SEC Filing | PFSweb, Inc.

View:

Download DOC

Download PDF

Download XLS

Form 8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): August 5, 2015

PFSweb, Inc.

(Exact name of registrant as specified in its charter)


Delaware	000-28275	75-2837058
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

505 Millennium Drive Allen, TX		75013
(Address of principal executive offices)		(zip code)

(972) 881-2900

Registrant’s telephone number, including area code

N/A

(Former name or former address, if changed since last report.)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

On August 5, 2015, PFSweb, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Original Form 8-K”) reporting that on August 5, 2015, the Company closed its acquisition of CrossView Inc. (“CrossView”). This Form 8-K/A amends the Original Form 8-K to include the historical audited and unaudited financial statements of CrossView and the unaudited pro forma condensed combined financial information required by Items 9.01(a) and 9.01(b) of Form 8-K that were excluded from the Original Form 8-K in reliance on the instructions to such items.

Item 9.01.

Financial Statements and Exhibits.

(a) Financial statements of businesses acquired. The audited financial statements of CrossView as of and for the year ended December 31, 2014, is filed herewith as Exhibit 99.1. The unaudited interim financial statements of CrossView as of and for the six months ended June 30, 2015 and 2014, are filed herewith as Exhibit 99.2. The consent of Citrin Cooperman & Company, LLP, CrossView’s independent auditors, is attached as Exhibit 23.1 to this Form 8-K/A.

(b) Pro forma financial information. The unaudited pro forma condensed combined financial information of the Company and CrossView for the year ended December 31, 2014 and as of and for the six months ended June 30, 2015 are filed herewith as Exhibit 99.3.

(d) Exhibits


Number		Description

23.1		Consent of Citrin Cooperman & Company, LLP, Independent Auditors of CrossView

99.1		Audited financial statements of CrossView for the year ended December 31, 2014

99.2		Unaudited condensed financial statements of CrossView for the six months ended June 30, 2015 and 2014

99.3		Unaudited pro forma condensed combined financial information of PFSweb, Inc. and CrossView for the year ended December 31, 2014 and as of and for the six months ended June 30, 2015

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 21, 2015


PFSweb, Inc.

By:		/s/ Thomas J. Madden
Name:		Thomas J. Madden
Title:		Executive Vice President and Chief Financial and Accounting Officer

EXHIBIT INDEX


Number		Description

23.1		Consent of Citrin Cooperman & Company, LLP, Independent Auditors of CrossView

99.1		Audited financial statements of CrossView for the year ended December 31, 2014

99.2		Unaudited condensed financial statements of CrossView for the six months ended June 30, 2015 and 2014

99.3		Unaudited pro forma condensed combined financial information of PFSweb, Inc. and CrossView for the year ended December 31, 2014 and as of and for the six months ended June 30, 2015

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements on Forms S-8 (File Nos. 333-201675, 333-164973, 333-128486, 333-75764, 333-75772, 333-46096, 333-42186 and 333-40020) and on Forms S-3 (File Nos. 333-201674, 333-164971 and 333-135794) of PFSweb, Inc. of our report dated October 6, 2015, with respect to the financial statements of CrossView, Inc., as of December 31, 2014 and the year then ended, included in the PFSweb, Inc. Form 8-K/A to be filed on or about October 21, 2015.

/s/CITRIN COOPERMAN & COMPANY, LLP

New York, New York

October 21, 2015

EX-99.1

Exhibit 99.1

CROSSVIEW, INC.

FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

CROSSVIEW, INC.

FOR THE YEAR ENDED DECEMBER 31, 2014

Table of Contents


	Page
Independent Auditor’s Report		2

Financial Statements

Balance sheet		3

Statement of income and retained earnings		4

Statement of cash flows		5

Notes to financial statements		6 - 9

CROSSVIEW, INC.

INDEPENDENT AUDITOR’S REPORT

To the Shareholders

CrossView, Inc.

We have audited the accompanying financial statements of CrossView, Inc., which comprise the balance sheet as of December 31, 2014, and the related statements of income and retained earnings and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CrossView, Inc., as of December 31, 2014, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Citrin Cooperman & Company, LLP

CERTIFIED PUBLIC ACCOUNTANTS

New York, New York

October 6, 2015

CROSSVIEW, INC.

