The accompanying unaudited condensed consolidated financial statements of PFSweb, Inc. and its subsidiaries have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and include all normal and recurring adjustments necessary to present fairly the unaudited condensed consolidated balance sheets, statements of operations and comprehensive loss, statements of shareholders' equity, and statements of cash flows for the periods indicated. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the SEC. This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018.   We refer to PFSweb, Inc. and its subsidiaries collectively as “PFSweb,” the “Company,” us,“us,” “we” and “our” in these condensed consolidated financial statements.

Results of our operations for interim periods may not be indicative of results for the full fiscal year. We reclassify certain prior year amounts, as applicable, to conform to the current year presentation.

For a complete set of our significant accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2018. During the three-monththree and nine-month periods ended March 31,September 30, 2019, there were no significant changes to our significant accounting policies, other than those policies impacted by the new leasing guidance as described below in this Note 2 and Note 9.  

Per ASC 842,Our operating leases are included in "Operatingoperating lease right-of-use assets," "Current current portion of operating lease liabilities"liabilities and "Operatingoperating lease liabilities"liabilities on the condensed consolidated balance sheets. FinanceOur finance leases are included in "Propertyproperty and equipment", "Long-termequipment, long-term debt and finance lease obligations"obligations and "currentcurrent portion of long-term debt and finance lease obligations"obligations on the condensed consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets. Operating leaseThe expense for these short-term leases and operating leases is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components and have elected to account for thecombine as a single lease and non-lease components separately.component. In addition, we utilized the portfolio approach to group leases with similar characteristics and did not use hindsight to determine lease term. See Note 9 for additional information.

The following tables present our revenues, excluding sales and usage-based taxes, disaggregated by revenue source (in thousands):

The following tables present our revenues, excluding sales and usage-based taxes, disaggregated by timing of revenue recognition (in thousands):

The following tables present our revenues, excluding sales and usage-based taxes, disaggregated by region (in thousands):

Changes in costs to fulfill contract assets during the period was an increase of $0.3decreased $1.5 million from December 31, 2018 to March 31,September 30, 2019, primarily due to an increase of approximately $1.9$3.4 million from new projects, offset by approximately $1.6$4.9 million of

Changes in contract liabilities during the period was a decrease of $0.2decreased $2.8 million in our contract liabilities from December 31, 2018 to March 31,September 30, 2019, primarily due to an increase of approximately $2.4$5.3 million from new projects, offset by approximately $2.6$8.1 million of amortization and recognition of revenue in the threenine months ended March 31,September 30, 2019.  Contract losses recognized for the quarternine months ended March 31,September 30, 2019 were not material. Accrued contract liabilities below are included within accrued expenses in our condensed consolidated balance sheets.

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables, and customer advances and deposits (contract liabilities) on the condensed consolidated balance sheet.sheets. Changes in the contract asset and liability balances during the quarternine months ended March 31,September 30, 2019 were not materially impacted by any other factors.

Contract balances consistedconsist of the following (in thousands):

Remaining performance obligations represent the transaction price of firm orders for which work has not yet been performed. This amount does not include 1) contracts that are less than one year in duration, 2) contracts for which we recognize revenue based on the right to invoice for services performed, or 3) variable consideration allocated entirely to a wholly unsatisfied performance obligation. Much of our revenue qualifies for one of these exemptions. As of March 31,September 30, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations for contracts with an original expected duration of one year or more was $23.1$14.9 million. We expect to recognize revenue on approximately 71%50% of the remaining performance obligations in 2019, 23%42% in 2020, and the remaining recognized thereafter.

Supplies Distributors has a short-term credit facility with IBM Credit LLC and its assignees (“IBM Credit Facility”) to finance its purchase and distribution of Ricoh products in the United States, providing financing for eligible Ricoh inventory and certain receivables up to $11.0 million, as per amended agreement. The agreement has no stated maturity date and provides either party the ability to exit the facility following a 90-day notice.

