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Document and Entity Information - USD ($)	6 Months Ended
Document and Entity Information - USD ($)	Jun. 30, 2011	Aug. 12, 2011	Jun. 30, 2010
Document and Entity Information [Abstract]
Entity Registrant Name	PFSWEB INC
Entity Central Index Key	0001095315
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 34,480,114
Entity Common Stock, Shares Outstanding		12,648,789

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2011	Dec. 31, 2010
CURRENT ASSETS:
Cash and cash equivalents	$ 18,959	$ 18,430
Restricted cash	1,267	1,853
Accounts receivable, net of allowance for doubtful accounts of $718 and $754 at June 30, 2011 and December 31, 2010, respectively	37,225	41,438
Inventories, net of reserves of $1,582 and $1,561 at June 30, 2011 and December 31, 2010, respectively	38,985	35,161
Assets of discontinued operations	0	2,776
Other receivables	12,779	14,539
Prepaid expenses and other current assets	4,405	3,580
Total current assets	113,620	117,777
PROPERTY AND EQUIPMENT, net	10,775	9,124
ASSETS OF DISCONTINUED OPERATIONS	0	1,126
OTHER ASSETS	2,216	2,203
Total assets	126,611	130,230
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations	19,191	18,320
Trade accounts payable	49,134	55,692
Deferred revenue	5,470	5,254
Accrued expenses	18,690	15,870
Total current liabilities	92,485	95,136
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion	1,135	2,136
OTHER LIABILITIES	4,074	3,608
Total liabilities	$ 97,694	$ 100,880
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued and outstanding	$ 0	$ 0
Common stock, $0.001 par value; 35,000,000 shares authorized; 12,667,150 and 12,255,064 shares issued at June 30, 2011 and December 31, 2010, respectively; and 12,648,789 and 12,236,703 outstanding at June 30, 2011 and December 31, 2010, respectively	13	12
Additional paid-in capital	103,511	101,229
Accumulated deficit	(76,833)	(73,332)
Accumulated other comprehensive income	2,311	1,526
Treasury stock at cost, 18,361 shares	(85)	(85)
Total shareholders' equity	28,917	29,350
Total liabilities and shareholders' equity.	$ 126,611	$ 130,230

Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2011	Dec. 31, 2010
CURRENT ASSETS:
Accounts receivable, net of allowance for doubtful accounts	$ 718	$ 754
Inventories, net of reserves	$ 1,582	$ 1,561
SHAREHOLDERS' EQUITY:
Preferred stock, par value	$ 1.00	$ 1.00
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	35,000,000	35,000,000
Common stock, shares issued	12,667,150	12,255,064
Common stock, shares outstanding	12,648,789	12,236,703
Treasury stock, shares	18,361	18,361

Interim Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
REVENUES:
Product revenue, net	$ 38,799	$ 43,654	$ 84,082	$ 89,276
Service fee revenue	20,970	16,567	39,870	32,546
Pass-through revenue	8,239	6,186	16,445	12,820
Total revenues	68,008	66,407	140,397	134,642
COSTS OF REVENUES:
Cost of product revenue	35,411	40,623	77,877	82,985
Cost of service fee revenue	15,795	11,987	29,578	23,441
Cost of pass-through revenue	8,239	6,186	16,445	12,820
Total costs of revenues	59,445	58,796	123,900	119,246
Gross profit	8,563	7,611	16,497	15,396
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, including stock based compensation expense of $399 and $262 in the three months ended June 30, 2011 and 2010, respectively and $709 and $358 in the six months ended June 30, 2011 and 2010, respectively	9,430	8,378	18,718	16,986
Loss from operations	(867)	(767)	(2,221)	(1,590)
INTEREST EXPENSE, net	270	234	461	488
Loss from continuing operations before income taxes	(1,137)	(1,001)	(2,682)	(2,078)
INCOME TAX EXPENSE	95	54	230	180
LOSS FROM CONTINUING OPERATIONS	(1,232)	(1,055)	(2,912)	(2,258)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX	14	(440)	(589)	(446)
NET LOSS	$ (1,218)	$ (1,495)	$ (3,501)	$ (2,704)
LOSS PER SHARE FROM CONTINUING OPERATIONS:
Basic	$ (0.10)	$ (0.10)	$ (0.23)	$ (0.22)
Diluted	(0.10)	(0.10)	(0.23)	(0.22)
LOSS PER SHARE INCLUDING DISCONTINUED OPERATIONS:
Basic	(0.10)	(0.14)	(0.28)	(0.26)
Diluted	$ (0.10)	$ (0.14)	$ (0.28)	$ (0.26)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic	12,567	10,796	12,418	10,369
Diluted	12,567	10,796	12,418	10,369

Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (3,501)	$ (2,704)
Loss from discontinued operations	(589)	(446)
Loss from continuing operations	(2,912)	(2,258)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	3,038	3,134
Provision for doubtful accounts	22	76
Provision for excess and obsolete inventory	17	64
Deferred income taxes	32	(8)
Stock based compensation expense	709	358
Changes in operating assets and liabilities:
Restricted cash	75	108
Accounts receivable	4,987	2,985
Inventories, net	(2,540)	513
Prepaid expenses, other receivables and other assets	1,568	(803)
Accounts payable, deferred revenue, accrued expenses and other liabilities	(5,378)	(619)
Net cash provided by (used in) continuing operating activities	(382)	3,550
Net cash provided by (used in) discontinued operating activities	1,254	(388)
Net cash provided by operating activities	872	3,162
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(4,016)	(1,876)
Proceeds from sale of eCOST subsidiary	2,327
Net cash used in investing activities	(1,689)	(1,876)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock	1,574	7,286
Decrease in restricted cash	511	578
Payments on capital lease obligations	(488)	(738)
Payments on debt, net	(537)	(3,256)
Net cash provided by financing activities	1,060	3,870
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	286	(558)
NET INCREASE IN CASH AND CASH EQUIVALENTS	529	4,598
CASH AND CASH EQUIVALENTS, beginning of period	18,430	14,812
CASH AND CASH EQUIVALENTS, end of period	18,959	19,410
Non-cash investing and financing activities:
Property and equipment acquired under debt and capital leases	$ 685	$ 355

Overview and Basis of Presentation	6 Months Ended
Overview and Basis of Presentation	Jun. 30, 2011
Overview and Basis of Presentation [Abstract]
OVERVIEW AND BASIS OF PRESENTATION	1. *OVERVIEW AND BASIS OF PRESENTATION* PFSweb, Inc. and its subsidiaries are collectively referred to as the “Company;” “Supplies Distributors” refers to Supplies Distributors, Inc. and its subsidiaries; “Retail Connect” refers to PFSweb Retail Connect, Inc.; and “PFS” refers to Priority Fulfillment Services, Inc. and its subsidiaries and affiliates, excluding Supplies Distributors and Retail Connect. In connection with the sale of certain of the assets of eCOST.com, Inc. (“eCOST”) described below, the name of eCOST was changed to PFSweb Retail Connect, Inc. in March 2011. *PFS Overview* PFS is an international business process outsourcing provider of end-to-end eCommerce solutions to major brand name companies seeking to optimize their supply chain and to enhance their traditional and online business channels and initiatives in the United States, Canada, and Europe. PFS offers a broad range of service offerings that include digital marketing, eCommerce technologies, order management, customer care, logistics and fulfillment, financial management and professional consulting. *Supplies Distributors Overview* Supplies Distributors, PFS and InfoPrint Solutions Company (“IPS”), a wholly-owned subsidiary of RICOH Company Limited, have entered into master distributor agreements under which Supplies Distributors acts as a master distributor of various products, primarily IPS product. Supplies Distributors has obtained certain financing that allows it to fund the working capital requirements for the sale of primarily IPS products. Pursuant to the transaction management services agreements between PFS and Supplies Distributors, PFS provides to Supplies Distributors transaction management and fulfillment services such as managed web hosting and maintenance, procurement support, web-enabled customer contact center services, customer relationship management, financial services including billing and collection services, information management, and international distribution services. Supplies Distributors does not have its own sales force and relies upon IPS’ sales force and product demand generation activities for its sale of IPS products. Supplies Distributors sells its products in the United States, Canada and Europe. All of the agreements between PFS and Supplies Distributors were made in the context of a related party relationship and were negotiated in the overall context of PFS’ and Supplies Distributors’ arrangement with IPS. Although management believes that the terms of these agreements are generally consistent with fair market values, there can be no assurance that the prices charged to or by each company under these arrangements are not higher or lower than the prices that may be charged by, or to, unaffiliated third parties for similar services. *eCOST Overview* Until February 2011 the Company operated eCOST primarily as a multi-category online discount retailer of new, “close-out” and recertified brand-name merchandise, which sold products primarily to customers in the United States. In February 2011 the Company sold substantially all of the inventory and certain intangible assets of the eCOST discount retailer business unit for a cash purchase price of $2.3 million (before expenses of approximately $0.2 million) and the assumption by the purchaser of certain limited liabilities of eCOST. The purchase price represented approximately $1 million for inventory and the balance for the intangible assets. In connection with the closing of this business unit, the Company incurred exit costs of approximately $0.3 million related to employee termination costs, excess property and equipment and certain contract termination costs and may incur additional costs, including excess facility costs. In December 2010, the Company recorded a non-cash goodwill impairment charge of approximately $2.8 million as a result of this sale. For all periods presented, the Company has reported the operating results of the eCOST discount retailer business unit, excluding costs expected to continue to occur in the future, as discontinued operations. The remaining assets and business operations of eCOST will be conducted under the name PFSweb Retail Connect and will continue to provide certain services, primarily under a product ownership based model, to certain of the Company’s client relationships on an ongoing basis. *Basis of Presentation* The unaudited interim condensed consolidated financial statements as of June 30, 2011, and for the three and six months ended June 30, 2011 and 2010, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are unaudited. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations promulgated by the SEC. In the opinion of management and subject to the foregoing, the unaudited interim consolidated financial statements of the Company include all adjustments necessary for a fair presentation of the Company’s financial position as of June 30, 2011, its results of operations for the three and six months ended June 30, 2011 and 2010 and its cash flows for the six months ended June 30, 2011 and 2010. Results of the Company’s operations for interim periods may not be indicative of results for the full fiscal year. Certain prior period data has been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported net income (loss) or total shareholders’ equity.

Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Significant Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements and related disclosures in conformity with generally accepted accounting principles requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The recognition and allocation of certain revenues and selling, general and administrative expenses in these consolidated financial statements also require management estimates and assumptions.

Estimates and assumptions about future events and their effects cannot be determined with certainty. The Company bases its estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as the operating environment changes. These changes have been included in the consolidated financial statements as soon as they became known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. These uncertainties are discussed in this report and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 in the section entitled “Risk Factors.” Based on a critical assessment of accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes the Company’s consolidated financial statements are fairly stated in accordance with generally accepted accounting principles in the United States of America, and provide a fair presentation of the Company’s financial position and results of operations.

Investment in Affiliates

PFS has made advances to Supplies Distributors that are evidenced by a Subordinated Demand Note (the “Subordinated Note”). Under the terms of certain of the Company’s debt facilities, the outstanding balance of the Subordinated Note cannot be increased to more than $5.0 million or decreased to less than $3.5 million without prior approval of the Company’s lenders. At June 30, 2011 and December 31, 2010, the outstanding balance of the Subordinated Note was $4.3 million in both periods. The Subordinated Note is eliminated in the Company’s consolidated financial statements.

PFS has also made advances to Retail Connect, which aggregated $11.1 million as of both June 30, 2011 and December 31, 2010. Certain terms of the Company’s debt facilities provide that the total advances to Retail Connect may not be less than $2.0 million without prior approval of Retail Connect’s lender, if needed. PFSweb, Inc. has also advanced to Retail Connect an additional $7.4 million as of both June 30, 2011 and December 31, 2010. The PFS and PFSweb advances are eliminated in the Company’s consolidated financial statements.

Concentration of Business and Credit Risk

The Company’s service fee revenue is generated under contractual service fee relationships with multiple client relationships. No service fee client or product revenue customer exceeded 10% of the Company’s consolidated total net revenue or accounts receivable during the six months ended June 30, 2011. A summary of the nonaffiliated customer and client concentrations is as follows:


	Six Months Ended
	June 30,
	2011			2010
Product Revenue (as a percentage of Product Revenue):
Customer 1		15	%		16	%
Customer 2		11	%		12	%

Service Fee Revenue (as a percentage of Service Fee Revenue):
Client 1		14	%		6	%
Client 2		14	%		4	%
Client 3		1	%		13	%

PFS previously operated three distinct geographical contract arrangements with Client 3, which are aggregated in the service fee revenue percentages reflected above. As of June 30, 2011, substantially all of Client 3’s contracts with PFS had expired in accordance with their terms and were not renewed.

The Company has provided certain collateralized guarantees of its subsidiaries’ financings and credit arrangements. These subsidiaries’ ability to obtain financing on similar terms would be significantly impacted without these guarantees.