BALANCE SHEET

DECEMBER 31, 2014


ASSETS
Current assets:
Cash and cash equivalents	$	2,774,859
Accounts receivable		10,388,328
Prepaid expenses		221,572
Other current assets		10,000

Total current assets		13,394,759

Property and equipment, net of accumulated depreciation of $243,365		394,088

Deferred software license fees		328,643

TOTAL ASSETS	$	14,117,490

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses and other current liabilities	$	1,841,959
Deferred revenue		772,765

Total current liabilities		2,614,724

Commitments and contingencies (Notes 4 and 6)

Shareholders’ equity:
Common stock - $.01 par value; 10,000 shares authorized, 100 shares issued and outstanding		1
Retained earnings		11,502,765

Total shareholders’ equity		11,502,766

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	14,117,490

See accompanying notes to financial statements

CROSSVIEW, INC.

STATEMENT OF INCOME AND RETAINED EARNINGS

FOR THE YEAR ENDED DECEMBER 31, 2014


Revenues	$	35,083,817

Operating expenses:
Payroll expenses		27,703,724
Payroll taxes and employee benefits		3,039,721
Training and non-billable travel		730,640
Travel		725,507
Estimated contract losses		439,748
Hosting expenses		410,387
Computer-related expenses		277,635
Recruiting fees		274,922
Professional fees		248,505
Bad debts		188,334
Meetings and conventions		187,030
Advertising and promotion		175,973
Depreciation		160,912
Rent		125,323
Auto expense		32,756
Telephone		7,774
Other operating expenses		9,062

Total operating expenses		34,737,953

Income from operations		345,864

Other income:
Interest		181,707

Net income		527,571

Retained earnings – beginning		10,975,194

RETAINED EARNINGS – ENDING	$	11,502,765

See accompanying notes to financial statements

CROSSVIEW, INC.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2014


Cash flows from operating activities:
Net income	$	527,571
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		160,912
Changes in assets and liabilities:
Accounts receivable		2,988,625
Prepaid expenses		(221,572	)
Other current assets		(10,000	)
Deferred software license fees		(328,643	)
Accrued expenses and other current liabilities		99,215
Deferred revenue		(163,274	)

Net cash provided by operating activities		3,052,834

Cash used in investing activities:
Purchases of property and equipment		(277,975	)

Net increase in cash and cash equivalents		2,774,859

Cash and cash equivalents - beginning		—

CASH AND CASH EQUIVALENTS - ENDING	$	2,774,859

See accompanying notes to financial statements

CROSSVIEW, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

CrossView, Inc. (the “Company”) is an S-corporation formed in the state of Florida. The Company provides cross-channel commerce solutions to enhance its customers’ brands and to support its customers’ overall marketing strategies. The Company’s services include hosting and managed services, systems integration, business and marketing strategy development, and design services.

Revenue recognition

The Company recognizes revenues when there is persuasive evidence of an arrangement, delivery has occurred or services are rendered, the sales price is fixed and determinable, and collectibility is reasonably assured.

Revenues from fixed-price, long-term contracts are recorded using the percentage-of- completion method once projects have progressed beyond the preliminary phase. Contract completion status is measured by the percentage of costs incurred to date compared to estimated total costs for each contract. This method is used because management considers costs incurred to date to be the best available measure of progress on contracts in progress. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Change orders that result from modification of an original contract are taken into consideration for revenue recognition when they result in a change of total contract value and are approved by the Company’s clients. Revenues relating to unapproved change orders are recognized when collected.

The liability “Deferred revenue” represents billings in excess of revenues earned.

Taxes collected from customers and remitted to governmental authorities are presented in the statement of income and retained earnings on a net basis.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company evaluates its estimates and assumptions on an on-going basis. Significant estimates and assumptions include the allowance for doubtful accounts, percentage of completion method of accounting and depreciable lives of property and equipment.

Concentrations of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash balances. The Company places its cash with major financial institutions in accounts that at times may exceed the Federal Deposit Insurance Corporation’s limit. The Company has not incurred any losses on such accounts.

CROSSVIEW, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash and cash equivalents

Cash and cash equivalents consist primarily of cash on deposit and money market accounts that are readily convertible into cash and purchased with original maturities of three months or less.

Accounts receivable

Accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the creditworthiness, reputation, and past transaction history with the customer, among other factors, when determining the collectibility of specific contracts and has concluded that an allowance for doubtful accounts is not required as of December 31, 2014.

