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DILUTION
The net tangible book value of our common stock as of September 30, 1999
was $(0.2) million, or $(0.02) per share of common stock. Net tangible book
value per share represents the amount of our total tangible assets less our
total liabilities, divided by the total number of shares of common stock
outstanding prior to this offering.
After giving effect to this offering and the receipt of $40.3 million of
net proceeds from this offering (based on an assumed initial public offering
price of $15.00 per share), the pro forma net tangible book value of the common
stock as of September 30, 1999 would have been approximately $40.1 million, or
$2.31 per share. This amount represents an immediate increase in net tangible
book value of $2.33 per share to Daisytek, our existing stockholder, and an
immediate dilution in net tangible book value of $12.69 per share to purchasers
of common stock in this offering. Dilution is determined by subtracting pro
forma net tangible book value per share after this offering from the amount of
cash paid by a new investor for a share of common stock. The following table
illustrates such dilution:
Assumed initial public offering price per share............. $15.00
Net tangible book value per share at September 30, 1999... $(0.02)
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 2.33
------
Pro forma net tangible book value per share after this
offering.................................................. 2.31
------
Dilution per share to new investors......................... $12.69
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The following table sets forth, as of September 30, 1999, on the pro forma
basis described above, the number of shares of common stock purchased from us,
the total consideration paid to us and the average price per share paid by the
existing stockholder and by new investors who purchase shares of common stock in
this offering, before deducting the estimated underwriting discounts and
commissions and offering expenses.
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
Existing
Stockholder(1)(2)........... 14,305,000 82.2% $ 20,000 0.1% $ 0.01
New Investors(2)............ 3,100,000 17.8 46,500,000 99.9 15.00
---------- ----- ----------- -----
Total............. 17,405,000 100.0% $46,520,000 100.0%
========== ===== =========== =====
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(1) If the Underwriters' over-allotment option is exercised in full, sales in
this offering will reduce the number of shares of common stock held by the
existing stockholder to approximately 80.1% of the total shares of common
stock outstanding after the offering and will increase the number of shares
held by new investors to 3,565,000, or approximately 19.9% of the total
shares of common stock outstanding after the offering. See "Underwriting."
(2) The foregoing table excludes outstanding stock options to purchase an
aggregate of 1,376,500 shares of common stock at a weighted average exercise
price of $10.51 per share. In addition, upon completion of the spin-off,
stock options exercisable for shares of Daisytek common stock held by PFSweb
employees will be converted into stock options exercisable for shares of our
common stock. It is not possible to specify how many shares of our common
stock will be subject to such stock options, as it is not known how many
stock options to purchase Daisytek common stock held by PFSweb employees
will remain unexercised and outstanding upon completion of the spin-off. We
may also issue additional shares of common stock upon exercise of future
stock option grants or equity awards, which could also result in additional
dilution to then-existing stockholders.
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