On November 1, 2018, we entered into Amendment No.1No. 1 to our Credit Agreement with Regions Bank (the “Amended Facility”). The Amended Facility providesprovided for an increase in availability of our revolving loans to $60.0 million, with the ability for a further increase of $20.0 million to $80.0 million, and the elimination of the term loan. Amounts outstanding under the term loan were reconstituted as revolving loans. The Amended Facility also extends the maturity date to November 1, 2023. The Amended Facility also2023 and provides for additional $10.0 million in equipment financing.

As of March 31,September 30, 2019, we had $31.3$21.6 million of available credit under the revolving loan facility. As of March 31,September 30, 2019 and December 31, 2018, the weighted average interest rate on the revolving loan facility was 4.43%4.40% and 4.57%, respectively.

As of March 31,September 30, 2019, we had $8.9$7.2 million of available credit in equipment financing.

As of March 31,September 30, 2019, we were in compliance with all debt covenants.

We received municipal tax abatements in certain locations. In prior years, we received notice from a municipality that we did not satisfy certain criteria necessary to maintain the abatements and that the municipal authority planned to make an adjustment to our tax abatement. We disputed the adjustment and such dispute has been settled with the municipality. However, the amount of additional property taxes to be assessed against us and the timing of the related payments has not been finalized. As of March 31,September 30, 2019, we believe we have adequately accrued for the expected assessment.

The Company adopted ASU 2016-02, as of January 1, 2019, using the modified retrospective approach. Prior year financial statements were not recast under the new standard and, therefore, those amounts are not presented below.

All of our office and warehouse facilities are leased under operating leases. We also lease vehicles primarily as operating leases. Most of our equipment leases are leased under finance leases. Lease costs are included within "Selling, Generalcost of service fee revenue, selling, general and Administrative Expenses"administrative expenses and interest expense, net in our Condensed Consolidated Statementscondensed consolidated statements of Operationsoperations and Comprehensive Income (Loss).comprehensive loss.

Total lease costs consistsconsist of the following (in thousands):

We had $2.4$2.2 million of finance lease assets that are reported in Propertyproperty and Equipment,equipment, net as of March 31,September 30, 2019. As of March 31,September 30, 2019, our weighted-average remaining lease term relating to our operating leases is 6.15.8 years, with a weighted-average discount of 5.0%5.06%. As of March 31,September 30, 2019, our weighted-average remaining lease term relating to our finance leases is 2.3 years, with a weighted-average discount of 6.0%5.66%. Our leases have remaining lease terms of 1 monthup to 9.3 years, some of which include options to extend the leases for up to 10 years.years, and some of which include options to terminate the leases within 1 year.

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with the unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Form 10-Q.

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans or intentions (such as those relating to future business, future results of operations or financial condition, new or planned features or services, or management strategies). You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “potential,” “intend,” “project,” “estimate,” and other similar expressions. These forward-looking statements involve risks and uncertainties, and may include assumptions as to how we may perform in the future. Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee these expectations will actually be achieved. In addition, some forward-looking statements are based upon assumptions about future events that may not prove to be accurate. Therefore, our actual results may differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in “Part I, Item 1A: Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Annual Report”), as well as in our consolidated financial statements, related notes, and the other information appearing elsewhere in the Annual Report and our other filings with the Securities and Exchange Commission, or the SEC. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

In the Service Fee model, we typically charge for our services on time and material basis, a cost-plus basis, a percent of shipped revenue basis, a time and materials, project or retainer basis for our professional services or a per transaction basis, such as a per labor hour basis for web-enabled customer contact center services and a per-item basis for fulfillment services. Additional fees are billed for other services. We price our services based on a variety of factors, including the depth and complexity of the services provided, the amount of capital expenditures or systems customization required, the length of contract and other factors.

Many of our service fee contracts involve third-party vendors who provide additional services, such as package delivery. The costs we are charged by these third-party vendors for these services are often passed on to our clients. Our billings for reimbursements of these costs and other ‘out-of-pocket’ expenses include travel, shipping and handling costs and telecommunication charges and are included in pass-through revenue.

Monitoring and controlling our available cash balances and our expenses continues to be a primary focus. Our cash and liquidity positions are important components of our financing of both current operations and our targeted growth.