Income taxes

The Company, with the consent of its shareholders, has elected under the Internal Revenue Code and New York State tax law to be taxed as an S corporation. In lieu of corporate income taxes, the shareholders of an S corporation are taxed on their proportionate share of a company’s taxable income. Therefore, no provision or liability for federal income tax has been included in the financial statements.

The Company recognizes and measures its unrecognized tax benefits in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes. Under that guidance, management assesses the likelihood that tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period, including the technical merits of those positions. The measurement of unrecognized tax benefits is adjusted when new information is available or when an event occurs that requires a change.

The Company files federal and state income tax returns. With few exceptions, the Company is no longer subject to federal or state income tax examinations by taxing authorities for years before 2011.

Property and equipment

Property and equipment are carried at cost. Expenditures for maintenance and repairs are expensed currently, while renewals and betterments that materially extend the life of an asset are capitalized. The costs of assets sold, retired or otherwise disposed of, and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized.

Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which range from three - five years.

CROSSVIEW, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Advertising

Advertising costs are expensed as incurred and aggregated $175,973 for the year ended December 31, 2014.

Subsequent events

In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through October 6, 2015, the date on which the financial statements were available to be issued. There were no material subsequent events that required recognition or additional disclosure in the financial statements, except for the legal settlement agreement and asset purchase agreement disclosed in Note 6.

NOTE 2.

CONCENTRATIONS

Sales to one customer accounted for approximately 12% of the Company’s sales for the year ended December, 31, 2014, and three customers had an aggregate accounts receivable balance of approximately 34% of the total outstanding as of December 31, 2014.

NOTE 3.

PROPERTY AND EQUIPMENT

Property and equipment consisted of computer equipment at December 31, 2014. For the year ended December 31, 2014, depreciation expense was $160,912.

NOTE 4.

COMMITMENTS AND CONTINGENCIES

Lease agreements

The Company leases office space in North Carolina and Ohio, under noncancelable leases that expire through July 2017.

Future minimum lease payments for the remaining life of the leases are as follows:


Year ending December 31:	Amount
2015	$	128,004
2016		50,004
2017		29,169

	$	207,177

Rent expense for the year ended December 31, 2014, totaled $125,323.

NOTE 5.

RETIREMENT PLAN

The Company sponsors a qualified 401(k) profit-sharing plan. The plan covers substantially all employees who meet certain eligibility requirements as defined by the plan. Under the plan, employees may elect to defer a percentage of their eligible compensation as contributions to the plan starting on the first day of the month following 30 days of employment. The Company does not make any matching contributions to the plan.

CROSSVIEW, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

NOTE 6.

SUBSEQUENT EVENTS

Litigation

In 2014, the Company was involved in litigation with a shareholder. The matter was settled on May 15, 2015, whereby the shareholder surrendered his shares of Company stock and relinquished all rights as a shareholder in exchange for a payment of $750,000. This amount is included in “Accrued expenses and other current liabilities” on the accompanying balance sheet as of December 31, 2014. The settlement agreement signed on May 15, 2015, also states that the former shareholder is entitled to additional compensation should the Company be sold on or before May 14, 2016. The amount of compensation is determined based on a calculation provided for in the settlement agreement dated May 15, 2015.

The Company is also subject to various proceedings arising during the ordinary course of operations. Management believes that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial condition.

Asset Purchase Agreement

On August 5, 2015, the Company entered into and consummated the transactions contemplated by an Asset Purchase Agreement (the “Purchase Agreement”) with PFSweb, Inc. (“PFS”), a publicly-traded company located in the United States. Pursuant to the terms of the Purchase Agreement, PFS purchased substantially all of the assets and assumed certain liabilities of the Company. In consideration of the transaction, PFS paid $30,700,000 in cash (subject to a post-closing balance sheet reconciliation) and issued 553,223 shares of unregistered PFS common stock. In addition, the Company will be entitled to receive future annual earn-out payments, based on the achievement of certain financial targets, as defined.

EX-99.2

Exhibit 99.2

CROSSVIEW, INC.

UNAUDITED CONDENSED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2015 AND 2014

CROSSVIEW, INC.

