's
financial  statements  and the pro forma  disclosures  in the notes  thereto  in
future periods.


NOTE 13 - INCOME TAXES

Comparative  analysis  of the tax  (benefit)  expense  for income  taxes for the
fiscal years ended July 31, 2000, 1999 and 1998 follows:



                                        Years  ended  July 31,
                                ---------------------------------------
                                 2000            1999            1998
                                -------        --------        --------
Current:
  Federal                       $(1,885)        $ ---           $ 509
  State                             ---            5              104
                                -------        --------        --------
                                 (1,885)           5              613
                                -------        --------        --------
Deferred:
  Federal                           ---           ---           1,016
  State                             ---           ---             208
                                -------        --------        --------
                                    ---           ---           1,224
                                -------        --------        --------
Tax (benefit) expense           $(1,885)        $  5           $1,837
                                =======        ========        ========

The computed income tax expense  (credit) differs from applying the U.S. federal
income tax rate due to losses  before  income taxes for the years ended July 31,
2000,  1999 and 1998 and because of  realization  of net operating  loses in the
year ended July 31, 2000. The following  reconciles  expected income tax effects
at a rage of 34% to the provision (credit) for income taxes:

                                                        Years ended July 31,
                                               --------------------------------
                                                  2000        1999      1998
                                               ---------   ---------  ---------

   Taxes at U.S. federal statutory rate          $(146)     $(3,406)   $  (660)
   Tax refund from prior years                  (1,885)        ---         ---
   Change in deferred tax valuation
     allowance                                  (3,916)       3,594      2,053
   Other, net                                    4,062         (183)       444
                                               ---------   ---------  ---------
   Tax (benefit) expense                       $(1,885)      $    5    $ 1,837
                                               =========   =========  =========


The tax effects of temporary  differences that give rise to significant portions
of deferred tax assets and  liabilities  at July 31, 1999 and 2000 are presented
below:

                                                               July 31,
                                                        ----------------------
                                                           2000         1999
                                                        ----------    --------
Deferred tax assets:
  Net trade activity included for income tax
   purposes not recognized for financial
   reporting                                            $    2,236      $6,018
  Investments and assets impaired for
   financial reporting, not disposed of
   for tax purposes                                          1,105       1,345
   Amortization                                                685         606
  Net operating loss carryforward                            3,052       2,415
  Capital loss carryforward                                    102         224
  Other                                                        679         860
                                                        ----------    --------
                                                             7,859      11,468
                                                        ----------    --------
Deferred tax liabilities:
  Amortization                                                (311)        ---
                                                        ----------    --------
Net deferred tax assets                                      7,548      11,468
Valuation allowance                                         (7,548)    (11,468)
                                                        ----------    --------
                                                        $      ---      $  ---
                                                        ==========    ========

In assessing  the  realizability  of deferred tax assets,  management  considers
whether it is more likely that some  portion or all of the  deferred  tax assets
will not be  realized.  The  ultimate  realization  of  deferred  tax  assets is
dependent  upon the  generating of future  taxable  income during the periods in
which those temporary  differences become deductible.  Management  considers the
scheduled reversal of deferred tax liabilities,  projected future taxable income
and projections for future taxable income over the periods in which the deferred
tax assets are deductible. At this time, management has concluded that it is not
likely  that  the  Company  will  realize  the  benefits  of  these   deductible
differences  as there can be no  assurance  that the Company  will  generate the
necessary taxable income in any future periods.

The  Company's  1996 and 1997  income  tax  returns  have been  examined  by the
Internal  Revenue  Service  ("IRS").  The  Company  and the IRS have  reached  a
tentative  agreement pursuant to which the Company will receive refunds of taxes
totaling $1,359. In addition, the Company has substantially completed its income
tax returns for the fiscal years ended July 31, 1998 and 1999 and has  concluded
that the filing of those  returns  will  result in  additional  refunds of taxes
totaling $526. The Company has also accrued  interest  income of $331 related to
the total refunds of $1,885.

NOTE 14 - 401(k) SAVINGS PLAN AND BONUS PLAN

Employees of the Company may  participate in a 401(k) savings plan,  whereby the
employees  may  elect  to make  contributions  pursuant  to a  salary  reduction
agreement upon meeting age and length of service requirements. The Company makes
matching contributions of 50% of electing employees' deferrals,  up to a ceiling
amount of 3% of gross  annual  wages.  Matching  contributions  to the plan were
$___,  $21 and $15 for the  years  ended  December  31,  2000,  1999  and  1998,
respectively.