The Company has multiple arrangements with International Business Machines Corporation (“IBM”) and IPS and is dependent upon the continuation of such arrangements. These arrangements, which are critical to the Company’s ongoing operations, include Supplies Distributors’ master distributor agreements and certain of Supplies Distributors’ working capital financing agreements. Substantially all of the Supplies Distributors’ revenue is generated by its sale of product purchased from IPS. Supplies Distributors also relies upon IPS’ sales force and product demand generation activities and the discontinuance of such services would have a material impact upon Supplies Distributors’ business. In addition, Supplies Distributors has product sales to IBM and IPS business affiliates and the Company has an IBM term master lease agreement applicable to its financing of property and equipment.

Inventories

Inventories (all of which are finished goods) are stated at the lower of weighted average cost or market. The Company establishes inventory reserves based upon estimates of declines in values due to inventories that are slow moving or obsolete, excess levels of inventory or values assessed at lower than cost.

Supplies Distributors assumes responsibility for slow-moving inventory under its IPS master distributor agreements, subject to certain termination rights, but has the right to return product rendered obsolete by engineering changes, as defined. In the event PFS, Supplies Distributors and IPS terminate the master distributor agreements, the agreements provide for the parties to mutually agree on a plan of disposition of Supplies Distributors’ then existing inventory.

Property and Equipment

The Company’s property held under capital leases amounted to approximately $1.7 million and $1.5 million, net of accumulated amortization of approximately $2.0 million and $2.8 million, at June 30, 2011 and December 31, 2010, respectively.

Cash Paid for Interest and Taxes

The Company made payments for interest of approximately $0.5 million in each of the six month periods ended June 30, 2011 and 2010. Income taxes of approximately $0.3 million were paid by the Company during both the six month periods ended June 30, 2011 and 2010.

Impact of Recently Issued Accounting Standards

In June 2011, the Financial Accounting Standards Board issued new accounting guidance regarding the presentation of comprehensive income. The new guidance requires the presentation of items of net income and comprehensive income in either a single continuous financial statement or in two separate but consecutive financial statements. This account guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The impact of adoption will not have a material effect on the Company’s consolidated financial statements as it only requires a change in the format of the Company’s current presentation.

Vendor Financing

6 Months Ended

Jun. 30, 2011

Vendor Financing [Abstract]

VENDOR FINANCING

6. VENDOR FINANCING:

Outstanding obligations under vendor financing arrangements consist of the following (in thousands):


	June 30,		December 31,
	2011		2010
Inventory and working capital financing agreements:
United States	$	18,143	$	16,472
Europe		17,720		11,318

Total	$	35,863	$	27,790

Inventory and Working Capital Financing Agreement, United States

Supplies Distributors has a short-term credit facility with IBM Credit LLC to finance its distribution of IPS products in the United States, providing financing for eligible IPS inventory and certain receivables up to $25.0 million through its expiration in March 2012. As of June 30, 2011, Supplies Distributors had $4.3 million of available credit under this facility. The credit facility contains cross default provisions, various restrictions upon the ability of Supplies Distributors to, among others, merge, consolidate, sell assets, incur indebtedness, make loans and payments to related parties (including other direct or indirect Company subsidiaries), provide guarantees, make investments and loans, pledge assets, make changes to capital stock ownership structure and pay dividends, as well as financial covenants, such as annualized revenue to working capital, net profit after tax to revenue, and total liabilities to tangible net worth, as defined, and are secured by certain of the assets of Supplies Distributors, as well as a collateralized guarantee of PFS and a Company parent guarantee. Additionally, PFS is required to maintain a minimum Subordinated Note receivable balance from Supplies Distributors of $3.5 million and the Company is required to maintain a minimum shareholders’ equity of $18.0 million. Borrowings under the credit facility accrue interest, after a defined free financing period, at prime rate plus 0.5% (3.75% as of June 30, 2011). The facility also includes a monthly service fee. Given the structure of this facility and as outstanding balances, which represent inventory purchases, are repaid within twelve months, the Company has classified the outstanding amounts under this facility as accounts payable in the consolidated balance sheets.