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

Table of Contents


	Page
Unaudited Condensed Financial Statements

Balance sheets		2

Statements of operations and retained earnings		3

Statements of cash flows		4

Notes to the unaudited condensed financial statements		5-7

CROSSVIEW, INC.

CONDENSED BALANCE SHEETS


	(Unaudited) June 30, 2015		December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	7,246,558	$	2,774,859
Accounts receivable, net		9,820,066		10,388,328
Prepaid expenses		—		221,572
Unbilled receivables		217,599		—
Other current assets		10,000		10,000

Total current assets		17,294,223		13,394,759

Property and equipment, net of accumulated depreciation of $341,374 in 2015 and $243,365 in 2014		354,738		394,088

Deferred software license fees		264,430		328,643

TOTAL ASSETS	$	17,913,391	$	14,117,490

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accrued expenses and other current liabilities	$	5,657,072	$	1,841,959
Deferred revenue		—		772,765

Total current liabilities		5,657,072		2,614,724

Commitments and contingencies

Shareholders’ equity:
Common stock - $.01 par value; 10,000 shares authorized, 100 shares issued and outstanding		1		1
Retained earnings		12,256,318		11,502,765

Total shareholders’ equity		12,256,319		11,502,766

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	17,913,391	$	14,117,490

See accompanying notes to condensed financial statements

CROSSVIEW, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014


	2015		2014
Revenues		$18,881,647		$18,540,187
Operating expenses:
Payroll expenses		15,101,301		14,111,366
Payroll taxes and employee benefits		1,473,243		1,390,489
Estimated contract losses		—		1,384,404
Travel		282,514		368,710
Training and non-billable travel		259,430		372,920
Hosting expenses		291,769		188,896
Bad debts		179,800		105,742
Computer-related expenses		173,703		229,966
Professional fees		108,446		162,017
Depreciation		98,010		75,613
Advertising and promotion		78,207		65,704
Rent		65,070		59,910
Recruiting fees		56,916		340,901
Telephone		24,056		—
Other operating expenses		8,603		—

Total operating expenses		18,201,068		18,856,638

Income from operations		680,579		(316,451	)

Other income:
Interest		72,974		3,482

Net income		753,553		(312,969	)

Retained earnings - beginning		11,502,765		10,975,194

RETAINED EARNINGS - ENDING	$	12,256,318	$	10,662,225

See accompanying notes to condensed financial statements

CROSSVIEW, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014


	2015			2014
Operating activities:
Net income	$	753,553		$	(312,969	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		98,010			75,613
Changes in assets and liabilities:
Accounts receivable		568,262			3,405,372
Prepaid expenses		221,572			(162,727	)
Unbilled receivables		(217,599	)		—
Deferred software license fees		64,213			—
Accrued expenses and other current liabilities		3,815,113			3,957,955
Deferred revenue		(772,765	)		474,973

Net cash provided by operating activities		4,530,359			7,438,217

Cash used in investing activities:
Purchases of property and equipment		(58,660	)		(186,902	)

Net increase in cash and cash equivalents		4,471,699			7,251,315

Cash and cash equivalents - beginning		2,774,859			—

CASH AND CASH EQUIVALENTS - ENDING	$	7,246,558		$	7,251,315

See accompanying notes to condensed financial statements

CROSSVIEW, INC.

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Basis of presentation

The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and applicable rules and regulations of Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not contain all information and footnotes required by US GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed interim financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present fairly the financial position of the Company as of June 30, 2015 and the results of operations and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the operating results for the full respective fiscal years or any future period. These unaudited condensed interim financial statements should be read in conjunction with the audited condensed financial statements and notes thereto as of and for the year ended December 31, 2014.

Revenue recognition

The liability “Deferred revenue” represents billings in excess of revenues earned.

Taxes collected from customers and remitted to governmental authorities are presented in the statement of income and retained earnings on a net basis.

Use of estimates

Concentrations of credit risk

CROSSVIEW, INC.

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash and cash equivalents

Cash and cash equivalents consist primarily of cash on deposit and money market accounts that are readily convertible into cash and purchased with original maturities of three months or less.

Accounts receivable

Income taxes

The Company files federal and state income tax returns. With few exceptions, the Company is no longer subject to federal or state income tax examinations by taxing authorities for years before 2012.

Property and equipment

Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which range from three - five years.

CROSSVIEW, INC.

