1 unchanged sentence
Evaluation of Disclosure Controls and Procedures.
−Removed: As required by Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures”, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.
−Removed: This evaluation was carried out under the supervision and with the participation of various members of our management, including our Company’s Chief Executive Officer (principal executive officer), Vice President and Chief Financial Officer (principal financial officer), and Vice President and Chief Accounting Officer (principal accounting officer).
−Removed: Based upon that evaluation, the Company’s Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer concluded that the Company’s disclosure controls and procedures were effective, as of the end of the period covered by this report, to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.
+Added: As required by Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures”, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.
+Added: This evaluation was carried out under the supervision and with the participation of various members of our management, including our Company’s Chief Executive Officer (principal executive officer) and Vice President and Chief Financial Officer (principal financial and accounting officer).
+Added: Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective, as of the end of the period covered by this report, to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized
+Added: and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.
−Removed: Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, and effected by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP.
+Added: Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP.
Internal control over financial reporting includes maintaining records in reasonable detail that accurately and fairly reflect our transactions and disposition of assets;
4 unchanged sentences
In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that, owing to changes in conditions, controls may become inadequate, or that the degree of compliance with policies or procedures may deteriorate.
−Removed: Management, with the participation of our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control —
−Removed: Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework).
−Removed: Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2019.
+Added: As previously disclosed in this Annual Report on Form 10-K, on April 30, 2020 we completed the acquisition of Interwork, and on November 6, 2020 we completed the acquisition of CDF.
+Added: SEC guidance permits management to omit an assessment of an acquired business’ internal control over financial reporting from management’s assessment of internal control over financial reporting for a period not to exceed one year from date of acquisition.
+Added: As of December 31, 2020, we have integrated Interwork into our existing control environment.
+Added: Management has excluded from its assessment of internal control over financial reporting the operations and related assets of CDF, which the Company began consolidating in November 2020.
+Added: The operations and related assets of CDF were included in the consolidated financial statements of the Company and constituted 12% and 14% of total assets and net assets, respectively as of December 31, 2020, and 2% and 5% of consolidated net sales and net income for the year ended December 31, 2020.
+Added: Management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework).
+Added: Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was effective as of December 31, 2020.
+Added: The Company's independent registered public accounting firm, BDO USA, LLP, has audited the effectiveness of the company's internal control over financial reporting as of December 31, 2020, as stated in their report, which is included herein.
Other Information
Directors, Executive Officers and Corporate Governance
−Removed: The information required hereunder, with the exception of the information relating to the Company’s Code of Ethical Conduct that is presented in Part I under the heading “Available Information,”
−Removed: is incorporated by reference herein from our Definitive Proxy Statement for the 2020 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A not later than April 30, 2020 (the “Definitive Proxy Statement”) under the sections captioned “Election of Directors,”
−Removed: “Corporate Governance”
−Removed: and “Delinquent Section 16 (a) Reports.”
+Added: The information required hereunder, with the exception of the information relating to the Company’s Code of Ethical Conduct that is presented in Part I under the heading “Available Information,” is incorporated by reference herein from our Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A
+Added: not later than April 30, 2021 (the “Definitive Proxy Statement”) under the sections captioned “Election of Directors,” “Corporate Governance” and “Delinquent Section 16 (a) Reports.”
Executive Compensation
−Removed: The information required hereunder is incorporated by reference herein from the Definitive Proxy Statement under the sections captioned “Executives and Executive Compensation”
−Removed: and “Corporate Governance.”
+Added: The information required hereunder is incorporated by reference herein from the Definitive Proxy Statement under the sections captioned “Executives and Executive Compensation” and “Corporate Governance.”
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
−Removed: The information required hereunder is incorporated by reference herein from the Definitive Proxy Statement under the sections captioned “Equity Compensation Plan Information —
−Removed: Securities Authorized for Issuance under Equity Compensation Plans”
−Removed: and “Security Ownership of Certain Beneficial Owners and Management.”
+Added: The information required hereunder is incorporated by reference herein from the Definitive Proxy Statement under the sections captioned “Equity Compensation Plan Information — Securities Authorized for Issuance under Equity Compensation Plans” and “Security Ownership of Certain Beneficial Owners and Management.”
Certain Relationships and Related Party Transactions, and Director Independence
−Removed: The information required hereunder is incorporated by reference herein from the Definitive Proxy Statement under the sections captioned “Executives and Executive Compensation,”
−Removed: “Corporate Governance”
−Removed: and “Transactions with Related Persons.”
+Added: The information required hereunder is incorporated by reference herein from the Definitive Proxy Statement under the sections captioned “Executives and Executive Compensation,” “Corporate Governance” and “Transactions with Related Persons.”
Principal Accounting Fees and Services
−Removed: The information required hereunder is incorporated by reference herein from the Definitive Proxy Statement under the section captioned “Ratification of Appointment of Independent Registered Public Accounting Firm.”
+Added: The information required hereunder is incorporated by reference herein from the Definitive Proxy Statement under the section captioned “Ratification of Appointment of Independent Registered Public Accounting Firm.”
Exhibits, Financial Statement Schedules
−Removed: The following documents are filed as part of this Report:
+Added: (a) The following documents are filed as part of this Report:
Consolidated Financial Statements (See Index to Consolidated Financial Statements on page F-1 of this report);
8 unchanged sentences
Specimen of Common Stock Certificate.
−Removed: Description of Securities.
Description of Exhibit
−Removed: Second Amended and Restated Revolving Credit Loan Agreement, dated November 15, 2017, by and among Wayside Technology Group, Inc., Lifeboat Distribution, Inc., Techxtend, Inc., Programmer’s Paradise, Inc., and ISP International Software Partners, Inc., as Co-Borrowers, and Citibank, N.A., as Lender.
−Removed: Second Amended and Restated Credit Loan Note, dated November 15, 2017, by and among Wayside Technology Group, Inc., Lifeboat Distribution, Inc., Techxtend, Inc., Programmer’s Paradise, Inc., and ISP International Software Partners, Inc., as Co-Borrowers, and Citibank, N.A., as Lender.
−Removed: Second Amended and Restated Security Agreement, dated November 15, 2017, by and among Wayside Technology Group, Inc., Lifeboat Distribution, Inc., Techxtend, Inc., Programmer’s Paradise, Inc., and ISP International Software Partners, Inc., as Debtors, and Citibank, N.A., as Lender.
+Added: Description of Securities.
+Added: Second Amended and Restated Revolving Credit Loan Agreement, dated November 15, 2017, by and among Wayside Technology Group, Inc., Lifeboat Distribution, Inc., Techxtend, Inc., Programmer’s Paradise, Inc., and ISP International Software Partners, Inc., as Co-Borrowers, and Citibank, N.A., as Lender.
+Added: Second Amended and Restated Credit Loan Note, dated November 15, 2017, by and among Wayside Technology Group, Inc., Lifeboat Distribution, Inc., Techxtend, Inc., Programmer’s Paradise, Inc., and ISP International Software Partners, Inc., as Co-Borrowers, and Citibank, N.A., as Lender.
+Added: Second Amended and Restated Security Agreement, dated November 15, 2017, by and among Wayside Technology Group, Inc., Lifeboat Distribution, Inc., Techxtend, Inc., Programmer’s Paradise, Inc., and ISP International Software Partners, Inc., as Debtors, and Citibank, N.A., as Lender.