Inventory and Working Capital Financing Agreement, Europe

Supplies Distributors’ European subsidiary has a short-term credit facility with IBM Belgium Financial Services S.A. (“IBM Belgium”) to finance its distribution of IPS products in Europe. The asset based credit facility with IBM Belgium provides up to 16.0 million euros (approximately $23.0 million as of June 30, 2011) in inventory financing and cash advances based on eligible inventory and accounts receivable through its expiration in March 2012. As of June 30, 2011, Supplies Distributors’ European subsidiaries had 3.0 million euros (approximately $4.3 million) of available credit under this facility. The credit facility contains cross default provisions, various restrictions upon the ability of Supplies Distributors and its European subsidiary to, among others, merge, consolidate, sell assets, incur indebtedness, make loans and payments to related parties (including other direct or indirect Company subsidiaries), provide guarantees, make investments and loans, pledge assets, make changes to capital stock ownership structure and pay dividends, as well as financial covenants, such as annualized revenue to working capital, net profit after tax to revenue, and total liabilities to tangible net worth, as defined, and are secured by certain of the assets of Supplies Distributors’ European subsidiary, as well as collateralized guaranties of Supplies Distributors and PFS and a Company parent guarantee. Additionally, PFS is required to maintain a minimum Subordinated Note receivable balance from Supplies Distributors of $3.5 million and the Company is required to maintain a minimum shareholders’ equity of $18.0 million. Borrowings under the credit facility accrue interest at Euribor plus 1.82% for cash advances, and, after a defined free financing period, at Euribor plus 4.1% for inventory financings. As of June 30, 2011, the interest rate was 5.4% on the $17.7 million of outstanding inventory financings. Supplies Distributors’ European subsidiary pays a monthly service fee on the commitment. Given the structure of this facility and as outstanding inventory financing balances are repaid within twelve months, the Company has classified the outstanding inventory financing amounts under this facility as accounts payable in the consolidated balance sheets.

Debt and Capital Lease Obligations

6 Months Ended

Jun. 30, 2011

Debt and Capital Lease Obligations [Abstract]

DEBT AND CAPITAL LEASE OBLIGATIONS

7. DEBT AND CAPITAL LEASE OBLIGATIONS;

Outstanding obligations under debt and capital lease obligations consist of the following (in thousands):


	June 30,		December 31,
	2011		2010
Loan and security agreements, United States
Supplies Distributors	$	8,164	$	7,220
PFS		5,250		6,000
Credit facility — Retail Connect		—		—
Factoring agreement, Europe		2,385		2,302
Taxable revenue bonds		800		1,600
Master lease agreements		2,438		2,660
Other		1,289		674

Total		20,326		20,456
Less current portion of long-term debt		19,191		18,320

Long-term debt, less current portion	$	1,135	$	2,136

Loan and Security Agreement — Supplies Distributors

Supplies Distributors has a loan and security agreement with Wells Fargo Bank, National Association (“Wells Fargo”) to provide financing for up to $25 million of eligible accounts receivable in the United States and Canada. As of June 30, 2011, based on the available borrowing collateral balances, Supplies Distributors did not have available credit under this agreement. The Wells Fargo facility expires on the earlier of March 2014 or the date on which the parties to the IPS master distributor agreement no longer operate under the terms of such agreement and/or IPS no longer supplies products pursuant to such agreement. Borrowings under the Wells Fargo facility accrue interest at prime rate plus 0.25% to 0.75% (3.75% as of June 30, 2011) or Eurodollar rate plus 2.5% to 3.0%, dependent on excess availability and subject to a minimum of 3.0%, as defined. The interest rate as of June 30, 2011 was 3.75% for $6.2 million of outstanding borrowings and 3.0% for $2.0 million of outstanding borrowings. This agreement contains cross default provisions, various restrictions upon the ability of Supplies Distributors to, among other things, merge, consolidate, sell assets, incur indebtedness, make loans and payments to related parties (including other direct or indirect Company subsidiaries), provide guarantees, make investments and loans, pledge assets, make changes to capital stock ownership structure and pay dividends, as well as financial covenants, such as minimum net worth, as defined, and is secured by all of the assets of Supplies Distributors, as well as a collateralized guarantee of PFS and a Company parent guarantee. Additionally, PFS is required to maintain a Subordinated Note receivable balance from Supplies Distributors of no less than $3.5 million and may not maintain restricted cash of more than $5.0 million, and is restricted with regard to transactions with related parties, indebtedness and changes to capital stock ownership structure. Supplies Distributors has entered into blocked account agreements with its banks and Wells Fargo pursuant to which a security interest was granted to Wells Fargo for all U.S. and Canadian customer remittances received in specified bank accounts. At June 30, 2011 and December 31, 2010, these bank accounts held $1.0 million and $0.8 million, respectively, which was restricted for payment to Wells Fargo.

