SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): August 14, 2008

PFSweb, Inc.

(Exact name of registrant as specified in its charter)

Delaware (STATE OR OTHER JURISDICTION OF INCORPORATION)		000-28275 (COMMISSION FILE NUMBER)		75-2837058 (IRS EMPLOYER IDENTIFICATION NO.)

500 NORTH CENTRAL EXPRESSWAY
PLANO, TX 75074
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(972) 881-2900
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE )

N/A
(FORMER NAME OR ADDRESS, IF CHANGED SINCE LAST REPORT)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

INFORMATION TO BE INCLUDED IN THE REPORT

ITEM 2.02.		Results of Operations and Financial Condition

     On August 14, 2008, PFSweb, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2008. Attached to this current report on Form 8-K is a copy of the related press release dated August 14, 2008. The information in this Report on Form 8-K, and the exhibit hereto, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section.

Exhibit No.		Description
99.1		Press Release Issued August 14, 2008

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact:
Mark C. Layton		Todd Fromer / Garth Russell
Senior Partner and Chief Executive Officer		Investor Relations
Or Thomas J. Madden		KCSA Strategic Communications
Senior Partner and Chief Financial Officer		(212) 896-1215 / (212) 896-1250
(972) 881-2900		tfromer@kcsa.com / grussell@kcsa.com

PFSweb Reports Profitable Second Quarter 2008 Results

Service Fee Revenue Increases 20% to $21.3 million

PLANO, Texas, August 14, 2008 — PFSweb, Inc. (Nasdaq: PFSW), an international business process outsourcing provider of end-to-end web commerce solutions and an online discount retailer, today announced its financial results for the second quarter and six months ended June 30, 2008.

Summary of consolidated results for the second quarter ended June 30, 2008:

	•		Total reported revenue was $110.7 million, compared to $108.4 million for the second quarter of 2007;
	•		Adjusted EBITDA (as defined) was $2.5 million versus $3.4 million for the same period last year;
	•		Net income was $62,000, or $0.01 per basic and diluted share, compared to a net income of $154,000, or $0.02 per basic and diluted share, for the second quarter of 2007;
	•		Non-GAAP net income (as defined) was $0.4 million, or $0.04 per basic and diluted share, compared to non-GAAP net income of $0.5 million, or $0.06 per basic and $0.05 per diluted share, for the second quarter of 2007;
	•		Merchandise sales (as defined) totaled approximately $631 million for the second quarter of 2008 versus $649 million for the same period last year;
	•		Total cash, cash equivalents and restricted cash equaled $17.8 million as of June 30, 2008 compared to $16.3 million as of December 31, 2007.

Summary of consolidated results for the six months ended June 30, 2008:

	•		Total reported revenue was $229.2 million, compared to $212.8 million for the six months ended June 30, 2007;
	•		Adjusted EBITDA (as defined) was $5.2 million versus $4.1 million for the same period last year;
	•		Net income was $476,000, or $0.05 per basic and diluted share, compared to a net loss of $2.2 million, or $0.22 per basic and diluted share, for the six months ended June 30, 2007;
	•		Non-GAAP net income (as defined) was $1.2 million, or $0.12 per basic and diluted share, compared to a non-GAAP net loss of $1.4 million, or $0.14 per basic and diluted share, for the same period last year;

•

Merchandise sales (as defined) totaled nearly $1.4 billion versus $1.3 billion for the same period last year.

Mark Layton, Chairman and Chief Executive Officer of PFSweb, stated, “During the second quarter we continued to perform within our expectations for this year, delivering our fifth consecutive profitable quarter and Adjusted EBITDA of $2.5 million. Notwithstanding the macroeconomics affecting the U.S. retail industry, our diversified roster of new and existing clients and customers in multiple industries have allowed us to increase revenue, generate positive cash flow and maintain a sound balance sheet during this year.”

All share data and per share data in this press release reflect the impact of the Company’s 1 for 4.7 reverse stock split effected June 2, 2008.

