Item 2. Properties

     Our general corporate headquarters and the corporate headquarters of our PFS service fee and Supplies Distributors businesses are located in Plano, Texas, a Dallas suburb. Our eCOST corporate headquarters is located in El Segundo, California.

     In the U.S., we operate two distribution facilities in Memphis, Tennessee, which includes aggregated floor and mezzanine space of more than 800,000 square feet. We also operate approximately 1 million square feet of distribution facilities in Southaven, Mississippi. Both of these complexes are located approximately five miles from the Memphis International Airport, where both Federal Express and United Parcel Service operate large hub facilities. We also manage a 200,000 square foot distribution facility in Grapevine, Texas.

     We operate a 150,000 square foot distribution center in Liege, Belgium, which contains advanced distribution systems and equipment. We also operate a 22,000 square foot distribution center in Markham, Canada, near Eastern Toronto. We operate customer service centers in Memphis, Tennessee; Plano, Texas; and Liege, Belgium. Our call center technology permits the automatic routing of calls to available customer service representatives in several of our call centers.

     We recently opened a 6,500 square foot facility in the Philippines to provide call center and customer service functions.

     Except for the Grapevine, Texas facility, which we manage on our client’s behalf, all of our facilities are leased and the material lease agreements contain one or more renewal options.

Item 3. Legal Proceedings

     On May 9, 2005, a lawsuit was filed in the District Court of Collin County, Texas, by J. Gregg Pritchard, as Trustee of the D.I.C. Creditors Trust, naming the former directors of Daisytek International Corporation and the Company as defendants. Daisytek filed for bankruptcy in May 2003 and the Trust was created pursuant to Daisytek’s Plan of Liquidation. The complaint alleges, among other things, that the spin-off of the Company from Daisytek in December 1999 was a fraudulent conveyance and that Daisytek was damaged thereby in the amount of at least $38 million. We believe the claim has no merit and intend to vigorously defend the action.

     On August 24, 2006, a lawsuit was filed in the Chancery Court of Davidson County, Tennessee, by ClientLogic Corp. alleging, among other things, that the Company breached its obligations under a Confidentiality and Nondisclosure Agreement. The complaint sought injunctive relief and damages in an unspecified amount. In January 2007 the lawsuit was voluntarily dismissed without prejudice.

Item 4. Submission of Matters to a Vote of Security Holders

     None.