Loan and Security Agreement — PFS

PFS has a Loan and Security Agreement (“Comerica Agreement”) with Comerica Bank (“Comerica”). The Comerica Agreement provides for up to $10.0 million of eligible accounts receivable financing through September 2012. The Comerica Agreement also allows for up to $12.5 million of eligible accounts receivable financing during certain seasonal peak months. As of June 30, 2011, PFS had $4.7 million of available credit under this facility. Borrowings under the Comerica Agreement accrue interest at a defined rate, which will generally be prime rate plus 2%, with a minimum of 4.5% (5.25% at June 30, 2011). The Comerica Agreement contains cross default provisions, various restrictions upon PFS’ ability to, among other things, merge, consolidate, sell assets, incur indebtedness, make loans and payments to related parties (including other direct or indirect Company subsidiaries), make capital expenditures, make investments and loans, pledge assets, make changes to capital stock ownership structure, as well as financial covenants of a minimum tangible net worth of $20 million, as defined, a minimum earnings before interest and taxes, plus depreciation, amortization and non-cash compensation accruals, if any, as defined, and a minimum liquidity ratio, as defined. The Comerica Agreement restricts the amount of the Subordinated Note receivable from Supplies Distributors to a maximum of $5.0 million. Comerica has provided approval for PFS to advance incremental amounts subject to certain cash inflows to PFS, as defined, to certain of its subsidiaries and/or affiliates, if needed. The Comerica Agreement is secured by all of the assets of PFS, as well as a Company parent guarantee.

Credit Facility — Retail Connect

Retail Connect has an asset-based line of credit facility of up to $7.5 million from Wachovia Bank, N.A. (“Wachovia”), through May 2012, which is collateralized by substantially all of Retail Connect’s assets. Borrowings under the facility are limited to a percentage of eligible accounts receivable and inventory up to a specified amount. Outstanding borrowings under the facility bear interest at prime rate plus 1% or Eurodollar rate plus 3.5%. There were no outstanding borrowings as of June 30, 2011. As of June 30, 2011, Retail Connect had $0.1 million of letters of credit outstanding and $0.1 million of available credit under this facility. Subsequent to the sale of certain assets in February 2011, amounts available under the outstanding letter of credit are secured by restricted cash in equivalent amounts until expiration. In connection with the line of credit, Retail Connect entered into a cash management arrangement whereby Retail Connect’s operating amounts are considered restricted and swept and used to repay outstanding amounts under the line of credit, if any. As of June 30, 2011 and December 31, 2010, the restricted cash amount was $0.1 million and $0.2 million, respectively. The credit facility restricts Retail Connect’s ability to, among other things, merge, consolidate, sell assets, incur indebtedness, make loans, investments and payments to subsidiaries, affiliates and related parties (including other direct or indirect Company subsidiaries), make investments and loans, pledge assets, make changes to capital stock ownership structure, and requires a minimum tangible net worth for Retail Connect of $0 million, as defined. The Company has guaranteed all current and future obligations of Retail Connect under this line of credit.

Factoring Agreement

Supplies Distributors’ European subsidiary has a factoring agreement with BNP Paribas Fortis that provides factoring for up to 7.5 million euros (approximately $10.8 million as of June 30, 2011) of eligible accounts receivables through March 2014. This factoring agreement is accounted for as a secured borrowing. Borrowings accrue interest at Euribor plus 0.7% (2.0% at June 30, 2011). This agreement contains certain financial covenants, including minimum tangible net worth.

Taxable Revenue Bonds

PFS has a Loan Agreement with the Mississippi Business Finance Corporation (the “MBFC”) in connection with the issuance by the MBFC of MBFC Taxable Variable Rate Demand Limited Obligation Revenue Bonds, Series 2004 (Priority Fulfillment Services, Inc. Project) (the “Bonds”). The MBFC loaned the proceeds of the Bonds to PFS for the purpose of financing the acquisition and installation of equipment, machinery and related assets located in one of the Company’s Southaven, Mississippi distribution facilities. The Bonds bear interest at a variable rate (0.3% as of June 30, 2011), as determined by Comerica Securities, as Remarketing Agent. PFS, at its option, may convert the Bonds to a fixed rate, to be determined by the Remarketing Agent at the time of conversion.

