•		eCOST’s potential indemnification obligations to its former parent;
	•		eCOST’s ability to maintain existing and build new relationships with manufacturers and vendors and the success of its advertising and marketing efforts; and
	•		eCOST’s ability to increase its sales revenue and sales margin and improve operating efficiencies.
	•		eCOST’s ability to generate a client and projected cash flows sufficient to cover the values of its intangible assets.

     We have based these statements on our current expectations about future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee you that these expectations actually will be achieved. In addition, some forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expected or forecasted in such forward-looking statements. We undertake no obligation to update publicly any forward-looking statement for any reason, even if new information becomes available or other events occur in the future. There may be additional risks that we do not currently view as material or that are not presently known. In evaluating these statements, you should consider various factors, including the risks set forth in the section entitled “Risk Factors.”

Key Transactions in 2006

     For 2006, we highlight the following key transactions:

	•		We completed the implementation of many new contracts signed in the latter portion of 2005. These newly implemented contracts contributed $6.4 million in new service fee revenues during 2006.
	•		We added relationships with both new and existing clients with estimated fully implemented full year annual service fees of approximately $10 to $12 million based on current client projections. Service fee revenues invoiced from these new relationships in 2006 were approximately $4.7 million. We also recognized approximately $1.3 million of service fee revenue in 2006 from special projects with new and existing clients.
	•		We occupied a new 164,000 square foot distribution facility in Memphis, Tennessee and a new 22,000 facility in Markham, Canada, near Eastern Toronto.
	•		We completed a merger with eCOST in February 2006 and substantially completed all of the related integration related activities.
	•		We continued our efforts to improve profitability with the continued expansion of our operations to the Philippines.
	•		We completed a $5.0 million private placement of our common stock, generating approximately $4.8 million in net proceeds.

Overview

     We are an international provider of integrated business process outsourcing solutions to major brand name companies seeking to maximize their supply chain efficiencies and to extend their traditional business and e-commerce initiatives as well as a leading multi-category online discount retailer of new, “close-out” and recertified brand-name merchandise. We derive our revenues from three business segments: business process outsourcing, a master distributor and a discount online retailer.

     First, in our business process outsourcing business segment we derive our revenues from a broad range of services, including professional consulting, technology collaboration, order management, managed web hosting and web development, customer relationship management, financial services including billing and collection services and working capital solutions, kitting and assembly services, information management and international fulfillment and distribution services. We offer our services as an integrated solution, which enables our clients to outsource their complete infrastructure needs to a single source and to focus on their core competencies. Our distribution services are conducted at warehouses that we lease or manage and include real-time inventory management and customized picking, packing and shipping of our clients’ customer orders. We currently offer the ability to provide infrastructure and distribution solutions to clients that operate in a range of vertical markets, including technology manufacturing, computer products, printers, cosmetics, fragile goods, high security collectibles, pharmaceuticals, contemporary home furnishings, apparel, aviation, telecommunications and consumer electronics, among others.