Summary of results by business:

Service Fee Business:

For the second quarter of 2008, Service Fee revenue increased 20.4% to $21.3 million, compared with $17.6 million for the same period in 2007. The Service Fee business reported Adjusted EBITDA of $1.0 million for the second quarter of 2008, compared to $1.9 million for the same period last year.

For the six months ended June 30, 2008, Service Fee revenue increased 21.5% to $42.1 million, from $34.6 million for the same period in 2007. The Service Fee business reported Adjusted EBITDA of $2.7 million for the six months ended June 30, 2008, compared to $2.2 million for the same period last year.

Mike Willoughby, President of PFSweb’s services division, commented, “Second quarter revenue for our Service Fee business, which increased approximately 20% from the prior year period, was driven by new contracts, temporary increased activity for one of our largest Service Fee clients and incremental project activity. Over the past several months, we participated in the launch of a new web commerce site for Ashley Stewart providing order management, customer care and fulfillment services for the initiative. We also completed the development of a new platform for Roots.com. This new platform utilizes our enhanced end-to-end offering, which features the Demandware eCommerce platform and integration with select interactive marketing partners, including Sitebrand and Coremetrics. The Roots.com Canadian and U.S. online storefronts, which also feature a new user experience design by Fluid, were officially launched last week.

“I am also pleased to report continued progress in winning new business, including both signed contracts as well as contracts still being finalized, which we partially attribute to our new end-to-end offering. PFSweb will formally announce each agreement in a press release or quarterly conference call if such disclosure is approved by the client. Many of these new arrangements are with brand name companies that are either moving from one of our competitors’ services to take advantage of our new end-to-end offering or are looking to take advantage of the eCommerce space for the first time. We believe these new client wins demonstrates significant demand for our Service Fee business, particularly with our new end-to-end offering. Our current pipeline for potential new business is in excess of $35 million, including contracts still being finalized, which is in line with our expectations for this time of year and is targeted to increase during the fall season.”

Supplies Distributors Business:

For the second quarter of 2008, Supplies Distributors revenue was $60.0 million, compared to $57.6 million for the same period last year. Adjusted EBITDA was $2.1 million for the second quarter of 2008, consistent with $2.1 million for the same period last year.

For the six months ended June 30, 2008, Supplies Distributors revenue was $122.3 million, compared to $116.4 million for the same period last year. Adjusted EBITDA was $3.7 million for the six months ended June 30, 2008, a slight increase compared to $3.4 million for the same period last year.

Mr. Willoughby continued, “For the quarter and first half of 2008, the Supplies Distributors business has continued to perform well. Revenue increased approximately four percent in the second quarter and gross margins were approximately 8%, which is slightly above their normal range due to the impact of certain incremental inventory cost reductions.”

eCOST.com Business:

For the second quarter of 2008, eCOST.com revenue was $23.0 million, compared to $27.1 million for the same period in 2007. Adjusted EBITDA for eCOST.com in the quarter was a loss of $0.6 million, consistent with the Adjusted EBITDA loss of $0.6 million for the same period last year.

For the six months ended June 30, 2008, eCOST.com revenues were $51.0 million, compared to $48.7 million for the same period in 2007. Adjusted EBITDA for eCOST.com in the six months ended June 30, 2008 was a loss of $1.2 million, compared to a loss of $1.5 million for the same period last year.

Mr. Layton continued, “Considering the macroeconomic forces pressuring the entire U.S. retail industry, we believe the overall health of eCOST.com continues to improve due to the enhancements we have made to the site and underlying business. During the quarter, eCOST.com experienced a softening in its business to business segment, and its business to consumer segment was relatively flat compared to last year. We improved our gross profit margin through implementation of new and more sophisticated automated pricing tools and from a growing mix of higher margin product sales, including our new ‘For the Home’ and ‘Sports and Leisure’ stores, especially in our business to consumer segment, and we continue to focus increased efforts here.

“Throughout the quarter we continued to make progress towards the overall site redevelopment and launching our new ‘For the Home’ and ‘Sports and Leisure’ products. We remain confident our continued emphasis on making site enhancements, introducing new products and focus on achieving higher gross margins will help us in our goal to achieve cash flow breakeven at eCOST.com,” Mr. Layton concluded.