Second Amended and Restated Pledge and Security Agreement, dated November 15, 2017, by and between Wayside Technology Group, Inc., as Grantor, and Citibank, N.A., as Secured Party.
+Added: First Amendment to Second Amended and Restated Revolving Credit Loan Agreement and Other Loan Documents, dated August 31, 2020, by and among Wayside Technology Group, Inc., Climb Channel Solutions, Inc., f/k/a Lifeboat Distribution, Inc., TechXtend, Inc., Programmer’s Paradise, Inc., ISP International Software Partners, Inc., and Interwork Technologies, Inc., as Co-Borrowers, and Citibank, N.A., as Lender.
+Added: First Allonge to Second Amended and Restated Revolving Credit Loan Note, dated August 31, 2020, by and among Wayside Technology Group, Inc., Climb Channel Solutions, Inc., f/k/a Lifeboat Distribution, Inc., TechXtend, Inc., Programmer’s Paradise, Inc., ISP International Software Partners, Inc., and Interwork Technologies Inc., as Co-Borrowers, and Citibank, N.A., as Lender.
Code of Ethics and Business Conduct.
1 unchanged sentence
Employment agreement dated January 2, 2018 between the Company and Charles Bass.
+Added: Employment agreement dated September 26, 2016 between the Company and Michael Vesey.
+Added: Offer Letter, dated January 6, 2003, from the Company to Vito Legrottaglie.
Form of Officer and Director Indemnification Agreement.
2012 Stock-Based Compensation Plan.
−Removed: Employment Agreement, dated January 12, 2006, between the Company and Simon F.
−Removed: Offer Letter, dated January 6, 2003, from the Company to Vito Legrottaglie.
Form of Non-Qualified Stock Option Agreement.
Subsidiaries of the Registrant.
−Removed: Consent of BDO USA, LLP.
+Added: Consent of BDO USA, LLP, an Independent Registered Public Accounting Firm.
Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Dale Foster, the Chief Executive Officer of the Company.
+Added: Description of Exhibit
Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Michael Vesey, the Vice President and Chief Financial Officer of the Company.
−Removed: Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Kevin T.
−Removed: Scull, the Vice President and Chief Accounting Officer of the Company.
Certification pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C.
2 unchanged sentences
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Michael Vesey, the Vice President and Chief Financial Officer of the Company.
−Removed: Description of Exhibit
−Removed: Certification pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C.
−Removed: Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Kevin T.
−Removed: Scull, the Vice President and Chief Accounting Officer of the Company.
−Removed: Insider Trading Policy.
−Removed: The following financial information from Wayside Technology Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 4, 2020, formatted in XBRL (Extensible Business Reporting Language) includes:
−Removed: (1) Consolidated Balance Sheets, (2) Consolidated Statements of Earnings, (3) Consolidated Statements of Comprehensive Income, (4) Consolidated Statements of Stockholders’
−Removed: Equity, (5) Consolidated Statements of Cash Flows, and (6) the Notes to the Consolidated Financial Statements.
−Removed: Incorporated by reference to the exhibits of the same number to the Registrant’s Registration Statement on Form S-1 or amendments thereto (File No.
+Added: The following financial information from Wayside Technology Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 16, 2021, formatted in XBRL (Extensible Business Reporting Language) includes:
+Added: (1) Consolidated Balance Sheets, (2) Consolidated Statements of Earnings, (3) Consolidated Statements of Comprehensive Income, (4) Consolidated Statements of Stockholders’ Equity, (5) Consolidated Statements of Cash Flows, and (6) the Notes to the Consolidated Financial Statements.
+Added: (1) Incorporated by reference to the exhibits of the same number to the Registrant’s Registration Statement on Form S-1 or amendments thereto (File No.
333-92810) filed on May 30, 1995, July 7, 1995 and July 18, 1995.
−Removed: Incorporated by reference to the exhibits of the same number to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 filed on November 3, 2006.
−Removed: Incorporated by reference to exhibits of the same number filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 filed on March 13, 2008.
−Removed: Incorporated by reference to Exhibit 10.43 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 filed on May 12, 2006.
−Removed: Incorporated by reference to exhibits of the same number filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 filed on May 15, 2007.
−Removed: Incorporated by reference to Exhibit A of the Registrant’s Definitive Annual Meeting Proxy Statement filed on April 24, 2012.
−Removed: Incorporated by reference to the Registrant’s Form 8-K filed on November 20, 2017.
−Removed: Incorporated by reference to the Registrant’s Form 8-K filed on December 8, 2017.
−Removed: Incorporated by reference to exhibits of the same number filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017 filed on March 15, 2018.
−Removed: Incorporated by reference to exhibits of the same number filed with the Registrant’s Quarterly Report on Form 10-Q for the Period Ended March 31, 2017 filed May 5, 2017.
−Removed: Incorporated by reference to the Registrant’s Form 8-K filed on January 21, 2020.
−Removed: Incorporated by reference to exhibits of the same number filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018 filed on March 18, 2019.
+Added: (2) Incorporated by reference to the exhibits of the same number to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 filed on November 3, 2006.
+Added: (3) Incorporated by reference to exhibits of the same number filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 filed on March 13, 2008.
+Added: (4) Incorporated by reference to exhibits of the same number filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 filed on May 15, 2007.
+Added: (5) Incorporated by reference to Exhibit A of the Registrant’s Definitive Annual Meeting Proxy Statement filed on April 24, 2012.
+Added: (6) Incorporated by reference to the Registrant’s Form 8-K filed on November 20, 2017.
+Added: (7) Incorporated by reference to the Registrant’s Form 8-K filed on December 8, 2017.
+Added: (8) Incorporated by reference to the Registrant’s Form 8-K filed on January 21, 2020.
+Added: (9) Incorporated by reference to Exhibit 10.2 and 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the Period Ended March 31, 2020 filed May 8, 2020.
+Added: (10) Incorporated by reference Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the Period Ended March 31, 2017 filed May 5, 2017.
+Added: (11) Incorporated by reference to the Registrant’s Form 8-K filed on September 2, 2020.
(12) Furnished herewith.
(13) Filed herewith.
−Removed: The exhibits required by Item 601 of Regulation S-K are reflected above in Section (a) 3.
+Added: (b) The exhibits required by Item 601 of Regulation S-K are reflected above in Section (a) 3.
of this Item.
−Removed: The financial statement schedule is included as reflected in Section (a) 2.
+Added: (c) The financial statement schedule is included as reflected in Section (a) 2.
of this Item.
13 unchanged sentences
Chief Financial Officer
−Removed: (Principal Financial Officer)
−Removed: /s/ Kevin Scull
−Removed: Vice President and
−Removed: March 4, 2020
−Removed: Chief Accounting Officer
−Removed: (Principal Accounting Officer)
+Added: (Principal Financial and Accounting Officer)
/s/ Jeffrey Geygan
1 unchanged sentence
March 16, 2021
+Added: Jeffrey Geygan
/s/ Diana Kurty
March 16, 2021
−Removed: /s/ Mike Faith
−Removed: March 4, 2020
/s/ John McCarthy
6 unchanged sentences
March 16, 2021
+Added: /s/ Carol DiBattiste
+Added: March 16, 2021
+Added: Carol DiBattiste
Items 8 and 15(a)
2 unchanged sentences
Index to Consolidated Financial Statements and Schedule
−Removed: Report of Independent Registered Public Accounting Firm
+Added: Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
1 unchanged sentence
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020 and 2019
−Removed: Consolidated Statements of Stockholders’
−Removed: Equity for the years ended December 31, 2019 and 2018
+Added: Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019
Notes to Consolidated Financial Statements
−Removed: Schedule II —
−Removed: Valuation and Qualifying Accounts
+Added: Schedule II — Valuation and Qualifying Accounts
Report of Independent Registered Public Accounting Firm
−Removed: Shareholders and Board of Directors
+Added: To the Board of Directors and Stockholders
Wayside Technology Group, Inc.