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Subsequent events

In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through October 21, 2015, the date on which the financial statements were available to be issued. There were no material subsequent events that required recognition or additional disclosure in the financial statements, except for the asset purchase agreement disclosed in Note 3.

NOTE 2.

LITIGATION

In 2014, the Company was involved in litigation with a shareholder. The matter was settled on May 15, 2015, whereby the shareholder surrendered his shares of Company stock and relinquished all rights as a shareholder in exchange for a payment of $750,000. This amount was accrued in June 2014 and paid in June 2015. The settlement agreement also states that the former shareholder is entitled to additional compensation should the Company be sold on or before May 14, 2016. The Company has accrued $2.25 million as of June 30, 2015 as additional compensation based on the terms of the settlement agreement and the selling price of the Company. See Note 3.

NOTE 3.

ASSET PURCHASE AGREEMENT

PFSweb, Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information and related notes present the historical condensed combined financial information of PFSweb, Inc. and its wholly owned subsidiaries and CrossView, Inc. (“CrossView”) after giving effect to PFSweb’s acquisition of CrossView that was completed on August 5, 2015 (the “Acquisition Date”). The unaudited pro forma condensed combined financial information gives effect to our acquisition of CrossView based on the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined balance sheet as of June 30, 2015 is presented as if the acquisition of CrossView occurred on June 30, 2015. The unaudited pro forma condensed combined statements of income for the six months ended June 30, 2015 and the year ended December 31, 2014 are presented as if the acquisition occurred on January 1, 2014. The historical financial information is adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma events that are (1) directly attributable to the proposed acquisition, (2) factually supportable, and (3) with respect to the condensed combined statements of income, expected to have a continuing impact on the combined results.

The determination and preliminary allocation of the purchase consideration used in the unaudited pro forma condensed combined financial information are based upon preliminary estimates, which are subject to change during the measurement period (up to one year from the Acquisition Date) as we finalize the valuations of the net tangible and intangible assets acquired.

The unaudited pro forma adjustments are not necessarily indicative of or intended to represent the results that would have been achieved had the transaction been consummated as of the dates indicated or that may be achieved in the future. The actual results reported by the combined companies in periods following the acquisition may differ significantly from those reflected in these unaudited pro forma condensed combined financial information for a number of reasons, including cost saving synergies from operating efficiencies and the effect of the incremental costs incurred to integrate the companies.

The unaudited pro forma condensed combined financial information should be read in conjunction with PFSweb Inc.’s historical consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2014, our Quarterly Report on Form 10-Q for the six months ended June 30, 2015, the historical financial statements of CrossView for the year ended December 31, 2014, and the historical unaudited condensed financial statements of CrossView as of and for the six months ended June 30, 2015 contained in this Form 8-K/A.

EX-99.3

Exhibit 99.3

PFSweb, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheets

as of June 30, 2015

(in thousands)


	Historical
	PFSweb, Inc			CrossView		Pro Forma Adjustments			Pro Forma Combined
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	15,721		$	7,247	$	(2,339	)(a)	$	20,629
Restricted cash		374			—		—			374
Accounts receivable, net of allowance for doubtful accounts		42,961			9,820		—			52,781
Inventories, net of reserves		10,333			—		—			10,333
Other receivables		4,565			—		—			4,565
Prepaid expenses and other current assets		4,551			227		—			4,778

Total current assets		78,505			17,294		(2,339	)		93,460
PROPERTY AND EQUIPMENT, net		23,912			355		—			24,267
IDENTIFIABLE INTANGIBLES, net		1,813			—		11,850	(b)		13,663
GOODWILL		10,322			—		31,563	(b)		41,885
OTHER ASSETS		2,101			264		—			2,365

Total assets	$	116,653		$	17,913	$	41,074		$	175,640

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations	$	5,717		$	—	$	(2,467	)(c)	$	3,250
Trade accounts payable		27,839			—		—			27,839
Deferred revenue		6,806			—		—			6,806
Accrued expenses		24,124			5,657		8,380	(d)		38,161

Total current liabilities		64,486			5,657		5,913			76,056
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion		3,739			—		38,115	(c)		41,854
DEFERRED REVENUE		4,481			—		—			4,481
DEFERRED RENT		4,561			—		—			4,561
OTHER LIABILITIES		368			—		4,712	(d)		5,080