Financial Targets for Fiscal Year 2008

PFSweb continues to target total consolidated revenues, excluding pass-through revenues, of approximately $445 million to $475 million and consolidated Adjusted EBITDA of $10 – $12 million for calendar year 2008. Non-GAAP net income, which excludes the impact of stock-based compensation and amortization of identifiable intangible assets, is targeted to be approximately $1 — $3 million for 2008. However, further weakening in the U.S. economy may cause us to fall toward the lower end of these targets.

Conference Call Information

Management will host a conference call at 9 a.m. Central Time (10 a.m. Eastern Time) on August 14, 2008 to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter the pin number (59375549) at least five minutes before the scheduled start time. Investors can also access the call in a “listen only” mode via the Internet at the Company’s website, www.pfsweb.com. Please allow extra time prior to the call to visit the site and download any necessary audio software.

A digital replay of the conference call will be available through September 14, 2008 at (800) 642-1687, pin number (59375549). The replay also will be available at the Company’s website for a limited time.

Non-GAAP Financial Measures

This news release contains the non-GAAP measures non-GAAP net income (loss), Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), and Adjusted EBITDA.

Non-GAAP net income (loss) represents net income (loss) calculated in accordance with U.S. GAAP as adjusted for the impact of non-cash stock-based compensation expense and amortization of identifiable intangible assets.

EBITDA represents earnings (or losses) before interest, income taxes, depreciation, and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation and merger integration related expenses.

Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are used by management, analysts, investors and other interested parties in evaluating our operating performance compared to that of other companies in our industry, as the calculation of non-GAAP net income (loss) eliminates the effect of stock-based compensation and amortization of intangible assets and EBITDA and Adjusted EBITDA further eliminates the effect of financing, income taxes, the accounting effects of capital spending and certain other merger related expenses, which items may vary from different companies for reasons unrelated to overall operating performance.

PFSweb believes these non-GAAP measures provide useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures included in this press release have been reconciled to the GAAP results in the attached tables.

Merchandise Sales

Merchandise sales represent the estimated value of all fulfillment activity that flows through PFSweb including whether or not PFSweb is the seller of the merchandise or records the full amount of such sales on its financial statements, excluding service fee revenues that PFSweb might recognize for the underlying sales transactions. PFSweb uses merchandise sales as an operating metric to allow investors to gain a more thorough understanding of its business and business volume, in addition to GAAP net revenue.

About PFSweb, Inc.

PFSweb develops and deploys integrated business infrastructure solutions and fulfillment services for Fortune 1000, Global 2000 and brand name companies, including third party logistics, call center support and e-commerce services. The company serves a multitude of industries and company types, including such clients as LEGO, Discovery Commerce, Riverbed, MARS Drinks North America, Hewlett-Packard, International Business Machines, Hawker Beechcraft Corp., Rene Furterer USA, Roots Canada Ltd. and Xerox.

Through its wholly owned eCOST.com subsidiary, PFSweb also serves as a leading multi-category online discount retailer of high-quality new, “close-out” and manufacturer recertified brand-name merchandise for consumers and small to medium size business buyers. The eCOST.com brand markets approximately 170,000 different products from leading manufacturers such as Sony, JVC, Canon, Hewlett-Packard, Garmin, Panasonic, Toshiba, Microsoft, Kitchen Aid, Panasonic, Black & Decker, Cuisinart, Coleman, Wilson and Nike primarily over the Internet and through direct marketing.

To find out more about PFSweb, Inc. (NASDAQ: PFSW), visit the company’s websites at http://www.pfsweb.com and http://www.ecost.com.