The Company has a bonus plan for its officers.  Bonuses applicable to the fiscal
years ended July 31, 2000, 1999 and 1998 were $339, $0 and $40, respectively.

NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial  Accounting  Standards Board Statement No. 107 requires the disclosure
of fair value for financial  instruments.  The following disclosures are made in
accordance with the requirements of that Statement. The estimated fair value has
been determined by the Company using  appropriate  valuation  methodologies  and
available or quoted market information.

However,  considerable  judgment is necessarily  required in interpreting market
data  to  develop  the  estimates  of fair  value.  Accordingly,  the  estimates
presented are not  necessarily  indicative of the amounts that the Company could
realize in a current market exchange.  The use of different  market  assumptions
and/or estimation methodologies may have a material effect on the estimated fair
value amounts.

<TABLE>
<CAPTION>

                                        July 31, 2000           July 31, 1999
                                --------------------------   --------------------
                                Carrying            Fair     Carrying        Fair
                                 Amount            Value      Amount        Value
                                ----------      ----------   ----------   --------
<S>                             <C>             <C>          <C>          <C>
 Assets:
Cash .........................   $1,516           $1,516        $  203     $  203
Accounts receivable ..........      659              659         1,143      1,143

Liabilities:
Bank line of credit ..........     --                 --           200        200
Accounts payable .............      723              723           675        675
Accounts payable to brokers
 due to brokers ..............      813              813         1,167      1,167
Current portion of long-term
    indebtedness .............       66               66         1,189      1,189
Long-term portion of long-term
  indebtedness ...............      505              505           209        209
</TABLE>


Cash, accounts  receivable,  notes receivable,  accounts payable, and portion of
receivables due to brokers.  The carrying value of such items approximates their
fair value at July 31, 2000 and 1999.

Bank  line  of  credit  and  current  and   long-term   portions  of   long-term
indebtedness.  Fair value of such debt is based on rates currently  available to
the Company for debt of similar  terms and  remaining  maturities.  There are no
quoted market prices for the debt or similar debt.


NOTE 16 - RELATED PARTY TRANSACTIONS

The  Company has dealt with Mr.  Terry Neal,  the founder of the Company and its
former Chairman and Chief Executive  Officer,  in various  transactions in which
Mr.  Neal  acted as agent or  otherwise  represented  the other  parties  to the
transactions.

On March 30, 1998, the Company agreed to issue 250 shares of unregistered common
stock in exchange for the retirement of  outstanding  warrants to purchase 1,011
shares of common stock.  The warrants to be retired had exercise  prices ranging
from $3.50 per share to $6.12 per share, with expiration dates ranging from June
29,  2000 to April 11,  2006.  The  warrants  were held by  Wycliff  Fund,  Inc.
("Wycliff")  and The Bailey Mutual Fund,  Inc.  ("Bailey").  Mr. Terry Neal, the
founder of the  Company  and its former  Chairman  and Chief  Executive  Officer
represented  Wycliff  and  Bailey  in  this  transaction.  The  transaction  was
completed  and the shares of common  stock were  issued on July 22,  1998.  As a
result of this  transaction  $1,000 was  charged to expense in the  accompanying
financial statements.

In August 1997 the Company  entered into a  transaction  in which it conveyed to
The Bailey Mutual Fund ("Bailey") 976 ITEX Trade Dollars and certain  securities
of other  companies  in exchange for shares of Wade Cook  Financial  Corporation
("WCFC") with a market value of $2,000 which resulted in a gain of approximately
$3.2 million.  The Company sold these shares  during the same fiscal  quarter in
which  they were  acquired.  During the fiscal  year  ended July 31,  1994,  the
Company  entered into  transactions  in which it sold  marketable  securities to
Bailey for an aggregate amount of 140 ITEX Trade Dollars. During the fiscal year
ended July 31,  1995,  the Company  entered into  transactions  in which it sold
marketable  securities  to Bailey  for an  aggregate  amount of 2,990 ITEX Trade
Dollars.  During the fiscal year ended July 31, 1996,  the Company  entered into
transactions in which it sold  marketable  securities to Bailey for an aggregate
amount of 440 ITEX Trade Dollars. In these transactions,  the Company dealt with
Mr. Neal as agent for Bailey.

In July 1999, when the Company needed working capital,  an individual who was at
that time  Chairman of the Board of  Directors,  and another  individual  who is
President,  CEO and a  Director  of the  Company,  loaned a total of $480 to the
Company.  The transactions were structured as convertible notes bearing interest
at 10% per annum.  The Company  paid those notes in full  together  with accrued
interest in January 2000. The conversion privilege was never exercised.