Total liabilities		77,635			5,657		48,740			132,032

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued or outstanding		—			—		—			—
Common stock, $0.001 par value; 35,000,000 shares authorized; 17,511,982 shares issued at June 30, 2015 and 17,478,515 outstanding at June 30, 2015		17			—		1	(e)		18
Additional paid-in capital		132,631			—		6,638	(e)		139,269
Retained earnings (Accumulated deficit)		(93,519	)		12,256		(14,305	)(e)		(95,568	)
Accumulated other comprehensive income		14			—		—			14
Treasury stock at cost, 33,467 shares		(125	)		—		—			(125	)

Total shareholders’ equity		39,018			12,256		(7,666	)		43,608

Total liabilities and shareholders’ equity		116,653		$	17,913	$	41,074		$	175,640

The accompanying notes are an integral part of these unaudited proforma financial statements

PFSweb, Inc.

Unaudited Pro Forma Condensed Combined Statements of Income

for the Six Months Ended June 30, 2015

(in thousands, except per share data)


	Historical						Pro Forma Adjustments			Pro Forma Combined
	PFSweb, Inc			CrossView			Pro Forma Adjustments			Pro Forma Combined
REVENUES:
Product revenue, net	$	30,312			—			—		$	30,312
Service fee revenue		75,783			18,882			—			94,665
Pass-through revenue		20,927			—			—			20,927

Total revenues		127,022			18,882			—			145,904

COSTS OF REVENUES:
Cost of product revenue		28,619			—			—			28,619
Cost of service fee revenue		51,800			11,329			—			63,129
Cost of pass-through revenue		20,927			—			—			20,927

Total costs of revenues		101,346			11,329			—			112,675

Gross profit		25,676			7,553			—			33,229
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		28,290			6,872			1,981	(f)		37,143

Income (Loss) from operations		(2,614	)		681			(1,981	)		(3,914	)
INTEREST EXPENSE (INCOME), net		541			(73	)		136	(g)		604

Income (Loss) from operations before income taxes		(3,155	)		754			(2,117	)		(4,518	)
INCOME TAX EXPENSE		438			—			—	(h)		438

NET INCOME (LOSS)	$	(3,593	)	$	754		$	(2,117	)	$	(4,956	)

NET LOSS PER SHARE:
Basic	$	(0.21	)							$	(0.28	)

Diluted	$	(0.21	)							$	(0.28	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic		17,257						553	(e)		17,810

Diluted		17,257						553	(e)		17,810

COMPREHENSIVE INCOME (LOSS):
Net Income (loss)	$	(3,593	)	$	754		$	(2,117	)	$	(4,956	)
Foreign currency translation adjustment		11			—			—			11

TOTAL COMPREHENSIVE INCOME (LOSS)	$	(3,582	)	$	754		$	(2,117	)	$	(4,945	)

The accompanying notes are an integral part of these unaudited proforma financial statements

PFSweb, Inc.

Unaudited Pro Forma Condensed Combined Statement of Income

For the Year Ended December 31, 2014

(in thousands, except per share data)


	Historical
	PFSweb, Inc.			CrossView			Pro Forma Adjustments			Pro Forma Combined
REVENUES:
Product revenue, net	$	75,284			—			—		$	75,284
Service fee revenue		134,385			35,084			—			169,469
Pass-through revenue		37,379			—			—			37,379

Total revenues		247,048			35,084			—			282,132

COSTS OF REVENUES:
Cost of product revenue		71,019			—			—			71,019
Cost of service fee revenue		94,858			25,011			—			119,869
Cost of pass-through revenue		37,379			—			—			37,379

Total costs of revenues		203,256			25,011			—			228,267

Gross profit		43,792			10,073			—			53,865
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		47,658			9,727			4,450	(f)		61,835

Income (Loss) from operations		(3,866	)		346			(4,450	)		(7,970	)
INTEREST EXPENSE, net		813			(182	)		305	(g)		936

Income (Loss) from operations before income taxes		(4,679	)		528			(4,755	)		(8,906	)
INCOME TAX EXPENSE		(53	)		—			—	(h)		(53	)

NET INCOME (LOSS)	$	(4,626	)	$	528		$	(4,755	)	$	(8,853	)

NET LOSS PER SHARE:
Basic	$	(0.28	)							$	(0.51	)