The matters discussed herein consist of forward-looking information under the Private Securities Litigation Reform Act of 1995 and is subject to and involves risks and uncertainties, which could cause actual results to differ materially from the forward-looking information. PFSweb’s Annual Report on Form 10-K for the year ended December 31, 2007 and Quarterly Report on From 10-Q for the quarter ended June 30, 2008 identifies certain factors that could cause actual results to differ materially from those projected in any forward looking statements made and investors are advised to review the Annual Report and the Risk Factors described therein. These factors include: our ability to retain and expand relationships with existing clients and attract and implement new clients; our reliance on the fees generated by the transaction volume or product sales of our clients; our reliance on our clients’ projections or transaction volume or product sales; our dependence upon our agreements with IBM and Infoprint Solutions; our dependence upon our agreements with our major clients; our client mix, their business volumes and the seasonality of their business; our ability to finalize pending contracts; the impact of strategic alliances and acquisitions; trends in the e-commerce, outsourcing, government regulation both foreign and domestic and the market for our services; whether we can continue and manage growth; increased competition; our ability to generate more revenue and achieve sustainable profitability; effects of changes in profit margins; the customer and supplier concentration of our business; the unknown effects of possible system failures and rapid changes in technology; foreign currency risks and other risks of operating in foreign countries; potential litigation; the impact of our reverse stock split; our dependency on key personnel; the impact of new accounting standards and changes in existing accounting rules or the interpretations of those rules; our ability to renew or replace our credit facilities or find alternative financing; our ability to raise additional capital or obtain additional financing; our ability and the ability of our subsidiaries to borrow under current financing arrangements and maintain compliance with debt covenants; relationship with and our guarantees of certain of the liabilities and indebtedness of our subsidiaries; our ability to successfully achieve the anticipated benefits of the eCOST merger: eCOST’s potential indemnification obligations to its former parent; eCOST’s ability to maintain existing and build new relationships with manufacturers and vendors and the success of its advertising and marketing efforts; eCOST’s ability to increase its sales revenue and sales margin and improve operating efficiencies and eCOST’s ability to generate a profit and cash flows sufficient to cover the values of its intangible assets. PFSweb undertakes no obligation to update publicly any forward-looking statement for any reason, even if new information becomes available or other events occur in the future. There may be additional risks that we do not currently view as material or that are not presently known.

(Tables Follow)

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations (A)
(In Thousands, Except Per Share Data)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
REVENUES:
Product revenue, net		$	83,048			$	84,678			$	173,339			$	165,135
Service fee revenue			21,254				17,646				42,066				34,608
Pass-thru revenue			6,382				6,076				13,748				13,064
Total revenues			110,684				108,400				229,153				212,807
COSTS OF REVENUES:
Cost of product revenue			76,368				77,798				160,347				152,569
Cost of service fee revenue			15,105				12,635				28,949				25,299
Cost of pass-thru revenue			6,382				6,076				13,748				13,064
Total costs of revenues			97,855				96,509				203,044				190,932
Gross profit			12,829				11,891				26,109				21,875
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			11,849				10,615				23,943				21,816
MERGER INTEGRATION EXPENSE			—				—				—				150
AMORTIZATION OF IDENTIFIABLE INTANGIBLES			201				204				403				408
Total operating expenses			12,050				10,819				24,346				22,374
Income (loss) from operations			779				1,072				1,763				(499	)
INTEREST EXPENSE, NET			366				658				696				1,242
Income (loss) before income taxes			413				414				1,067				(1,741	)
INCOME TAX PROVISION			351				260				591				466
NET INCOME (LOSS)		$	62			$	154			$	476			$	(2,207	)
NET INCOME (LOSS) PER SHARE (B)
Basic		$	0.01			$	0.02			$	0.05			$	(0.22	)
Diluted		$	0.01			$	0.02			$	0.05			$	(0.22	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (B):
Basic			9,900				9,889				9,896				9,888
Diluted			10,037				10,002				10,045				9,888
NON-GAAP NET INCOME (LOSS)		$	391			$	546			$	1,208			$	(1,402	)
EBITDA		$	2,341			$	3,166			$	4,906			$	3,589
ADJUSTED EBITDA		$	2,469			$	3,354			$	5,235			$	4,136

