PFSweb, Inc. and Subsidiaries

Notes to Unaudited Interim Condensed Consolidated Financial Statements

     The FASB also issued ASU 2009-14, Certain Revenue Arrangements That Include Software Elements — a consensus of the FASB Emerging Issues Task Force, to amend the scope of arrangements under ASC 985, Software, 605, “Revenue Recognition” to exclude tangible products containing software components and non-software components that function together to deliver a product’s essential functionality.

     The amended guidance in ASC 605-25 and ASC 985-605 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early application and retrospective application permitted. The amendments to ASC 605-25 and ASC 985-605 have no material impact on the Company’s consolidated financial statements.

3. COMPREHENSIVE LOSS (in thousands)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Net loss		$	(1,920	)		$	(846	)		$	(4,624	)		$	(3,623	)
Other comprehensive income (loss):
Foreign currency translation adjustment			871				435				(569	)			551
Comprehensive loss		$	(1,049	)		$	(411	)		$	(5,193	)		$	(3,072	)

4. NET LOSS PER COMMON SHARE

     Basic and diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the reporting period. For both the three and nine months ended September 30, 2010 and 2009, outstanding options to purchase common shares of 2.3 million and 1.8 million, respectively, were anti-dilutive and have been excluded from the diluted weighted average share computation.

5. STOCK AND STOCK OPTIONS

     In May 2010, the Company completed a public offering pursuant to which the Company issued and sold an aggregate of 2.3 million shares of common stock, par value $.001 per share, at $3.50 per share, resulting in net proceeds after deducting offering expenses of $7.3 million.

     During the nine months ended September 30, 2010, the Company issued an aggregate of approximately 654,000 options to purchase shares of common stock to officers, directors, employees and consultants of the Company.

6. VENDOR FINANCING:

Outstanding obligations under vendor financing arrangements consist of the following (in thousands):

		September 30,				December 31,
		2010				2009
Inventory and working capital financing agreements:
United States		$	16,523			$	16,073
Europe			12,774				15,649
Total		$	29,297			$	31,722

Inventory and Working Capital Financing Agreement, United States

     Supplies Distributors has a short-term credit facility with IBM Credit LLC to finance its distribution of IPS products in the United States, providing financing for eligible IPS inventory and certain receivables up