Diluted	$	(0.28	)							$	(0.51	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic		16,737						553	(e)		17,290

Diluted		16,737						553	(e)		17,290

COMPREHENSIVE INCOME (LOSS):
Net Income (loss)	$	(4,626	)	$	528		$	(4,755	)	$	(8,853	)
Foreign currency translation adjustment		(1,129	)		—			—			(1,129	)

TOTAL COMPREHENSIVE INCOME (LOSS)	$	(5,755	)	$	528		$	(4,755	)	$	(9,982	)

The accompanying notes are an integral part of these unaudited proforma financial statements

PFSWEB, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

(TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

1. BASIS OF PRO FORMA PRESENTATION

The unaudited pro forma condensed combined balance sheet as of June 30, 2015 combines our historical condensed consolidated balance sheet with the historical condensed balance sheet of CrossView and has been prepared as if our acquisition of Crossview occurred on June 30, 2015. The unaudited pro forma condensed combined statements of income for the six months ended June 30, 2015 and the year ended December 31, 2014 combined our historical condensed consolidated statements of income with CrossView’s historical statements of operations and were prepared as if the acquisition occurred on January 1, 2014. The historical financial information is adjusted in the unaudited pro forma condensed combined financial information in accordance with Article 11 of Regulation S-X to give effect to pro forma events that are (1) directly attributable to the proposed acquisition, (2) factually supportable, and (3) with respect to the condensed combined statements of income, expected to have a continuing impact on the combined results.

We have accounted for the acquisition in this unaudited pro forma condensed combined financial information using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, we use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the Acquisition Date. Goodwill as of the Acquisition Date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.

The pro forma adjustments described below were developed based upon PFSweb Inc. management’s assumptions and estimates, including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed from CrossView based on preliminary estimates of fair value. The final purchase consideration and the allocation of the purchase consideration will differ from that reflected in the unaudited pro forma condensed combined financial information after final valuation procedures are performed and amounts are finalized.

The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the combined company would have been had the acquisition occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or financial position.

The unaudited pro forma condensed combined financial information does not reflect any integration activities or cost savings from operating efficiencies, synergies, asset dispositions or other restructurings that could result from the acquisition.

The following reclassifications have been made to the presentation of CrossView’s historical financial statements to conform to PFSweb Inc.’s presentation:

•

CrossView’s prepaid expenses, unbilled receivables and other current assets were reclassified as prepaid expenses and other current assets;

•

CrossView’s deferred software license fees were reclassified as other assets; and

•

A portion of CrossView’s operating expenses were reclassified as cost of service fee revenue.

PFSWEB, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

(TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

2. PRELIMINARY PURCHASE CONSIDERATION AND RELATED ALLOCATION

Pursuant to the agreement, we paid consideration of an initial cash payment of $30.7 million and 553,223 unregistered shares of Company common stock (approximately $6.6 million in value as of the acquisition date). The Purchase Agreement also provides for (i) adjustment of the initial cash payment based upon a post-closing balance sheet reconciliation and (ii) future earn-out payments (“CrossView Earn-out Payments”) payable in 2016, 2017 and 2018 based on the achievement of certain 2015, 2016 and 2017 financial targets. The CrossView Earn-out Payments have no guaranteed minimum and an aggregate maximum of $18.0 million and are subject to possible offsets for indemnification and other claims arising under the Purchase Agreement. We will pay 20% of the 2015 earn-out and 15% of the 2016 earn-out and 2017 earn-out in restricted shares of Company common stock, based on the then current market value at the time of issuance.

The following table summarizes the preliminary unaudited, estimated fair value of the tangible and intangible assets acquired and liabilities assumed. This allocation requires the significant use of estimates and is based on the information available to management at the time these financial statements were prepared. Goodwill is expected to be deductible for tax purposes and will be amortized over 15 years. The detail of finite identifiable intangibles is in the process of being identified and allocated to customer relationships, trademarks, non-compete agreements and technology development. We are in the process of finalizing the purchase price allocation and, accordingly, the following preliminary allocation of the purchase price is subject to adjustment.