PFSweb, Inc. and Subsidiaries
Reconciliation of certain Non-GAAP Items to GAAP
(In Thousands, Except Per Share Data)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
NET INCOME (LOSS)		$	62			$	154			$	476			$	(2,207	)
Income tax expense			351				260				591				466
Interest expense			366				658				696				1,242
Depreciation and amortization			1,562				2,094				3,143				4,088
EBITDA		$	2,341			$	3,166			$	4,906			$	3,589
Stock-based compensation			128				188				329				397
Merger integration related expenses			—				—				—				150
ADJUSTED EBITDA		$	2,469			$	3,354			$	5,235			$	4,136

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
NET INCOME (LOSS)		$	62			$	154			$	476			$	(2,207	)
Stock-based compensation			128				188				329				397
Amortization of identifiable intangible assets			201				204				403				408
NON-GAAP NET INCOME (LOSS)		$	391			$	546			$	1,208			$	(1,402	)
NET INCOME (LOSS) PER SHARE:
Basic		$	0.01			$	0.02			$	0.05			$	(0.22	)
Diluted		$	0.01			$	0.02			$	0.05			$	(0.22	)
NON-GAAP NET INCOME (LOSS) Per Share:
Basic		$	0.04			$	0.06			$	0.12			$	(0.14	)
Diluted		$	0.04			$	0.05			$	0.12			$	(0.14	)

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In Thousands, Except Share Data)

		June 30,				December 31,
		2008				2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	13,972			$	14,272
Restricted cash			3,836				2,021
Accounts receivable, net of allowance for doubtful accounts of $999 and $1,483 at June 30, 2008 and December 31, 2007, respectively			39,669				48,493
Inventories, net of reserves of $2,358 and $2,080 at June 30, 2008 and December 31, 2007, respectively			52,715				46,392
Other receivables			15,995				10,372
Prepaid expenses and other current assets			3,795				2,608
Total current assets			129,982				124,158
PROPERTY AND EQUIPMENT, net			11,122				11,918
IDENTIFIABLE INTANGIBLES			5,421				5,824
GOODWILL			15,362				15,362
OTHER ASSETS			933				911
Total assets			162,820				158,173
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations		$	17,601			$	22,238
Trade accounts payable			69,117				56,975
Accrued expenses			22,357				22,438
Total current liabilities			109,075				101,651
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion			2,561				6,378
OTHER LIABILITIES			831				1,302
Total liabilities			112,467				109,331
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued and outstanding			—				—
Common stock, $.001 par value; 75,000,000 shares authorized; 9,911,762 and 9,909,401 shares issued at June 30, 2008 and December 31, 2007, respectively; and 9,930,123 and 9,891,040 outstanding as of June 30, 2008 and December 31, 2007, respectively			10				10
Additional paid-in capital			92,496				92,121
Accumulated deficit			(45,262	)			(45,738	)
Accumulated other comprehensive income			3,194				2,534
Treasury stock at cost, 18,361 shares			(85	)			(85	)
Total shareholders’ equity			50,353				48,842
Total liabilities and shareholders’ equity		$	162,820			$	158,173

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended June 30, 2008
(In Thousands)