−Removed: and Subsidiaries
Eatontown, New Jersey
+Added: Opinion on Internal Control over Financial Reporting
+Added: We have audited Wayside Technology Group, Inc.
+Added: and Subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).
+Added: In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes and schedule and our report dated March 16, 2021 expressed an unqualified opinion thereon.
+Added: Basis for Opinion
+Added: The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Controls and Procedures.
+Added: Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
+Added: We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.
+Added: federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
+Added: We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.
+Added: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
+Added: Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
+Added: Our audit also included performing such other procedures as we considered necessary in the circumstances.
+Added: We believe that our audit provides a reasonable basis for our opinion.
+Added: As indicated in the accompanying Item 9A, Controls and Procedures, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of CDF Group Limited, which was acquired on November 6, 2020, and which is included in the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for the year then ended.
+Added: CDF Group Limited constituted 12% and 14% of total assets and net assets, respectively, as of December 31, 2020, and 2% and 5% of net sales and net income, respectively, for the year then ended.
+Added: Management did not assess the effectiveness of internal control over financial reporting of CDF Group Limited because of the timing of the acquisition which was completed on November 6, 2020.
+Added: Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of CDF Group Limited.
+Added: Definition and Limitations of Internal Control over Financial Reporting
+Added: A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
+Added: A company’s internal control over financial reporting includes those policies
+Added: and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
+Added: (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
+Added: and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
+Added: Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
+Added: Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
+Added: /s/ BDO USA, LLP
+Added: Woodbridge, New Jersey
+Added: March 16, 2021
+Added: Report of Independent Registered Public Accounting Firm
+Added: To the Board of Directors and Stockholders
+Added: Wayside Technology Group, Inc.
+Added: Eatontown, New Jersey
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Wayside Technology Group, Inc.
−Removed: and Subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of earnings, comprehensive income, stockholders’
−Removed: equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes and schedule (collectively referred to as the “consolidated financial statements”).
+Added: and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes and schedule (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020 , in conformity with accounting principles generally accepted in the United States of America.
−Removed: Change in Accounting Principle
−Removed: As discussed in Note 2 to the consolidated financial statements, effective on January 1, 2019, the Company changed its method of accounting for leases due to the adoption of Accounting Standards Codification Topic 842, Leases.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) our report dated March 16, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
−Removed: These consolidated financial statements are the responsibility of the Company’s management.
−Removed: Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.
−Removed: We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.
+Added: These consolidated financial statements are the responsibility of the Company’s management.
+Added: Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.
+Added: We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
1 unchanged sentence
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
−Removed: The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
−Removed: As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
−Removed: Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
2 unchanged sentences
We believe that our audits provide a reasonable basis for our opinion.
+Added: Critical Audit Matter
+Added: The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:
+Added: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
+Added: The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
+Added: Business Combinations
+Added: As described in Note 4 of the consolidated financial statements, the Company completed the acquisitions of Interwork Technologies Inc.
+Added: and CDF Group Limited during the year ended December 31, 2020.
+Added: The total purchase consideration
+Added: for Interwork Technologies Inc.
+Added: was approximately $2.9 million, inclusive of a $0.8 million post-closing contingent earn-out, and for CDF Group Limited was approximately $24.1 million.
+Added: As a result of the acquisitions, management determined the estimated fair value of the identifiable assets acquired and liabilities assumed at the acquisition dates and recorded intangible assets of approximately $10.7 million in aggregate.
+Added: The primary intangible assets acquired were vendor and customer relationships.
+Added: We determined the accounting for the business combinations to be a critical audit matter.
+Added: The principal considerations for our determination were the inherent uncertainties that exist related to the Company’s forecasts used to determine the fair value of the intangible assets acquired and contingent earn-out liability.
+Added: Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.
+Added: The primary procedures we performed to address this critical audit matter included:
+Added: • Assessing the design and testing the operating effectiveness of certain controls over the selection of the valuation models by management, and controls over the development of significant assumptions used to determine fair values.
+Added: • Assessing the reasonableness of significant underlying assumptions through (i) evaluating historical performance of the target entity, (ii) assessing performance against market trends, industry metrics, and guideline companies, and (iii) performing a sensitivity analysis of the assumptions used in the discounted cash flow, net asset value, and terminal value and evaluating the potential effect of changes in these assumptions.
+Added: • Utilizing professionals with specialized skills and knowledge to assist in evaluating (i) the appropriateness of the valuation model used by management, (ii) testing the mathematical accuracy of the Company’s calculations, and (iii) evaluating the reasonableness of the discount rate used.
/s/ BDO USA, LLP
−Removed: We have served as the Company’s auditor since 2018.
+Added: We have served as the Company's auditor since 2018.
Woodbridge, New Jersey
12 unchanged sentences
Equipment and leasehold improvements, net
+Added: Other intangibles, net
Right-of-use assets, net
Accounts receivable-long-term, net
−Removed: Deferred income taxes
−Removed: LIABILITIES AND STOCKHOLDERS’
+Added: Deferred income tax assets
+Added: LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
4 unchanged sentences
Non-current liabilities
+Added: Deferred income tax liabilities
Total liabilities
Commitments and contingencies
−Removed: Stockholders’
+Added: Stockholders’ equity:
Common stock, $.01 par value;
6 unchanged sentences
Accumulated other comprehensive loss
−Removed: Total stockholders’
+Added: Total stockholders’ equity
Total liabilities and stockholders' equity
7 unchanged sentences
Selling, general, and administrative expenses
−Removed: Separation expenses
+Added: Legal and financial advisory expenses, net - unsolicited bid and related matters
+Added: Acquisition related costs
+Added: Amortization and depreciation expense
Income from operations
6 unchanged sentences
Income per common share-Diluted
−Removed: Weighted average common shares outstanding —
−Removed: Weighted average common shares outstanding —
+Added: Weighted average common shares outstanding — Basic
+Added: Weighted average common shares outstanding — Diluted
Dividends paid per common share
4 unchanged sentences
(Amounts in thousands)
−Removed: Other comprehensive income (loss):
+Added: Other comprehensive income:
Foreign currency translation adjustments
−Removed: Other comprehensive income (loss)
+Added: Other comprehensive income
Comprehensive income
2 unchanged sentences
and Subsidiaries
−Removed: Consolidated Statements of Stockholders’
+Added: Consolidated Statements of Stockholders’ Equity
(Amounts in thousands, except share amounts)
19 unchanged sentences
(Amounts in thousands)
−Removed: Year ended December 31,
Cash flows from operating activities
1 unchanged sentence
Depreciation and amortization expense
−Removed: Benefit from doubtful accounts receivable
+Added: Provision for doubtful accounts
Deferred income tax benefit
3 unchanged sentences
Amortization of right-of-use assets
−Removed: Changes in operating assets and liabilities:
+Added: Change in fair value of contingent earn-out consideration
+Added: Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
7 unchanged sentences
Purchase of equipment and leasehold improvements
+Added: Payment for acquisitions, net of cash acquired
Net cash and cash equivalents used in investing activities
4 unchanged sentences
Dividends paid
+Added: Payments of deferred financing costs
Net cash and cash equivalents used in financing activities
1 unchanged sentence
Net increase in cash and cash equivalents
−Removed: Cash and cash equivalents at beginning of period
−Removed: Cash and cash equivalents at end of period
+Added: Cash and cash equivalents at beginning of year
+Added: Cash and cash equivalents at end of year
Supplementary disclosure of cash flow information:
Income taxes paid
+Added: Interest paid
The accompanying notes are an integral part of the consolidated financial statements.
