95
PFSWEB
NOTES TO UNAUDITED INTERIM
CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
presentation of the Company's financial position as of September 30, 1999, its
results of operations and its results of cash flows for the six months ended
September 30, 1998 and 1999. Results of the Company's operations for interim
periods may not be indicative of results for the full fiscal year.
The unaudited interim condensed combined financial statements should be
read in conjunction with the audited combined financial statements and
accompanying notes for the years ended March 31, 1997, 1998 and 1999 included
herein. Accounting policies used in the preparation of the unaudited interim
condensed combined financial statements are consistent in all material respects
with the accounting policies described in the notes to audited combined
financial statements.
2. COMPREHENSIVE LOSS (IN THOUSANDS):
SIX MONTHS
ENDED
SEPTEMBER 30,
-------------
1998 1999
---- -----
Net loss.................................................... $(16) $(773)
Comprehensive income adjustments:
Foreign currency translation adjustment................... (57) (46)
---- -----
Comprehensive loss.......................................... $(73) $(819)
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3. TRANSACTIONS WITH DAISYTEK AND OTHER RELATED PARTIES:
The Company's product revenue from sales to Daisytek was $8.7 million and
$7.2 million for the six months ended September 30, 1998 and 1999, respectively.
The Company's cost and expenses include allocations from Daisytek for
certain general administrative services including information technology,
financial, treasury, legal, insurance and other corporate functions as well as
certain costs of operations including facility charges. These allocations have
been estimated on bases that Daisytek and the Company consider to be a
reasonable reflection of the utilization of services provided or the benefit
received by the Company. The methods used for allocation or expenses from
Daisytek were either (i) percentage of: revenue, shipped orders, or number of
employees or (ii) management's best estimate. However, these allocations of
costs and expenses do not necessarily indicate the costs and expenses that would
have been or will be incurred by the Company on a stand-alone basis. Management
estimates that incremental selling, general and administrative expenses
associated with PFSweb operating as a stand-alone publicly traded company,
including executive management, overhead and public company costs, insurance and
risk management costs, and other costs would have been approximately $1.0 to
$1.1 million for each of the six months ended September 30, 1998 and 1999.
In addition, included in the combined financial statements are service fee
revenues and cost of service fee revenue which have been reflected by PFSweb for
certain services subcontracted to PFSweb by Daisytek under Daisytek's
contractual agreements. Service fee revenues applicable to these contracts were
$363,000 and $350,000 for the six months ended September 30, 1998 and 1999,
respectively.
During the quarter ended September 30, 1999 and in connection with the
restructuring of certain IBM master distribution agreements, the Company
transferred to Daisytek certain related product inventory, accounts receivable
and accounts payable that it held under its prior agreements. In consideration
of this transfer, the Company received the net book value of these assets and
liabilities of approximately $20 million and reduced its payable to Daisytek by
a corresponding amount.
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