NOTE 17 - BUSINESS COMBINATIONS

Sacramento.  In October  1999,  the Company  exchanged  1,967  shares of the its
restricted  common stock for all of the  outstanding  stock of California  Trade
Exchange,  Inc., a California  corporation,  which  operated the business of the
Company's largest independent brokerage located in Sacramento,  California.  The
total value  assigned to the  acquisition,  which is being  accounted for by the
purchase  method,  was $669  less  related  costs  of $217.  A total of $399 was
allocated  to the right to service the member  lists,  which is being  amortized
over a four-year life. The principal owner of the Sacramento  brokerage business
is now the President,  Chief Executive Officer and a Director of the Company and
a minority owner of the Sacramento brokerage business served as a vice president
of the Company in charge of broker training until March 7, 2000.

Seattle.  In  February  2000,  the  Company  acquired  all  of  the  issued  and
outstanding  stock  of  Seattle  Trade  Network,   Inc.,  ("STN")  a  Washington
corporation  which  operated the business of the  independent  broker located in
Issaqua (Seattle area),  Washington.  The purchase price consisted of $150 cash,
150 ITEX  Trade  Dollars  and 200  shares of  common  stock of the  company.  In
addition,  the Company issued 15 warrants to purchase restricted common stock of
the  Company  at an  exercise  price  of  $0.75  per  share.  One of the  former
stockholders  of "STN"  continued  as an ITEX  employee  to manage  the  Seattle
office.  The total value assigned to the  acquisition,  which is being accounted
for by the purchase method,  was $305.  Substantially  all of the purchase price
was allocated to the right to service the member lists, which is being amortized
over a four-year life.

Houston.  Also  in  February  2000,  the  Company  acquired  the  assets  of the
independent broker office located in Houston, Texas. The purchase price was $100
cash, payable $50 at closing and the remainder over time, 100 ITEX Trade Dollars
and 100,000 shares of the restricted  common stock of the Company and the option
to  acquire  up to an  additional  25 shares of  restricted  common  stock at an
exercise price of $0.75 per share. The owner of the operation has remained as an
ITEX employee to manage the Houston  office.  . The total value  assigned to the
acquisition,  which is being  accounted  for by the purchase  method,  was $184.
Substantially  all of the purchase  price was  allocated to the right to service
the member lists, which is being amortized over a four-year life.

Unaudited Proforma  Information.  The following  unaudited pro forma information
represents  the results of operations of the Company as if the  acquisitions  of
the Sacramento,  Houston and Seattle  brokerages had occurred on August 1, 1998,
and the  eliminating  of the  intercompany  transactions  after giving effect to
amortization  of the cost  allocated to member lists,  depreciation  of acquired
property and  equipment  and the assumed  issuance on August 1, 1998 of ________
shares of common stock that were issued in connection with the acquisitions.

                                                        Years ended July 31,
                                                     -------------------------
                                                       2000           1999
                                                     ------------   ----------

     Revenue................                          $  13,642    $ 19,173
     Net income (loss)...............                     1,491      (9,827)
     Net income (loss) per common share                     .10        (.70)

The  unaudited  pro forma  information  does not purport to be indicative of the
results which would  actually  have been achieved for the periods  indicated had
the acquisitions  occurred as of August 1, 1998 or results which may be achieved
in the future.

Note 18 - LEGAL PROCEEDINGS

o SEC Inquiry

During June 1996, the Company  announced in a press release that the Company was
the subject of an informal inquiry from the Securities and Exchange  Commission.
Subsequently,  the Company  received  subpoenas  for the  production  of certain
documents  pursuant to a formal order of private  investigation.  In  connection
with that investigation,  the SEC took the deposition of several individuals. On
September  27,  1999,  the SEC  filed a civil  Complaint  in the  United  States
District Court for the District of Oregon naming the Company and former officers
and/or  directors  of the  Company,  Terry L. Neal,  Michael T. Baer,  Graham H.
Norris,  Cynthia  Pfaltzgraff  and Joseph M. Morris,  as defendants and alleging
securities  fraud and other  securities law  violations.  In January,  2000, the
Company  entered into a Consent and  Undertaking  with the SEC wherein,  without
admitting or denying the allegations of the Complaint,  the Company consented to
entry of a Final Judgment of Permanent Injunction which, among other things, (i)
permanently  restrains  and enjoins the Company  from  violating  Sections 5 and
17(a) of the Securities Act of 1933 and Sections 10(b),  13(a),  13(b)(2)(A) and
13(b)(2)(B)  of the  Securities  Exchange  Act of 1934 and Rules  10b-5,  13a-1,
13a-13 and  12b-20  thereunder,  and (ii)  orders  the  Company  to restate  its
financial statements for the fiscal year ended July 31, 1997. The Final Judgment
based upon the Consent was entered by the Court on February 3, 2000. The Company
was given 90 days from that date to file its  amended  Form 10K for fiscal  1997
and its Form 10K's for 1998 and 1999. The Company complied with this requirement
on May 3, 2000.

o Sondra Ames Litigation.