5 unchanged sentences
Wayside Technology Group, Inc.
−Removed: and Subsidiaries (the “Company”), was incorporated in Delaware in 1982.
+Added: and Subsidiaries (the “Company”), was incorporated in Delaware in 1982.
The Company distributes technology products developed by others to resellers who in turn sell to end customers worldwide.
−Removed: The Company also resells computer software and hardware developed by others and provides technical services directly to customers in the United States of America (“USA”) and Canada.
−Removed: The Company also operates a sales branch in Europe to serve our customers in this region of the world.
+Added: The Company also is a cloud solutions provider and value-added reseller of software, hardware and services to customers worldwide.
+Added: The Company also operates in Canada, the United Kingdom and Europe.
The Company offers an extensive line of products from leading software vendors and tools for virtualization/cloud computing, security, networking, storage & infrastructure management, application lifecycle management and other technically sophisticated domains as well as computer hardware.
The Company is organized into two reportable operating segments.
−Removed: The “Lifeboat Distribution”
−Removed: segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide.
−Removed: The “TechXtend”
−Removed: segment is a value-added reseller of software, hardware and services, selling to end user corporations, government organizations and academic institutions in the USA and Canada.
+Added: The “Distribution” segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide under the names “Climb Channel Solutions” (formerly Lifeboat Distribution) and “Sigma Software Distribution”.
+Added: The “Solutions” segment is a cloud solutions provider and value-added reseller of software, hardware and services to customers worldwide under the names “TechXtend” and “Grey Matter”.
Summary of Significant Accounting Policies
3 unchanged sentences
All intercompany transactions and balances have been eliminated.
+Added: Business Combinations
+Added: The Company accounts for business combinations using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.
+Added: The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.
+Added: When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions.
+Added: The Company may utilize third-party valuation specialists to assist the Company in the allocation.
+Added: Initial purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition.
+Added: Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred.
Use of Estimates
−Removed: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make extensive use of certain estimates and assumptions which 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 revenues and expenses during the reporting periods.
+Added: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make extensive use of certain estimates and assumptions which 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 revenues and expenses during the reporting periods.
The significant areas of estimation include but are not limited to accounting for allowance for doubtful accounts, sales returns, allocation of revenue in multiple deliverable arrangements, principal vs.
−Removed: agent considerations, discount rates applicable to long term receivables, inventory obsolescence, income taxes, depreciation, contingencies and stock-based compensation.
+Added: agent considerations, discount rates applicable to long term receivables, inventory obsolescence, income taxes, depreciation, amortization of intangible assets, contingencies and stock-based compensation.
Actual results could differ from those estimates.
1 unchanged sentence
Our basic and diluted earnings per share are computed using the two-class method.
−Removed: The two-class method is an earnings allocation method that determines net income per share for each class of common sto ck and participating securities according to their participation rights in dividends and undistributed earnings or losses.
+Added: The two-class method is an earnings allocation method that determines net income per share for each class of common stock and participating
+Added: securities according to their participation rights in dividends and undistributed earnings or losses.
Non-vested restricted stock awards that include non-forfeitable rights to dividends are considered participating securities.
2 unchanged sentences
A reconciliation of the numerators and denominators of the basic and diluted per share computations follows:
−Removed: Year ended December 31,
Less distributed and undistributed income allocated to participating securities
19 unchanged sentences
Foreign Currency Translation
−Removed: Assets and liabilities of the Company’s foreign subsidiaries have been translated using the end of the reporting period exchange rates, and related revenues and expenses have been translated at average rates of exchange in effect during the period.
−Removed: Cumulative translation adjustments have been classified within accumulated other comprehensive income, which is a separate component of stockholders’
−Removed: equity in accordance FASB ASC Topic No.
−Removed: 220, “Comprehensive Income”.
+Added: Assets and liabilities of the Company’s foreign subsidiaries have been translated using the end of the reporting period exchange rates, and related revenues and expenses have been translated at average rates of exchange in effect during the period.
+Added: Cumulative translation adjustments have been classified within accumulated other comprehensive income, which is a separate component of stockholders’ equity in accordance FASB ASC Topic No.
+Added: 220, “Comprehensive Income”.
Foreign currency transaction gains and losses are recorded as income or expenses as amounts are settled.
+Added: For foreign currency remeasurement from each local currency into the appropriate functional currency, monetary assets and liabilities are remeasured to functional currencies using current exchange rates in effect at the balance sheet date.
+Added: Gains or losses from these remeasurements have been included in the Company's Consolidated Statements of Earnings.
+Added: Non-monetary assets and liabilities are recorded at historical exchange rates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations in credit risk consist of cash and cash equivalents.
−Removed: The Company’s cash and cash equivalents, at times, may exceed federally insured limits.
−Removed: The Company’s cash and cash equivalents are deposited primarily in banking institutions with global operations.
+Added: The Company’s cash and cash equivalents, at times, may exceed federally insured limits.
+Added: The Company’s cash and cash equivalents are deposited primarily in banking institutions with global operations.
The Company has not experienced any losses in such accounts.
2 unchanged sentences
The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of December 31, 2020 and 2019, because of the relative short maturity of these instruments.
−Removed: The Company’s accounts receivable-long-term is discounted to their present value at prevailing market rates at the time of sale which, approximates fair value as of December 31, 2019 and 2018.
+Added: The Company’s accounts receivable-long-term is discounted to their present value at prevailing market rates at the time of sale which, approximates fair value as of December 31, 2020 and 2019.
Inventory, consisting primarily of finished products held for resale, is stated at the lower of cost or net realizable value.
3 unchanged sentences
Equipment and Leasehold Improvements
−Removed: Equipment and leasehold improvements are stated at cost.
+Added: Equipment and leasehold improvements are stated at cost or fair value, if purchased as part of a business combination.
Equipment depreciation is calculated using the straight-line method over three to five years.
Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the assets or the related lease terms, whichever is shorter.
+Added: Software Development Costs
+Added: The Company capitalizes certain internal and external costs incurred to acquire or create internal-use software.
+Added: Capitalized software costs are amortized on a straight-line basis over the estimated useful life of the software, which is generally four to ten years.
+Added: At December 31, 2020 and 2019, the company had unamortized software development costs
+Added: of $0.8 million and zero, respectively, which are included in "Equipment and leasehold improvements"
+Added: in the company's consolidated balance sheets.
Accounts Receivable-Long-Term
2 unchanged sentences
The amounts under these long-term accounts receivable due within one year are reclassified to the current portion of accounts receivable.
