NOTES TO UNAUDITED INTERIM
CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1999, the Company entered into an agreement to provide services to a
certain company. An executive officer and director of PFSweb serve on the Board
of Directors of this company.
PFSweb, along with several other Daisytek subsidiaries, has guaranteed an
unsecured revolving line of credit with commercial banks of Daisytek (the
"Facility"). As of September 30, 1999, Daisytek had borrowed $55.0 million and
has a maximum borrowing availability of $85.0 million under the Facility,
leaving approximately $30.0 million available under the Facility. The Facility,
and PFSweb's guarantee thereon, expires on December 31, 2000.
4. NET LOSS PER COMMON SHARE:
The Company computed net loss per share in accordance with SFAS No. 128
"Earnings Per Share." Basic and diluted net loss per common share attributable
to PFSweb common stock was determined based on net loss divided by the
14,305,000 shares of PFSweb, Inc. outstanding prior to the Offering. For
purposes of the net loss per common share calculation, the shares outstanding
prior to the Offering are treated as outstanding for all periods presented.
There were no potentially dilutive securities outstanding during the periods
5. OTHER MATTERS:
On August 31, 1999, the Company entered into a lease for an approximately
442,000 square foot distribution facility in Memphis, Tennessee. The five year
lease, with monthly lease payments totaling approximately $109,000, expires on
August 31, 2004 and contains a renewal option for four years.
PFSweb, Inc. has authorized 6,000,000 shares of common stock for issuance
under its 1999 stock option plans (the "Option Plans"). The Option Plans, which
are currently administered by the Compensation Committee of the Board of
Directors of PFSweb, Inc. provide for the granting of incentive awards in the
form of stock options to directors, executive management, key employees, and
outside consultants of PFSweb, Inc. and its subsidiaries. The right to purchase
shares under the stock option agreements typically vest over a three year
period. Stock options must be exercised within 10 years from the date of grant.
Stock options are generally issued at fair market value. In July 1999, PFSweb,
Inc. issued options to purchase 1,344,250 common shares at $10.45. In August
1999, PFSweb, Inc. issued options to purchase 32,250 common shares at $13.00.
All of these options are subject to a three year vesting schedule, under which
no options vest for three years, subject to acceleration, in part, upon
completion of the spin-off of PFSweb, Inc. from Daisytek.
On September 21, 1999, Daisytek announced its plans to file this Offering.
In conjunction with the successful completion of this Offering, PFSweb, Inc. has
stated its intention to enter into agreements with Daisytek, including a tax
sharing agreement, a transaction management services agreement, transition
services agreement and a master separation agreement which are expected to have
a significant impact on the financial position and results of operations of
On October 29, 1999, Daisytek amended the Facility, effective November 1,
1999, to increase the maximum borrowing availability to $105 million. This
amendment also provides for the release of PFSweb, Inc. and its subsidiaries as
guarantors or the Facility upon (i) the effective date of the Offering of the
shares of common stock of PFSweb, Inc. and (ii) the payment from PFSweb, Inc. to
Daisytek in settlement of the outstanding payable to Daisytek. Additionally,
this amendment also prohibits Daisytek from advancing funds to PFSweb, Inc.
following the completion of this Offering.