The primary source of repayment of the Bonds is a letter of credit (the “Letter of Credit”) issued by Comerica pursuant to a Reimbursement Agreement between PFS and Comerica under which PFS is obligated to pay to Comerica all amounts drawn under the Letter of Credit. The Letter of Credit has a maturity date of April 2012. The Bonds require a final principal repayment of $800,000 in January of 2012. PFS’ obligations under the Reimbursement Agreement are secured by substantially all of the assets of PFS and a Company parent guarantee.

Debt Covenants

To the extent the Company or any of its subsidiaries fail to comply with covenants applicable to its debt or vendor financing obligations, including the monthly financial covenant requirements and required level of shareholders’ equity or net worth, and one or all of the lenders accelerate the repayment of the credit facility obligations, the Company would be required to repay all amounts outstanding thereunder. In particular, if PFS service fee revenue declines from expected levels and it is unable to reduce costs to correspond to such reduced revenue levels or if Supplies Distributors revenue or gross profit declines from expected levels, such events may result in a breach of one or more of the financial covenants required under its working capital line of credit. In such event, absent a waiver, the working capital lender would be entitled to accelerate all amounts outstanding thereunder and exercise all other rights and remedies, including sale of collateral and demand for payment under the Company parent guarantee. Any acceleration of the repayment of the credit facilities would have a material adverse impact on the Company’s financial condition and results of operations and no assurance can be given that the Company would have the financial ability to repay all of such obligations. As of June 30, 2011, the Company was in compliance with all debt covenants.

Master Lease Agreements

The Company has a Term Lease Master Agreement with IBM Credit Corporation (“Master Lease Agreement”) that provides for leasing or financing transactions of equipment and other assets, which generally have terms of three years. The amounts outstanding under this Master Lease Agreement ($0.6 million as of June 30, 2011 and $1.0 million as of December 31, 2010) are secured by the related equipment and a Company parent guarantee.

The Company has other leasing and financing agreements and will continue to enter into such arrangements as needed to finance the purchasing or leasing of certain equipment or other assets. Borrowings under these agreements are generally secured by the related equipment, and in certain cases, by a Company parent guarantee.

Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information [Abstract]

SEGMENT INFORMATION

8. SEGMENT INFORMATION

The Company is currently organized into two primary operating segments, which generally align with the corporate organization structure. In the first segment, PFS is an international provider of various business process outsourcing solutions and operates as a service fee business. In the second operating segment (“Business and Retail Connect”), subsidiaries of the Company purchase inventory from clients and resell the inventory to client customers. In this segment, the Company generally recognizes product revenue.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Revenues (in thousands):
PFS	$	30,798		$	24,506		$	59,568		$	48,822
Business and Retail Connect		38,799			43,654			84,082			89,276
Eliminations		(1,589	)		(1,753	)		(3,253	)		(3,456	)

	$	68,008		$	66,407		$	140,397		$	134,642

Income (loss) from continuing operations (in thousands):
PFS	$	(1,729	)	$	(1,376	)	$	(3,648	)	$	(3,012	)
Business and Retail Connect		497			321			736			754
Eliminations		—			—			—			—

	$	(1,232	)	$	(1,055	)	$	(2,912	)	$	(2,258	)

Depreciation and amortization (in thousands):
PFS	$	1,536		$	1,573		$	3,024		$	3,119
Business and Retail Connect		7			7			14			15
Eliminations		—			—			—			—

	$	1,543		$	1,580		$	3,038		$	3,134

Capital expenditures (in thousands):
PFS	$	2,639		$	978		$	3,996		$	1,854
Business and Retail Connect		17			12			20			22
Eliminations		—			—			—			—

	$	2,656		$	990		$	4,016		$	1,876


	June 30,			December 31,
	2011			2010
Assets (in thousands):
PFS	$	66,144		$	62,617
Business and Retail Connect		76,489			82,175
Eliminations		(16,022	)		(14,562	)