+Added: We test goodwill for impairment on an annual basis and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
+Added: In a qualitative assessment, we assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill.
+Added: If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary.
+Added: If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform the quantitative goodwill impairment test.
+Added: We may also elect the unconditional option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test.
+Added: In the quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill.
+Added: If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired.
+Added: Conversely, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
+Added: Intangible Assets
+Added: Intangible assets with determinable lives are amortized on a straight-line basis over their respective estimated useful lives, which is determined based on their expected period of benefit.
+Added: Intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
+Added: Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition.
+Added: If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset's carrying amount over its fair value.
+Added: In addition, each quarter, the Company evaluates whether events and circumstances warrant a revision to the remaining estimated useful life of each of these intangible assets.
+Added: If the Company were to determine that a change to the remaining estimated useful life of an intangible asset was necessary, then the remaining carrying amount of the intangible asset would be amortized prospectively over that revised remaining useful life.
Comprehensive Income
4 unchanged sentences
This principle is achieved through applying the following five-step approach:
−Removed: Identification of the contract, or contracts, with a customer —
−Removed: A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
−Removed: We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
+Added: Identification of the contract, or contracts, with a customer — A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
+Added: We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
The Company considers customer purchase orders, which in some cases are governed by master agreements or general terms and conditions of sale, to be contracts with customers.
All revenue is generated from contracts with customers.
−Removed: Identification of the performance obligations in the contract —
−Removed: Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.
+Added: Identification of the performance obligations in the contract — Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.
To the extent a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are capable of being distinct in the context of the contract.
If these criteria are not met the promised goods or services are accounted for as a single performance obligation.
−Removed: Determination of the transaction price —The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer, net of sales taxes collected from customers, which are subsequently remitted to governmental entities.
+Added: Determination of the transaction price —The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer, net of sales taxes collected from customers, which are subsequently remitted to governmental entities.
Net sales are recorded net of estimated discounts, rebates, and returns.
Vendor rebates are recorded when earned as a reduction to cost of sales or inventory, as applicable.
−Removed: Allocation of the transaction price to the performance obligations in the contract —
−Removed: If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
+Added: Allocation of the transaction price to the performance obligations in the contract — If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price, or SSP, basis.
3 unchanged sentences
These contracts generally offer customers extended payment terms of up to three years.
−Removed: Recognition of revenue when, or as, we satisfy a performance obligation —
−Removed: The Company recognizes revenue when its performance obligations are complete, and control of the specified goods or services pass to the customer.
+Added: Recognition of revenue when, or as, we satisfy a performance obligation — The Company recognizes revenue when its performance obligations are complete, and control of the specified goods or services pass to the customer.
The Company considers the following indicators in determining when control passes to the customer:
6 unchanged sentences
Stock-based compensation is recognized based on the grant date fair value and is recognized as expense on a straight-line basis over the requisite service period.
+Added: Operating Segments
+Added: Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
+Added: The Company's operations are classified into two reportable business segments:
+Added: Distribution and Solutions.
Treasury Stock
2 unchanged sentences
The reissuance of shares from treasury stock is based on the weighted average purchase price of the shares.
−Removed: Separation Expenses
−Removed: Separation expenses during the year ended December 31, 2019 consist of expenses related to cash payments made to the Company’s former President, Chief Executive Officer and member of the Board pursuant to a separation agreement dated May 24, 2019.
−Removed: Separation expenses during the year ended December 31, 2018 consist of accelerated vesting of restricted stock and other cash payments made to the Company’s former Chairman of the Board, President and Chief Executive Officer pursuant to a separation agreement dated May 11, 2018.
−Removed: See Note 14 for additional details.
Interest, net
−Removed: Interest, net consists primarily of income from the amortization of the discount on accounts receivable long term, net of interest expense on the Company’s credit facility.
+Added: Interest, net consists primarily of income from the amortization of the discount on accounts receivable long term, net of interest expense on the Company’s credit facility.
The Company utilizes the asset and liability method of accounting for income taxes.
1 unchanged sentence
This method also requires a valuation allowance against the net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all the deferred tax assets will not be realized.
−Removed: The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense when assessed.
−Removed: The Company accounts for uncertainties in accordance with FASB ASC 740 “Income Taxes”.
+Added: The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense when assessed.
+Added: The Company accounts for uncertainties in accordance with FASB ASC 740 “Income Taxes”.
This standard clarified the accounting for uncertainties in income taxes.
1 unchanged sentence
It also provides guidance on derecognition, classification, interest and penalties, and disclosures related to income taxes associated with uncertain tax positions.
−Removed: The Company classifies all deferred tax asset or liabilities as non-current on the balance sheet in accordance with ASU 2015-17 which the Company has adopted.
+Added: The Company classifies all deferred tax asset or liabilities as non-current on the balance sheet.
+Added: Foreign Exchange
+Added: The Company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product.
+Added: In cases where the Company is not able to create a natural hedge by maintaining offsetting asset and liability amounts in the same currency, it may enter into foreign exchange contracts, typically in the form of forward purchase agreements, to facilitate the hedging of foreign currency exposures to mitigate the impact of changes in foreign currency exchange rates.
+Added: These contracts generally have terms of no more than two months.
+Added: The Company does not apply hedge accounting to these contracts and therefore the changes in fair value are recorded in earnings.
+Added: The Company does not enter into foreign exchange contracts for trading purposes and the risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the Company minimizes by limiting its counterparties to major financial institutions.
+Added: The fair value of forward purchase contracts at December 31, 2020 was not material to the consolidated financial statements.
+Added: Reclassifications
+Added: Certain amounts from the prior year’s financial statements have been reclassified in order to conform to the current year’s presentation.
Recently Issued Accounting Pronouncements
−Removed: In February 2016, the FASB issued ASU 2016-02, “Leases”
−Removed: ("ASU 2016-02").
−Removed: ASU 2016-02 supersedes the lease guidance under FASB ASC Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases.
−Removed: ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term from operating leases.
−Removed: For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities.
−Removed: In transition, lessees and lessors were originally required
−Removed: to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.
−Removed: In July 2018, FASB issued ASU 2018-11, Targeted Improvements.
−Removed: This update still requires modified retrospective transition;
−Removed: however, it adds the option to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment in the current period instead of at the beginning of the earliest period presented.
−Removed: Under this option, comparative periods presented in the financial statements in which the new lease standard is adopted will continue to be presented in accordance with prior guidance.
−Removed: The Company adopted the new accounting standard on January 1, 2019 using the modified retrospective transition option.
−Removed: The new standard provides optional practical expedients in transition, which the Company has elected as a package permitting the Company to not reassess under the new standard prior conclusions regarding lease identification, lease classification and initial direct costs.
−Removed: Also, in accordance with the new standard, the Company has elected in transition and for an ongoing basis not to apply the recognition requirements for all short-term leases.
−Removed: The adoption of the new standard had a material effect on the Company’s financial statements, with the most significant effects of adoption relating to (1) the recognition of new right-of-use assets and lease liabilities on its balance sheet for real estate operating leases;
−Removed: and (2) providing significant new disclosures about its leasing activities.
−Removed: Upon adoption, the Company recognized operating lease liabilities of approximately $3.0 million based on the present value of the remaining minimum rental payments for existing operating leases.