In October 1998, the Company was served with summons and complaint for an action
in the Superior  Court of Orange County,  California  styled Sondra Ames v. ITEX
Corporation,  Graham H. Norris and John Does I through X. The complaint  alleged
(i) fraud in the acquisition by ITEX of plaintiff's trade exchange in 1996; (ii)
violation of Rule 10b-5 of the Securities and Exchange Act of 1934 in connection
with plaintiff's purchase of ITEX stock on the open market in 1996; (iii) breach
of written and oral  contracts,  (iv) sex  discrimination  and  harassment;  (v)
discrimination based on religion; (vi) retaliation and tortuous discharge; (vii)
defamation;  and (viii) violation of various  provisions of the California labor
code.  Plaintiff  asked for $5,000,000  actual damages and for punitive  damages
along with other statutory  relief.  The case was subsequently  moved to Federal
Court.

Plaintiff  was a  former  employee  and  former  officer  of the  Company  whose
employment  agreement  expired in April 1998. The parties settled the matter for
an  undisclosed  amount,  which is  confidential  by the terms of the settlement
agreement,  in January 2000 without any  admission of liability and the case has
been dismissed in its entirety.  The amount for which the matter was settled was
not significant to the Company's financial position.



o Martin Kagan Litigation.

During July 1998, the Company was served with a summons and complaint for a case
in Circuit  Court of  Multnomah  County,  Oregon,  styled  Martin  Kagan v. ITEX
Corporation.  The complaint  alleges breach of a stock option agreement  between
the Company and Kagan and seeks to set aside a settlement  agreement between the
parties dated January 14, 1997. The Company  answered  thecomplaint  denying its
material  allegations.   Subsequently,  the  plaintiff  filed  a  first  amended
complaint  adding  Graham H. Norris,  the Company's  former  President and Chief
Executive Officer, as an additional party and modifying somewhat the allegations
of the original complaint.  The Company and Mr. Norris have answered the amended
complaint and denied all  allegations.  The Company has vigorously  defended the
action. The company has bonded the judgment that has been entered and guaranteed
the bond with a ertificate of deposit for $550,000. The company has appealed and
has been advised by its counsel  that it has a reasonable  chance for success in
overturning the decision.

o IBTEX, A.G. Litigation.

During September 1998, the Company was served with a summons and complaint for a
case in the Circuit Court of Multnomah  County,  Oregon,  styled IBTEX,  A.G. v.
ITEX  Corporation,  Donovan Snyder and Graham Norris,  Sr. The complaint alleges
breach of contract, breach of duty of good faith and fair dealing and violations
of the Oregon Franchise Act.

The  defendants  have answered the complaint  denying its material  allegations,
demanding that the disputes between IBTEX and the Company be arbitrated pursuant
to an arbitration agreement between the parties and requiring that the action be
stayed until such time as the  arbitration is complete.  The proceeding has been
abated and no  arbitration  has been set and the case has been  dormant for many
months.

o Wade Cook Financial Corporation Litigation.

During February 1998, an action was filed in Washington (Seattle) State Court by
Associated  Reciprocal  Traders,  Ltd., ("ART") an ITEX wholly owned subsidiary,
based on Wade Cook Financial  Corporation's ("WCFC") refusal to permit transfer,
without  restricted  legend, of WCFC stock issued to ART in exchange for a media
due bill. ART filed a Motion for Replevin and Preliminary  Injunction requesting
delivery  and  transfer  of the  certificates  of WCFC  stock to ART based  upon
compliance by ART with the  requirements  of Rule 144 of the  Securities  Act of
1933. After two separate hearings,  on October 2, 1998, the Court ruled that the
requirements of Rule 144 had been met, but that issues raised by WCFC concerning
the radio spots, pursuant to the due bill, required a trial of the merits of the
action.  During August 1999, the matter was settled. WCFC has agreed that ART is
the owner of 1,400,000  shares of WCFC  unrestricted  stock which may be sold by
ITEX at no more than 100,000 shares a month,  at current market prices,  subject
to a right of first refusal by WCFC. The settlement  agreement also provided for
the  transfer  of 300,000  ITEX trade  dollars to WCFC,  which the  Company  has
completed. As of April 28, 2000, the Company had realized approximately $176,000
from the sale of approximately 471,000 shares of its Wade Cook common stock.

o "John Doe" Litigation.

