86
PFSWEB
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average fair values of options granted during each of the
years ended March 31, 1997, 1998 and 1999, were $8.03, $7.05 and $7.68,
respectively. As of March 31, 1997, 1998 and 1999, 358,982, 183,956 and 243,747,
respectively, of options outstanding were exercisable. The weighted average
exercise price of exercisable options outstanding at March 31, 1997, 1998 and
1999, were $2.56, $5.74 and $10.44, respectively. The remaining options will
become exercisable over the next three to five years based on vesting
percentages.
The following table summarizes information concerning currently outstanding
and exercisable Daisytek stock options issued to PFSweb employees at March 31,
1999:
OPTIONS OUTSTANDING
---------------------------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF OUTSTANDING AS OF REMAINING AVERAGE EXERCISABLE AS OF AVERAGE
EXERCISE PRICES MARCH 31, 1999 CONTRACTUAL LIFE EXERCISE PRICE MARCH 31, 1999 EXERCISE PRICE
--------------- ----------------- ---------------- -------------- ----------------- --------------
$ 2.65 5,613 3.0 $ 2.65 5,613 $ 2.65
$ 9.75 - $14.06 1,963,631 8.7 $12.52 237,884 $10.62
$15.50 - $22.88 407,247 9.3 $22.22 250 $16.25
6. TRANSACTIONS WITH DAISYTEK AND OTHER RELATED PARTIES:
The Company's product revenue from sales to Daisytek was $7.5 million,
$10.7 million, and $12.4 million in 1997, 1998, and 1999, respectively.
The Company's costs 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 of 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.
In addition, included in the combined financial statements are service fee
revenue 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 revenue applicable to these contracts were
$230,000, $467,000 and $804,000 in 1997, 1998, and 1999, respectively.
In May 1999, the Company entered into an agreement to provide services to a
certain company. An executive officer and a director of PFSweb serve on the
Board of Directors of this company.
7. INCOME TAXES:
The Company's operations have been included in consolidated income tax
returns filed by Daisytek. If Daisytek or other members of the consolidated
group fail to make tax payments required by law, PFSweb would be liable for any
shortfall. The provision for income taxes reflected in the combined statements
of operations and the deferred tax assets reflected in the combined balance
sheets have been prepared as computed on a separate return basis. The current
income tax liabilities for the periods presented have been included in the
payable to Daisytek.
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