−Removed: The Company also recognized corresponding right-of-use assets, net of lease incentives of approximately $2.2 million.
−Removed: There was no impact to stockholders’
−Removed: equity from the adoption.
In June 2016, the FASB issued Accounting Standards Update No.
−Removed: 2016-13, “Financial Instruments - Credit Losses (Topic 326)”
−Removed: ("ASU 2016-13").
+Added: 2016-13, “Financial Instruments - Credit Losses (Topic 326)” ("ASU 2016-13").
ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.
Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted.
−Removed: In November 2019, FASB issued ASU 2019-10, “
−Removed: Financial Instruments –
−Removed: Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).”
−Removed: This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
+Added: In November 2019, FASB issued ASU 2019-10, “ Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
The Company is planning to adopt this standard in the first quarter of fiscal 2023.
1 unchanged sentence
2016-13 on its Consolidated Financial Statements, particularly its recognition of allowances for accounts receivable.
−Removed: In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220):
−Removed: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”
−Removed: (“ASU 2018-02”), which permits the reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act (the “TCJA”
−Removed: or “U.S.
−Removed: tax reform”) from accumulated other comprehensive income (loss) to retained earnings.
−Removed: The new standard became effective for the Company beginning with the first quarter of 2019.
−Removed: The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.
−Removed: In June 2018, the FASB issued ASU 2018-07, “Compensation —
−Removed: Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting”
−Removed: (“ASU 2018-07”), which aligns the measurement and classification guidance for share-based payments to nonemployees with that for employees, with certain exceptions.
−Removed: It expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in the entity’s own operations and supersedes the guidance in ASC 505-50.
−Removed: The ASU retains the existing cost attribution guidance, which requires entities to recognize compensation cost for nonemployee awards in the same period and in the same manner (i.e., capitalize or expense) they would if they paid cash for the goods or services, but it moves the guidance to ASC 718.
−Removed: The new standard became effective for the Company beginning with the first quarter of 2019.
−Removed: The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.
−Removed: In July 2018, the FASB issued ASU 2018-09 –
−Removed: Codification Improvements, which facilitates amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification.
−Removed: The effective date of the standard is dependent on the facts and circumstances of each amendment.
−Removed: Some amendments do not require transition guidance and will be effective upon the issuance of this standard.
−Removed: A majority of the amendments in this
−Removed: standard became effective for the Company beginning with the first quarter of 2019.
−Removed: The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.
−Removed: In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):
−Removed: Simplifying the Accounting for Income Taxes”
−Removed: as part of its initiative to reduce complexity in the accounting standards.
+Added: In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):
+Added: Simplifying the Accounting for Income Taxes” as part of its initiative to reduce complexity in the accounting standards.
The standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.
7 unchanged sentences
The following table depicts the disaggregation of revenue according to revenue type and is consistent with how we evaluate our financial performance
−Removed: Year ended December 31,
Hardware, software and other products
16 unchanged sentences
This involves considering if the software provides its original intended functionality without the updates, or is dependent on frequent, or continuous updates to maintain its functionality.
−Removed: See Allocation of the transaction price to the performance obligations in the contract in Note 2 for a discussion of the allocation
−Removed: of maintenance and support costs when they are distinct from the related software licenses and Software - security and highly interdependent with support below for a discussion of maintenance and support costs when they are not distinct from the related software license.
+Added: See Allocation of the transaction price to the performance obligations in the contract in Note 2 for a discussion of the allocation of maintenance and support costs when they are distinct from the related software licenses and Software - security and highly interdependent with support below for a discussion of maintenance and support costs when they are not distinct from the related software license.
Software - security and highly interdependent with support - Software - security software and software highly interdependent with support consists of sales of security subscriptions and other licensed software products whose functionality is highly interdependent with, and therefore not distinct from, related software maintenance.
Delivery of the software license and related support over time is considered a single performance obligation of the third-party vendor for these products.
−Removed: The Company is an agent in these transactions, with revenue being recorded on a net basis when its performance obligation of processing a valid order between the supplier and customer contracting for the services is complete.
+Added: The Company is an agent in these transactions, with revenue being recorded on a net basis when its performance obligation of processing a valid order between the vendor partner and customer contracting for the services is complete.
Maintenance, support and other services revenue - Maintenance, support and other services revenue consists of third-party post-contract support that is not critical or essential to the core functionality of the related licensed software, and, to a lesser extent, from third-party professional services, software as a service, and cloud subscriptions.
6 unchanged sentences
The balance of accounts receivable, net of allowance for doubtful accounts as of December 31, 2020 and 2019 is presented in the accompanying Consolidated Balance Sheets.
−Removed: Accounts receivable-long-term result from product sales with extended payment terms that are discounted to their present values at the Company’s estimates of prevailing market rates at the time of the sale.
+Added: Accounts receivable-long-term result from product sales with extended payment terms that are discounted to their present values at the Company’s estimates of prevailing market rates at the time of the sale.
The Company has determined that these amounts do not represent variable consideration as the amount earned is fixed.
3 unchanged sentences
Provisions for doubtful accounts including long-term accounts receivable and returns are estimated based on historical write offs, sales returns and credit memo analysis which are adjusted to actual on a periodic basis.
−Removed: Refund liability –
−Removed: The Company records a refund liability for expected product returns with a corresponding asset for an amount representing any expected recovery from vendors regarding the return.
−Removed: Principal versus agent considerations –
−Removed: The Company determines whether it is acting as a principal or agent in a transaction by assessing whether it controls a good or service prior to it being transferred to a customer, with control being defined as having the ability to direct the use of and obtain the benefits from the asset.
+Added: Refund liability – The Company records a refund liability for expected product returns with a corresponding asset for an amount representing any expected recovery from vendors regarding the return.
+Added: Principal versus agent considerations – The Company determines whether it is acting as a principal or agent in a transaction by assessing whether it controls a good or service prior to it being transferred to a customer, with control being defined as having the ability to direct the use of and obtain the benefits from the asset.
The Company considers the following indicators, among others, in making the determination:
2 unchanged sentences
As we enter into distribution agreements with third-party service providers, we evaluate whether we are acting as a principal or agent for each product sold under the agreement based on the nature of the product or service, and our performance obligations.
−Removed: Products for which there are significant ongoing third-party performance obligations include software maintenance, which includes periodic software updates and support, security software that is highly interdependent with maintenance, software as a service, cloud and
−Removed: third-party professional services.
+Added: Products for which there are significant ongoing third-party performance obligations include software maintenance, which includes periodic software updates and support, security software that is highly interdependent with maintenance, software as a service, cloud and third-party professional services.
Sales of hardware, software and other products where we are a principal are recorded on a gross basis with the selling price to the customer recorded as sales and the cost of the product or software recorded as cost of sales.
1 unchanged sentence
Under net revenue recognition, the cost paid to the vendor or third-party service provider is recorded as a reduction to sales, resulting in revenue being equal to the gross profit on the transaction.
+Added: Acquisition of Interwork Technologies
+Added: On April 30, 2020, pursuant to a Stock Purchase Agreement dated April 20, 2020, the Company completed the purchase of Interwork Technologies Inc., a Delaware corporation, and Interwork Technologies Inc., a corporation incorporated under the laws of the Province of Ontario, Canada (collectively “Interwork”).
