1095315--3/31/2009--PFSWEB

related topics

{customer, product, revenue}

{product, market, service}

{system, service, information}

{control, financial, internal}

{stock, price, share}

{property, intellectual, protect}

{acquisition, growth, future}

{stock, price, operating}

{debt, indebtedness, cash}

{financial, litigation, operation}

{provision, law, control}

{cost, regulation, environmental}

{operation, natural, condition}

{regulation, change, law}

{tax, income, asset}

{interest, director, officer}

{personnel, key, retain}

{operation, international, foreign}

{cost, contract, operation}

{competitive, industry, competition}

Our clients and customers may be unable to pay us for our products and services We anticipate incurring significant expenses in the foreseeable future, which may reduce our ability to achieve or maintain profitability. Changes to financial accounting standards may affect our reported results of operations. We operate with significant levels of indebtedness and are required to comply with certain financial and non-financial covenants; we are required to maintain a minimum level of subordinated loans to our subsidiary Supplies Distributors; and we have guaranteed certain indebtedness and obligations of our subsidiaries Supplies Distributors and eCOST. We are dependent on our key personnel, and we need to hire and retain skilled personnel to sustain our business. We are subject to risks associated with our international operations. We are uncertain about our need for and the availability of additional funds. We may engage in future strategic alliances or acquisitions that could dilute our existing shareholders, cause us to incur significant expenses or harm our business. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in our financial reporting, which could harm our business, and the trading price of our common stock. Delivery of our and our clients products could be delayed or disrupted by factors beyond our control, and we could lose customers and clients as a result. Our profitability could be adversely affected if the operation of our distribution or call center facilities were interrupted or shut down as the result of a natural disaster. We may be a party to litigation involving our e-commerce intellectual property rights. If third parties claim we are infringing their intellectual property rights, we could incur significant litigation costs, be required to pay damages, or change our business or incur licensing expenses. A breach of our e-commerce security measures could reduce demand for its services. Credit card fraud and other fraud could adversely affect our business. We may be liable for misappropriation of our customers and our clients customers personal information. We are subject to a dispute with a municipal authority, which, if not resolved in our favor, may materially adversely affect our results of operations. Risks Related to Our PFS and Supplies Distributors Operating Segments Our service fee revenue and gross margin is dependent upon our clients business and transaction volumes and our costs; many of our client service agreements are terminable by the client at will; we may incur financial penalties if we fail to meet contractual service levels under certain client service agreements. Our business is subject to the risk of customer and supplier concentration. Our operating results are materially impacted by our client mix and the seasonality of their business. Our systems may not accommodate significant growth in our number of clients. We may not be able to recover all or a portion of our start-up costs associated with one or more of our clients. Our revenue and margins may be materially impacted by client transaction volumes that differ from client projections and business assumptions. We face competition from many sources that could adversely affect our business. Our sales and implementation cycles are highly variable and our ability to finalize pending contracts may cause our operating results to vary widely. Our business could be adversely affected by a systems or equipment failure, whether that of us or our clients. Risks Related to the Business Process Outsourcing Industry If the trend toward outsourcing does not continue, our business could be adversely affected. Our market is subject to rapid technological change and to compete we must continually enhance our systems to comply with evolving standards. Risks Related to eCOST, our Online Discount Retailer Segment We may not be able to achieve or maintain profitability. We may need additional financing and may not be able to obtain additional financing on favorable terms or at all, which could increase our costs and limit our ability to grow. Our operating results are difficult to predict. The failure to improve our financial and operating performance may result in a failure to comply with our financial covenants. If we fail to accurately predict our inventory risk, our margins may decline as a result of write-downs of our inventory due to lower prices obtained for older or obsolete products. Increased product returns or a failure to accurately predict product returns could decrease our revenues and impact profitability. Our ability to offer a broad selection of products at competitive prices is dependent on our ability to maintain existing and build new relationships with manufacturers and vendors. We do not have long-term agreements with our manufacturers or vendors and some of our manufacturers and vendors compete directly with us. Our business is subject to the risk of supplier concentration. We are dependent on the success of our advertising and marketing efforts, which are costly and may not achieve desired results, and on our ability to attract customers on cost-effective terms. Because we experience seasonal fluctuations in our revenues, our quarterly results may fluctuate. Our business may be harmed by fraudulent activities on our website. If we do not successfully expand our eCOST website and processing systems to accommodate higher levels of traffic and changing customer demands, we could lose customers and our revenues could decline. If we fail to successfully expand our merchandise categories and product offerings in a cost-effective and timely manner, our reputation and the value of our new and existing brands could be harmed, customer demand for our products could decline and our profit margins could decrease. Credit card fraud could materially adversely affect our business. If we are unable to provide satisfactory customer service, we could lose customers. We may not be able to compete successfully against existing or future competitors. If the protection of our trademarks and proprietary rights is inadequate, our eCOST brand and reputation could be impaired and we could lose customers. We may be subject to product liability claims that could be costly and time consuming. eCOST may be subject to future impairment charges related to eCOST s intangible assets. Risks Related to Our eCOST Online Retailer Operating Segment s Industry Additional sales and use taxes could be imposed on past or future sales of our products or other products sold on our eCOST website, which could adversely affect our revenues and profitability. Existing or future government regulation could expose us to liabilities and costly changes in our business operations, and could reduce customer demand for our products. Risks Related to Our Stock The market price of our common stock may be volatile. You may not be able to sell your shares at or above the price at which you purchased such shares. Our stock price could decline if a significant number of shares become available for sale. Our common stock could be delisted from the Nasdaq Capital Market. Our certificate of incorporation, our bylaws, our shareholder rights plan and Delaware law make it difficult for a third party to acquire us, despite the possible benefit to our shareholders. There are limitations on the liabilities of our directors and executive officers.

Full 10-K form ▸

1095315--3/31/2009--PFSWEB_INC