	$	126,611		$	130,230

Commitments and Contingencies	6 Months Ended
Commitments and Contingencies	Jun. 30, 2011
Commitments and Contingencies [Abstract]
COMMITMENTS AND CONTINGENCIES	9. COMMITMENTS AND CONTINGENCIES The Company receives municipal tax abatements in certain locations. During 2004 the Company received notice from a municipality that it did not satisfy certain criteria necessary to maintain the abatements. In December 2006, the Company received notice that the municipal authority planned to make an adjustment to the Company’s tax abatement. The Company disputed the adjustment and such dispute has been settled with the municipality. However, the amount of additional property taxes to be assessed against the Company and the timing of the related payments has not been finalized. As of June 30, 2011, the Company believes it has adequately accrued for the expected assessment. In April 2010, a sales employee of eCOST was charged with violating various federal criminal statutes in connection with the sales of eCOST products to certain customers, and approximately $620,000 held in an eCOST deposit account was seized and turned over to the Office of the U.S. Attorney in connection with such activity. The Company received subpoenas from the Office of the U.S. Attorney requesting information regarding the employee and other matters, and the Company has responded to the subpoenas and is fully cooperating with the Office of the U.S. Attorney. The Company has commenced its own investigation into the actions of the employee. Neither the Company nor eCOST have been charged with any criminal activity, and the Company intends to seek the recovery or reimbursement of the funds which are currently classified as other receivables in the June 30, 2011 financial statements. Based on the information available to date, the Company is unable to determine the amount of the loss, if any, relating to the seizure of such funds. No assurance can be given, however, that the seizure of such funds, or the inability of the Company to recover such funds or any significant portion thereof, or any costs and expenses incurred by the Company in connection with this matter will not have a material adverse effect upon the Company’s financial condition or results of operations. The Company is subject to claims in the ordinary course of business, including claims of alleged infringement by the Company or its subsidiaries of the patents, trademarks and other intellectual property rights of third parties. PFS is generally required to indemnify its service fee clients against any third party claims alleging infringement by PFS of the patents, trademarks and other intellectual property rights of third parties.

Discontinued Operations

6 Months Ended

Jun. 30, 2011

Discontinued Operations [Abstract]

DISCONTINUED OPERATIONS

10. DISCONTINUED OPERATIONS

In February 2011, the Company sold certain assets of eCOST to a third party for a total aggregate cash purchase price of approximately $2.3 million (before expenses of approximately $0.2 million). Accordingly, the accompanying consolidated financial statements reflect the related operating results of the eCOST segment as discontinued operations for all periods presented.

Summarized financial information in the accompanying consolidated statements of operations for the discontinued eCOST operations is as follows (in thousands):


	Three Months Ended					Six Months Ended
	June 30,					June 30
	2011		2010			2011			2010
Revenue, net	$	86	$	16,057		$	6,811		$	36,082
Expenses		72		16,474			7,391			36,504

Income (loss) before provision for income		14		(417	)		(580	)		(422	)
taxes
Provision for income taxes		—		(23	)		(9	)		(24	)

Discontinued operations, net of income taxes	$	14	$	(440	)	$	(589	)	$	(446	)

Summarized financial information in the accompanying consolidated balance sheet for the discontinued eCOST operations, which were sold in February 2011, is as follows (in thousands):


	December 31,
	2010
Inventories, net	$	2,776
Identifiable intangibles		316
Goodwill		810

Assets of discontinued operations	$	3,902

At December 31, 2010, the amount of allowance for slow moving inventory included in discontinued operations was $0.2 million.

The original eCOST acquisition resulted in a purchase price in excess of the fair value of net identifiable assets acquired and liabilities assumed. This excess purchase price was allocated to goodwill. Goodwill, which is not deductible for tax purposes, is not amortized yet is subject to an annual impairment test, using a fair-value-based approach. The remaining balance of goodwill, $0.8 million as of December 31, 2010, was included in assets of discontinued operations.

Net Loss Per Common Share	6 Months Ended
Net Loss Per Common Share	Jun. 30, 2011
Net Loss Per Common Share [Abstract]
NET LOSS PER COMMON SHARE	4. NET LOSS PER COMMON SHARE Basic and diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the reporting period. For the three and six months ended June 30, 2011 and 2010, outstanding options to purchase common shares of 2.4 million in each period were anti-dilutive and have been excluded from the diluted weighted average share computation.

Stock and Stock Options	6 Months Ended
Stock and Stock Options	Jun. 30, 2011
Stock and Stock Options [Abstract]
STOCK AND STOCK OPTIONS	5. *STOCK AND STOCK OPTIONS* In May 2010, the Company completed a public offering pursuant to which the Company issued and sold an aggregate of 2.3 million shares of common stock, par value $.001 per share, at $3.50 per share, resulting in net proceeds after deducting offering expenses of $7.3 million. During the six months ended June 30, 2011 and 2010, the Company issued an aggregate of 660,000 and 650,000 options, respectively, to purchase shares of common stock to officers, directors, employees and consultants of the Company.