Accounts receivable	$	9,820
Property and equipment		355
Other assets		491
Identifiable intangibles		11,850

Total assets acquired		22,516
Total liabilities assumed		3,407

Net assets acquired		19,109
Goodwill and intangible assets		31,563

Total purchase price	$	50,672


Number of shares of common stock issued		553,223
Multiplied by PFSweb Inc.‘s stock price	$	12.00

Share consideration	$	6,639
Aggregate cash payments		30,740
Performance-based contingent payments (based on estimated fair value at acquisition date)		13,293

Total purchase price	$	50,672

PFSWEB, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

(TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

3. PRO FORMA ADJUSTMENTS

The pro forma adjustments included in the unaudited pro forma condensed combined financial information are as follows:

(a)

To record cash consideration paid for the acquisition, financing of new debt and eliminate cash not acquired:


Cash and cash equivalents
Cash payment for acquisition	$	(30,740	)
Eliminate cash not acquired		(7,247	)
Acquisition of new debt, net of debt issuance fees		39,519
Retirement of former debt		(3,871	)

	$	(2,339	)

(b)

To record value of goodwill and identifiable intangible assets acquired in connection with the acquisition.

(c)

To record the acquisition of new debt to finance the CrossView acquisition and the retirement of former debt:


Acquisition of new debt	$	40,000
Retirement of former debt		(3,871	)
Debt issuance costs		(481	)

Change in total debt	$	35,648
Change in current portion of long-term debt		(2,467	)

Change in long-term debt, less current portion	$	38,115

(d)

To record the performance-based contingent payments based on the estimated fair value at acquisition date, eliminate liabilities not assumed and to record the additional acquisition costs expected to be incurred:


	Short-term			Long-term
Performance-based contingent payment based on estimated 2015 activity	$	7,822		$	—
Performance-based contingent payment based on estimated 2016 activity		—			2,672
Performance-based contingent payment based on estimated 2017 activity		—			2,040
Working capital payout related to acquisition		759			—

Total performance-based contingent estimated payments		8,581			4,712
Eliminate liabilities not assumed		(2,250	)		—
Acquisition costs expected to be incurred		2,049			—

Total change in accrued expenses	$	8,380		$	4,712

PFSWEB, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

(TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

(e)

To record the adjustments to additional paid-in capital and retained earnings to reflect the combined equity structure, to record the additional $553 of common stock (553,225 shares issued at $0.001 par value), to eliminate cash not acquired and liabilities not assumed and to record the additional acquisition costs expected to be incurred:


	Additional Paid-In Capital			Retained Earnings
Historical balance as reported
PFSweb, Inc.	$	132,631		$	(93,519	)
CrossView Inc.		—			12,256

Combined historical balances		132,631			(81,263	)

Eliminate net assets acquired		—			(7,259	)
Eliminate cash not acquired		—			(7,247	)
Eliminate liabilities not assumed		—			2,250
Share consideration for acquisition		6,639			—
Goodwill related to CrossView acquisition		31,563			—
Identifiable intangibles related to CrossView acquisition		11,850			—
Elimination of equity related to acquisition		(43,413	)		—
Accrue additional acquisition costs expected to be incurred		—			(2,049	)

Total adjustments	$	6,639		$	(14,305	)

(f)

To record preliminary fair values of the identifiable intangible assets acquired in connection with the CrossView acquisition and associated amortization expenses and the elimination of non-recurring transaction costs of approximately $244,000 incurred during the six-month period ended June 30, 2015 that are directly related to the acquisition (in thousands, except for estimated useful life).


	Preliminary				Preliminary Amortization
	Fair Value at Acquisition		Estimated Useful Lives		Six Months June 30, 2015		Annual December 31, 2014
Identifiable intangibles	$	11,850		2-8 years	$	2,225	$	4,450

(g)

To adjust interest expense based on the new debt agreement and former debt agreements.


	Six Months Ended June 30, 2015			Year Ended December 31, 2014
Interest related to retirement of old debt	$	(148	)	$	(272	)
Interest related to acquisition of new debt		284			577

Total change in interest expense, net	$	136		$	305

PFSWEB, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

(TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

(h)

CrossView was previously taxed as an S corporation. Following the acquisition, CrossView’s operating results will be included in a consolidated federal tax return with our federal operations. The Company has tax net operating loss carryforwards that would offset any CrossView taxable income for the periods presented. The Company has also recorded a valuation allowance against its deferred tax assets, including the tax net operating losses, and as such, the resulting tax effect of the pro forma adjustments is insignificant.