						Supplies
		PFSweb				Distributors				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	60,025			$	23,023			$	—			$	83,048
Service fee revenue			21,254				—				—				—				21,254
Service fee revenue — affiliate			2,069				—				—				(2,069	)			—
Pass-thru revenue			6,389				—				—				(7	)			6,382
Total revenues			29,712				60,025				23,023				(2,076	)			110,684
COSTS OF REVENUES:
Cost of product revenue			—				55,247				21,121				—				76,368
Cost of service fee revenue			15,771				—				—				(666	)			15,105
Cost of pass-thru revenue			6,389				—				—				(7	)			6,382
Total costs of revenues			22,160				55,247				21,121				(673	)			97,855
Gross profit			7,552				4,778				1,902				(1,403	)			12,829
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			7,946				2,721				2,585				(1,403	)			11,849
AMORTIZATION OF IDENTIFIABLE INTANGIBLES			—				—				201				—				201
Total operating expenses			7,946				2,721				2,786				(1,403	)			12,050
Income (loss) from operations			(394	)			2,057				(884	)			—				779
INTEREST EXPENSE (INCOME), NET			(1	)			361				6				—				366
Income (loss) before income taxes			(393	)			1,696				(890	)			—				413
INCOME TAX PROVISION (BENEFIT)			(249	)			600				—				—				351
NET INCOME (LOSS)		$	(144	)		$	1,096			$	(890	)		$	—			$	62
NON-GAAP NET INCOME (LOSS)		$	(16	)		$	1,096			$	(689	)		$	—			$	391
EBITDA		$	919			$	2,063			$	(641	)		$	—			$	2,341
ADJUSTED EBITDA		$	1,047			$	2,063			$	(641	)		$	—			$	2,469
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	(144	)		$	1,096			$	(890	)		$	—			$	62
Income tax expense (benefit)			(249	)			600				—				—				351
Interest expense (income)			(1	)			361				6				—				366
Depreciation and amortization			1,313				6				243				—				1,562
EBITDA		$	919			$	2,063			$	(641	)		$	—			$	2,341
Stock-based compensation			128				—				—				—				128
ADJUSTED EBITDA		$	1,047			$	2,063			$	(641	)		$	—			$	2,469
A reconciliation of NET INCOME(LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	(144	)		$	1,096			$	(890	)		$	—			$	62
Stock-based compensation			128				—				—				—				128
Amortization of intangible assets			—				—				201				—				201
NON-GAAP NET INCOME (LOSS)		$	(16	)		$	1,096			$	(689	)		$	—			$	391

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Six Months Ended June 30, 2008
(In Thousands)

						Supplies
		PFSweb				Distributors				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	122,347			$	50,992			$	—			$	173,339
Service fee revenue			42,066				—				—				—				42,066
Service fee revenue — affiliate			4,220				—				—				(4,220	)			—
Pass-thru revenue			13,706				—				—				42				13,748
Total revenues			59,992				122,347				50,992				(4,178	)			229,153
COSTS OF REVENUES:
Cost of product revenue			—				113,499				46,848				—				160,347
Cost of service fee revenue			30,322				—				—				(1,373	)			28,949
Cost of pass-thru revenue			13,706				—				—				42				13,748
Total costs of revenues			44,028				113,499				46,848				(1,331	)			203,044
Gross profit			15,964				8,848				4,144				(2,847	)			26,109
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			16,259				5,139				5,392				(2,847	)			23,943
AMORTIZATION OF IDENTIFIABLE INTANGIBLES			—				—				403				—				403
Total operating expenses			16,259				5,139				5,795				(2,847	)			24,346
Income (loss) from operations			(295	)			3,709				(1,651	)			—				1,763
INTEREST EXPENSE (INCOME), NET			(61	)			750				7				—				696
Income (loss) before income taxes			(234	)			2,959				(1,658	)			—				1,067
INCOME TAX PROVISION (BENEFIT)			(444	)			1,035				—				—				591
NET INCOME (LOSS)		$	210			$	1,924			$	(1,658	)		$	—			$	476
NON-GAAP NET INCOME (LOSS)		$	539			$	1,924			$	(1,255	)		$	—			$	1,208
EBITDA		$	2,353			$	3,719			$	(1,166	)		$	—			$	4,906
ADJUSTED EBITDA		$	2,682			$	3,719			$	(1,166	)		$	—			$	5,235
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	210			$	1,924			$	(1,658	)		$	—			$	476
Income tax expense (benefit)			(444	)			1,035				—				—				591
Interest expense (income)			(61	)			750				7				—				696
Depreciation and amortization			2,648				10				485				—				3,143
EBITDA		$	2,353			$	3,719			$	(1,166	)		$	—			$	4,906
Stock-based compensation			329				—				—				—				329
ADJUSTED EBITDA		$	2,682			$	3,719			$	(1,166	)		$	—			$	5,235
A reconciliation of NET INCOME(LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	210			$	1,924			$	(1,658	)		$	—			$	476
Stock-based compensation			329				—				—				—				329
Amortization of intangible assets			—				—				403				—				403
NON-GAAP NET INCOME (LOSS)		$	539			$	1,924			$	(1,255	)		$	—			$	1,208