In July 1998,  the Company filed an action in Multnomah  County,  Oregon,  State
Court against 100 John Doe defendants,  that is,  individuals  whose  identities
were, at the time of filing,  unknown to the Company.  The Complaint  arose from
certain   anonymous   postings  on  the  Internet  which  the  Company  believed
constituted intentional  interference with the Company's economic relationships,
unfair trade practices,  civil conspiracy and, with respect to then President of
the Company Graham H. Norris,  defamation. The Complaint sought monetary damages
and injunctive relief. After filing the Complaint, the Company subpoened certain
Internet  Service  Providers to  determine  the true  identity of the  anonymous
posters.   Various  amendments  to  the  Complaint  were  filed  naming  certain
defendants  until the Company's Fifth Amended  Complaint was filed naming Leslie
L.  French and adding a claim for breach of a  settlement  agreement  previously
entered  into  between  Mr.  French  and the  Company in  connection  with other
litigation  in 1997.  Mr.  French  has  answered  the  Fifth  Amended  Complaint
essentially  denying  all of the  allegations  of the  Complaint  and  asserting
counterclaims  against  the  Company  for (1)  breach of  contract  related to a
Settlement Agreement previously entered into between French and the Company; (2)
fraud in the  inducement  in  connection  with  the  Settlement  Agreement;  (3)
securities  fraud;  and (4) unlawful  trade  practices.  The Company  denied the
allegations  of the  counterclaims.  In April 2000 the  parties  agreed upon and
executed a  settlement  of the matter,  which  resulted in the  dismissal of the
entire action.  The amount for which the matter was settled was not  significant
to the Company's financial position.

o Desert Rose Foods Litigation.

On April 28, 2000, ITEX Corporation was served with summons and complaint for an
action in the Circuit Court of Fairfax County, Virginia style Desert Rose Foods,
Inc. v. ITEX  Corporation  and ITEX USA,  Inc. The complaint  alleges  Breach of
Contract,  Fraud,  and  violations of federal law.  Plaintiff  asks for $750,000
compensatory damages,  punitive damages,  other statutory damages,  interest and
attorneys fees.  Plaintiff entered into a contract with the Company for delivery
of goods  valued at  approximately  $120,000.  The  Company has  retained  local
counsel in this case.  and is  vigorously  defending  the  matter.  The  Company
believes  Plaintiff's  complaint  is  frivolous.  The Company  has  successfully
defended  similar  actions.   The  Company  does  not  believe  this  action  is
significant to the Company's financial position.  The matter is set for trial in
April 2001.

o Antelope Company v. Zoring.

The  Company was served with a summons  and  complaint  on June 1, 2000,  in the
matter  of  Antelope  Company  v.  Zoring  International  Incorporated  and ITEX
Corporation,  filed in the  District  Court of the City and  County  of  Denver,
olorado. The complaint alleges that in December 1997, the plaintiff entered into
a lease with Zoring of certain office space in Denver,  Colorado,  and that ITEX
guaranteed  the lease.  Zoring is alleged to have defaulted on the lease and the
plaintiff is seeking to enforce the lease guaranty.  The Company agrees that the
lease was  breached,  but  contends  that the  plaintiff  failed to mitigate its
damages.  The Company  intends to defend the action and has set up a reserve for
loss in the event that the  plaintiff  is  successful.  The matter is  presently
pending the assignment of a trial date and the completion of discovery.

o Metro Sales v ITEX.

On May 28, 2000,  the Company was served with a summons and complaint out of the
Circuit Court of Multnomah County, Oregon, in the matter of Metro Sales v. ITEX.
The  complaint  alleges  breach of contract and  violation of an Oregon Blue Sky
statute. The Company denies all the allegations and intends to vigorously defend
this action.

o Skiers Edge Litigation.

On June 19, 2000, the Company was served with a summons and complaint out of the
District  Court for  Summit  County,  Colorado,  in the  matter  of Skiers  Edge
Condominium  Association v. George Owens. The complaint alleges that the Company
owes plaintiff association fees relating to interval timeshares that the Company
is alleged to own. The Company is defending this matter and does not foresee any
material impact from this matter.