+Added: The Company acquired Interwork for an aggregate purchase price of $5 million Canadian dollar (equivalent to $3.6 million USD), subject to certain working capital adjustments, paid at closing plus a potential post-closing $1.1 million Canadian dollar (equivalent to $0.8 million USD) earn-out.
+Added: The allocation of the purchase price was based upon the estimated fair value of Interwork’s net tangible and identifiable intangible assets as of the date of the acquisition.
+Added: The transaction was accounted for under the purchase method of accounting.
+Added: The financial position and operating results of Interwork is included in the Company’s consolidated financial statements from the date of acquisition.
+Added: The net sales and net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it has been integrated into the Company’s operations.
+Added: The impact of the acquisition’s preliminary purchase price allocations on the Company’s consolidated balance sheet and the acquisition date fair value of the total consideration transferred were as follows.
+Added: The Company is in the process of filing remaining tax returns;
+Added: thus the provisional measurements of goodwill and deferred income taxes are subject to change:
+Added: (in thousands)
+Added: Trade accounts receivable
+Added: Other current assets
+Added: Intangible assets
+Added: Vendor relationships (14-year weighted average useful life)
+Added: Non-compete (1-year useful life)
+Added: Accounts payable and other current liabilities
+Added: Deferred income tax liabilities
+Added: Taxes payable
+Added: (in thousands)
+Added: Supplementary information:
+Added: Cash paid to sellers
+Added: Contingent earn-out
+Added: Total purchase consideration
+Added: Cash paid to sellers
+Added: Cash acquired in acquisition
+Added: Net cash paid for acquisition
+Added: Intangible assets are comprised of approximately $3.8 million of vendor relationships with a weighted average amortization period of 13.7 years, representing the expected period of benefits, of which $2.3 million is deductible for
+Added: Canadian income tax purposes.
+Added: Goodwill, which was allocated to the Distribution segment, is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce.
+Added: Goodwill recognized as a result of the acquisition is not deductible for income tax purposes.
+Added: The purchase consideration includes approximately $0.8 million of potential earn-out consideration if certain targets are achieved, payable in cash.
+Added: As of December 31, 2020, the Company reassessed the earn-out liability and increased the fair value of the earn-out liability by less than $0.1 million, with the adjustment recognized within selling, general and administrative expenses during the year ended December 31, 2020.
+Added: The earn-out liability is included in accounts payable and accrued expenses as of December 31, 2020 as payment would be due in the third quarter of 2021.
+Added: Acquisition of CDF Group Limited
+Added: On November 6, 2020, the Company entered into a Share Purchase Agreement and purchased the entire share capital of CDF Group Limited (“CDF”) for an aggregate purchase price of approximately £13.3 million (equivalent to approximately $17.4 million USD), subject to certain working capital and other adjustments.
+Added: The allocation of the purchase price was based upon the estimated fair value of CDF’s net tangible and identifiable intangible assets as of the date of the acquisition.
+Added: The transaction was accounted for under the purchase method of accounting.
+Added: The financial position and operating results of CDF is included in the Company’s consolidated financial statements from the date of acquisition.
+Added: The Company recorded net revenue for CDF of approximately $3.8 million and net income of approximately $0.2 million during the year ended December 31, 2020.
+Added: The impact of the acquisition’s preliminary purchase price allocations on the Company’s consolidated balance sheet and the acquisition date fair value of the total consideration transferred is depicted in the table below.
+Added: Due to the timing of the closing of the transaction in the fourth quarter of 2020, the Company has not yet completed its evaluation and determination of certain assets acquired and liabilities assumed, primarily (i) the final valuation of goodwill and intangible assets, (ii) capitalized software, and (iii) the final evaluation and assessment of income tax accounts;
+Added: therefore the final fair value of the assets acquired and liabilities assumed may vary from the Company’s preliminary estimates:
+Added: (in thousands)
+Added: Trade accounts receivable
+Added: Other current assets
+Added: Equipment and leasehold improvements, net
+Added: Intangible assets
+Added: Customer relationships (13-year useful life)
+Added: Trademarks (15-year useful life)
+Added: Non-compete (1-year useful life)
+Added: Accounts payable and other current liabilities
+Added: Deferred income tax liabilities
+Added: Other liabilities
+Added: (in thousands)
+Added: Supplementary information:
+Added: Cash paid to sellers
+Added: Cash acquired in acquisition
+Added: Net cash paid for acquisition
+Added: Estimated intangible assets are comprised of approximately $6.4 million of customer relationships with an amortization period of 13 years and $0.5 million of tradenames with an amortization period of 15 years, representing the expected periods of benefits.
+Added: Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce.
+Added: Goodwill recognized as a result of the acquisition is not deductible for income tax purposes.
+Added: The preliminary allocation of the purchase price for the acquisitions of Interwork and CDF were allocated based on information that is currently available.
+Added: The Company's estimates and assumptions underlying the initial allocations is subject to the collection of information necessary to complete its allocations within the measurement period, which is up to one year from each of the acquisition dates.
+Added: The Company incurred acquisition related costs of approximately $1.5 million during the year ended December 31, 2020 in conjunction with the acquisitions of Interwork and CDF, which are reflected in the accompanying consolidated statements of earnings.
+Added: There were no acquisition related costs incurred during the year ended December 31, 2019.
+Added: Pro Forma Results (unaudited)
+Added: The following unaudited pro forma financial information summarizes the results of operations for the years ended December 31, 2020 and 2019 as if the acquisition of Interwork and CDF had been completed as of the beginning of 2020 and 2019, respectively.
+Added: The pro forma results are based upon certain assumptions and estimates, and they give effect to actual operating results prior to the acquisitions and adjustments to reflect the change in intangible assets amortization and income taxes at a rate consistent with the tax rates of the local jurisdictions.
+Added: As a result, these pro forma results do not necessarily represent results that would have occurred if the acquisitions had taken place on the basis assumed above, nor are they indicative of the results of future combined periods.
+Added: Year ended December 31,
+Added: Goodwill and Other Intangible Assets
+Added: The following table summarizes the changes in the carrying amount of goodwill for the year ended December 31, 2020.
+Added: Balance at January 1, 2020
+Added: Goodwill acquired during 2020
+Added: Translation adjustments
+Added: Balance December 31, 2020
+Added: Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are individually identified and separately recognized in business combinations.
+Added: The change in our goodwill balance during the year ended December 31, 2020 relates to our acquisitions of Interwork and CDF, with goodwill acquired through our acquisitions of Interwork and CDF provisional for a period of up to one year from the acquisition date.
+Added: Information related to the Company’s other intangibles, net is as follows:
+Added: As of December 31, 2020
+Added: Gross Carrying Amount
+Added: Accumulated Amortization
+Added: Net Carrying Amount
+Added: Customer and vendor relationships
+Added: Customer relationships are amortized over thirteen years.
+Added: Vendor relationships are amortized between eleven and fifteen years.
+Added: Trade name is amortized over fifteen years.
+Added: Non-compete is amortized over one year.
+Added: Intangible assets acquired through our acquisition of CDF are provisional for a period of up to one year from the acquisition date.
+Added: During the year ended December 31, 2020, the Company recognized total amortization expense for other intangibles, net of $0.3 million.
+Added: There was no amortization expense for other intangibles, net during the year ended December 31, 2019.
+Added: Estimated future amortization expense of the Company’s other intangibles, net as of December 31, 2020 is as follows:
Right-of-use Asset and Lease Liability
2 unchanged sentences
Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets and lease expense for these leases is recognized on a straight-line basis over the lease term.