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of June 30, 2008
(In Thousands)

						Supplies
		PFSweb				Distributors				eCOST				Eliminations				Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	12,217			$	1,698			$	57			$	—			$	13,972
Restricted cash			1,575				1,644				617				—				3,836
Accounts receivable, net			14,294				24,249				1,713				(587	)			39,669
Inventories, net			—				45,731				6,984				—				52,715
Other receivables			—				15,995				—				—				15,995
Prepaid expenses and other current assets			2,275				1,421				99				—				3,795
Total current assets			30,361				90,738				9,470				(587	)			129,982
PROPERTY AND EQUIPMENT, net			10,664				92				366				—				11,122
NOTES RECEIVABLE FROM AFFILIATES			19,595				—				—				(19,595	)			—
INVESTMENT IN AFFILIATES			39,242				—				—				(39,242	)			—
IDENTIFIABLE INTANGIBLES			—				—				5,421				—				5,421
GOODWILL			—				—				15,362				—				15,362
OTHER ASSETS			788				—				145				—				933
Total assets			100,650				90,830				30,764				(59,424	)			162,820
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations		$	5,126			$	12,475			$	—			$	—			$	17,601
Trade accounts payable			9,156				53,590				6,958				(587	)			69,117
Accrued expenses			11,748				8,043				2,566				—				22,357
Total current liabilities			26,030				74,108				9,524				(587	)			109,075
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion			2,561				—				—				—				2,561
NOTES PAYABLE TO AFFILIATES			—				5,505				14,090				(19,595	)			—
OTHER LIABILITIES			597				—				234				—				831
Total liabilities			29,188				79,613				23,848				(20,182	)			112,467
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock			10				—				19				(19	)			10
Capital contributions			—				1,000				—				(1,000	)			—
Additional paid-in capital			92,496				—				28,059				(28,059	)			92,496
Retained earnings (accumulated deficit)			(24,150	)			6,761				(21,162	)			(6,711	)			(45,262	)
Accumulated other comprehensive income			3,191				3,456				—				(3,453	)			3,194
Treasury stock			(85	)			—				—				—				(85	)
Total shareholders’ equity			71,462				11,217				6,916				(39,242	)			50,353
Total liabilities and shareholders’ equity		$	100,650			$	90,830			$	30,764			$	(59,424	)		$	162,820

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended June 30, 2007
(In Thousands)

						Supplies
		PFSweb				Distributors				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	57,595			$	27,083			$	—			$	84,678
Service fee revenue			17,646				—				—				—				17,646
Service fee revenue — affiliate			2,040				—				—				(2,040	)			—
Pass-thru revenue			6,145				—				—				(69	)			6,076
Total revenues			25,831				57,595				27,083				(2,109	)			108,400
COSTS OF REVENUES:
Cost of product revenue			—				52,912				24,886				—				77,798
Cost of service fee revenue			13,297				—				—				(662	)			12,635
Cost of pass-thru revenue			6,145				—				—				(69	)			6,076
Total costs of revenues			19,442				52,912				24,886				(731	)			96,509
Gross profit			6,389				4,683				2,197				(1,378	)			11,891
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			6,551				2,623				2,819				(1,378	)			10,615
AMORTIZATION OF IDENTIFIABLE INTANGIBLES			—				—				204				—				204
Total operating expenses			6,551				2,623				3,023				(1,378	)			10,819
Income (loss) from operations			(162	)			2,060				(826	)			—				1,072
INTEREST EXPENSE (INCOME), NET			11				661				(14	)			—				658
Income (loss) before income taxes			(173	)			1,399				(812	)			—				414
INCOME TAX PROVISION (BENEFIT)			(186	)			446				—				—				260
NET INCOME (LOSS)		$	13			$	953			$	(812	)		$	—			$	154
NON-GAAP NET INCOME (LOSS)		$	201			$	953			$	(608	)		$	—			$	546
EBITDA		$	1,676			$	2,065			$	(575	)		$	—			$	3,166
ADJUSTED EBITDA		$	1,864			$	2,065			$	(575	)		$	—			$	3,354
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	13			$	953			$	(812	)		$	—			$	154
Income tax expense (benefit)			(186	)			446				—				—				260
Interest expense (income)			11				661				(14	)			—				658
Depreciation and amortization			1,838				5				251				—				2,094
EBITDA		$	1,676			$	2,065			$	(575	)		$	—			$	3,166
Stock-based compensation			188				—				—				—				188
ADJUSTED EBITDA		$	1,864			$	2,065			$	(575	)		$	—			$	3,354
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	13			$	953			$	(812	)		$	—			$	154
Stock-based compensation			188				—				—				—				188
Amortization of intangible assets			—				—				204				—				204
NON-GAAP NET INCOME (LOSS)		$	201			$	953			$	(608	)		$	—			$	546

