PFSWEB, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

management/customer care services and are recognized as incurred.

     The Company recognizes revenue and records trade accounts receivables, pursuant to the methods described above, when collectibility is reasonably assured. Collectibility is evaluated in the aggregate and on an individual customer basis taking into consideration payment due date, historical payment trends, current financial position, results of independent credit evaluations and payment terms.

     The Company primarily performs its services under one to three-year contracts that can generally be terminated by either party. In conjunction with these long-term contracts, the Company sometimes receives start-up fees to cover its implementation costs, including certain technology infrastructure and development costs. The Company defers the fees received, and the related costs, and amortizes them over the life of the contract. The amortization of deferred revenue is included as a component of service fee revenue. The amortization of deferred implementation costs is included as a cost of service fee revenue. To the extent implementation costs for non-technology infrastructure and development exceed the fees received, the excess costs are expensed as incurred. The following summarizes the deferred implementation revenues and costs, excluding technology and development costs, which are included in property and equipment (in thousands):

		December 31,				December 31,
		2005				2004
Deferred implementation revenues
Current		$	1,547			$	898
Non-current			862				821
		$	2,409			$	1,719
Deferred implementation costs
Current		$	950			$	507
Non-current			579				658
		$	1,529			$	1,165

     Current and non-current deferred implementation costs, excluding technology and development costs, are a component of prepaid expenses and other assets, respectively. Current and non-current deferred implementation revenues, which may precede the timing of when the related implementation costs are incurred and thus deferred, are a component of accrued expenses and other liabilities, respectively.

Concentration of Business and Credit Risk

     The Company’s product revenue is primarily generated by sales to customers of product purchased under master distributor agreements with one supplier. The Company’s service fee revenue is generated under contractual service fee relationships with multiple client relationships. A summary of the customer and client concentrations is as follows:

		December 31,				December 31,				December 31,
		2005				2004				2003
Product Revenue (as a percentage of Product Revenue):
Customer 1			14	%			9	%			12	%
Customer 2			12	%			12	%			13	%
Customer 3			11	%			11	%			10	%
Service Fee Revenue (as a percentage of Service Fee Revenue):
Client 1			27	%			42	%			40	%
Client 2			12	%			15	%			16	%
Client 3			16	%			—				—
Consolidated Revenue:
Customer/Client 1			10	%			7	%			10	%
Customer/Client 2			7	%			18	%			16	%
Accounts Receivable:
2 Customers/Clients			22	%			27	%			37	%