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Six Months Ended June 30, 2007
(In Thousands)

						Supplies
		PFSweb				Distributors				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	116,405			$	48,730			$	—			$	165,135
Service fee revenue			34,608				—				—				—				34,608
Service fee revenue — affiliate			4,066				—				—				(4,066	)			—
Pass-thru revenue			13,241				—				—				(177	)			13,064
Total revenues			51,915				116,405				48,730				(4,243	)			212,807
COSTS OF REVENUES:
Cost of product revenue			—				107,851				44,722				(4	)			152,569
Cost of service fee revenue			26,599				—				—				(1,300	)			25,299
Cost of pass-thru revenue			13,241				—				—				(177	)			13,064
Total costs of revenues			39,840				107,851				44,722				(1,481	)			190,932
Gross profit			12,075				8,554				4,008				(2,762	)			21,875
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			13,848				5,126				5,604				(2,762	)			21,816
MERGER INTEGRATION EXPENSE			—				—				150				—				150
AMORTIZATION OF IDENTIFIABLE INTANGIBLES			—				—				408				—				408
Total operating expenses			13,848				5,126				6,162				(2,762	)			22,374
Income (loss) from operations			(1,773	)			3,428				(2,154	)			—				(499	)
INTEREST EXPENSE (INCOME), NET			47				1,226				(31	)			—				1,242
Income (loss) before income taxes			(1,820	)			2,202				(2,123	)			—				(1,741	)
INCOME TAX PROVISION (BENEFIT)			(329	)			795				—				—				466
NET INCOME (LOSS)		$	(1,491	)		$	1,407			$	(2,123	)		$	—			$	(2,207	)
NON-GAAP NET INCOME (LOSS)		$	(1,094	)		$	1,407			$	(1,715	)		$	—			$	(1,402	)
EBITDA		$	1,809			$	3,438			$	(1,658	)		$	—			$	3,589
ADJUSTED EBITDA		$	2,206			$	3,438			$	(1,508	)		$	—			$	4,136
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	(1,491	)		$	1,407			$	(2,123	)		$	—			$	(2,207	)
Income tax expense (benefit)			(329	)			795				—				—				466
Interest expense (income)			47				1,226				(31	)			—				1,242
Depreciation and amortization			3,582				10				496				—				4,088
EBITDA		$	1,809			$	3,438			$	(1,658	)		$	—			$	3,589
Stock-based compensation			397				—				—				—				397
Merger integration expense			—				—				150				—				150
ADJUSTED EBITDA		$	2,206			$	3,438			$	(1,508	)		$	—			$	4,136
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	(1,491	)		$	1,407			$	(2,123	)		$	—			$	(2,207	)
Stock-based compensation			397				—				—				—				397
Amortization of intangible assets			—				—				408				—				408
NON-GAAP NET INCOME (LOSS)		$	(1,094	)		$	1,407			$	(1,715	)		$	—			$	(1,402	)