−Removed: Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.
+Added: Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.
Operating lease right-of-use assets and liabilities are recognized at commencement date of the lease based on the present value of the lease payments over the lease term.
2 unchanged sentences
Operating lease expense is recognized on a straight-line basis over the lease term and included in selling, general and administrative expenses.
−Removed: Information related to the Company’s right-of-use assets and related lease liabilities were as follows:
+Added: Information related to the Company’s right-of-use assets and related lease liabilities were as follows:
Cash paid for operating lease liabilities
2 unchanged sentences
Weighted-average discount rate
−Removed: Represents operating leases existing on January 1, 2019 and recognized as part of the Company’s adoption of ASU 2016-02.
−Removed: No new operating leases commenced during the year ended December 31, 2019.
+Added: (1) During the year ended December 31, 2020, includes $0.5 million recognized through acquisitions.
+Added: During the year ended December 31, 2019, represents operating leases existing on January 1, 2019 and recognized as part of the Company’s adoption of ASU 2016-02 .
Maturities of lease liabilities as of December 31, 2020 were as follows:
6 unchanged sentences
Equipment and leasehold improvements, net consist of the following:
+Added: Capitalized software
Leasehold improvements
Less accumulated depreciation and amortization
−Removed: Depreciation expense relating to equipment and leasehold improvements, net was $0.5 million during the years ended December 31, 2019 and 2018, respectively.
−Removed: Accounts receivable –
−Removed: long term, net consist of the following:
+Added: Depreciation expense relating to equipment and leasehold improvements, net was $0.4 million and $0.5 million during the years ended December 31, 2020 and 2019, respectively.
+Added: Amortization expense relating to capitalized software was less than $0.1 million and zero during the years ended December 31, 2020 and 2019.
+Added: Accounts receivable – long term, net consist of the following:
Total amount due from customer
10 unchanged sentences
Deferred rent credit
+Added: Depreciation and amortization
Total deferred tax assets
Deferred tax liabilities:
+Added: Accruals and reserves
Depreciation and amortization
Total deferred tax liabilities
−Removed: Net deferred tax asset
+Added: Net deferred tax (liabilities) asset
The provision for income taxes is as follows:
1 unchanged sentence
Effective Tax Rate
−Removed: The Company’s effective tax rate for the year ended December 31, 2018 was impacted by limitations on the deductibility of executive compensation resulting from Section 162(m) of the Internal Revenue Code and adjustments to the accrual for state income taxes in states which have enacted economic nexus statutes.
−Removed: The Company recorded a $0.4 million tax benefit related to separation expenses during the year ended December 31, 2018, which were accounted for as a discrete item, resulting in a 19.4% effective tax benefit rate on that item.
−Removed: The Company also recorded an adjustment to its accrual for potential liabilities for state income taxes in states which have enacted economic nexus statutes of $0.2 million during the year ended December 31, 2018.
−Removed: The effective tax rate for ordinary income was 25.1% for the year ended December 31, 2018.
The reasons for the difference between total tax expense and the amount computed by applying the U.S.
2 unchanged sentences
Statutory rate applied to pretax income
−Removed: Section 162(m) and other permanent items
−Removed: Potential state tax obligations, net of federal tax benefit
+Added: Acquisition related costs
+Added: Stock compensation
+Added: Other permanent items
State income taxes, net of federal income tax benefit
2 unchanged sentences
Income tax expense
−Removed: The Company receives a tax deduction from the income realized by employees on the exercise of certain non-qualified stock options and restricted stock awards for which the tax effect of the difference between the book and tax
−Removed: deduction is recognized as a component of current income tax.
−Removed: Included in the table above is the net effect of the global intangible low-taxed income (“GILTI”) inclusion for the years ended December 31, 2019 and 2018 of $0.1 million, respectively, which is fully offset by a foreign tax credit.
The Company has analyzed filing positions in all the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.
−Removed: The Company has identified its federal consolidated tax return, its state tax return in New Jersey and its Canadian tax return as major tax jurisdictions.
−Removed: As of December 31, 2019, the Company’s 2016 through 2018 Federal tax returns remain open for examination.
−Removed: The Company’s New Jersey and Canadian tax returns are open for examination for the years 2015 through 2018.
−Removed: As of December 31, 2018, the Company recorded an accrual of $0.6 million, net of federal tax benefit, for potential liabilities for state income taxes in states which have enacted economic nexus statutes and the Company has not filed income tax returns.
−Removed: The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses.
+Added: The Company has identified its federal consolidated tax return, its state tax return in New Jersey, its Canadian tax return and its tax return in the United Kingdom as major tax jurisdictions.
+Added: As of December 31, 2020, the Company’s 2017 through 2019 Federal tax returns remain open for examination.
+Added: The Company’s New Jersey and Canadian tax returns are open for examination for the years 2016 through 2019.
+Added: The Company’s tax return in the United Kingdom is open for examination for the years 2019 and 2020.
+Added: The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses.
The Company believes that it has appropriate support for the income tax positions it takes and expects to take on its tax returns, and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including experience and interpretations of tax law applied to the facts of each matter.
2 unchanged sentences
United States
−Removed: The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31, 2019 and 2018:
+Added: The Company has approximately $6.7 million of undistributed earnings in Canada, which it continues to reinvest indefinitely, and therefore no withholding taxes related to its repatriation has been recorded.
+Added: The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31, 2020 and 2019:
Balance as of January 1
2 unchanged sentences
Balance as of December 31
−Removed: All of the unrecognized income tax benefits at December 31, 2019 and 2018 would have affected the Company’s effective income tax rate if recognized.
−Removed: The Company believes that it is reasonably possible that a significant decrease in the total amount of unrecognized income tax benefits related to state exposures may be necessary within the next twelve months.
During the years ended December 31, 2020 and 2019, the Company incurred interest and penalties of less than $0.1 million, respectively, related to these uncertain tax benefits.
Credit Facility
−Removed: On November 15, 2017, the Company entered into a $20,000,000 revolving credit facility (the “Credit Facility”) with Citibank, N.A.
−Removed: (“Citibank”) pursuant to a Second Amended and Restated Revolving Credit Loan Agreement (the “Loan Agreement”), Second Amended and Restated Revolving Credit Loan Note (the “Note”), Second Amended and Restated Security Agreement (the “Security Agreement”) and Second Amended and Restated Pledge and Security Agreement (the “Pledge Agreement”).
−Removed: The Credit Facility, which will be used for working capital and general corporate purposes, matures on August 31, 2020, at which time the Company must pay all outstanding principal of all outstanding loans plus all accrued and unpaid interest, and any, fees, costs and expenses.
+Added: On November 15, 2017, the Company entered into a $20 million revolving credit facility (the “Credit Facility”) with Citibank, N.A.
+Added: (“Citibank”) pursuant to a Second Amended and Restated Revolving Credit Loan Agreement (the “Loan Agreement”), Second Amended and Restated Revolving Credit Loan Note (the “Note”), Second Amended and Restated Security Agreement and Second Amended and Restated Pledge and Security Agreement.
+Added: On August 31, 2020, the Company entered into an amendment to the Credit Facility (the “Amended Credit Facility”) pursuant to a First Amendment to Second Amended and Restated Revolving Credit Loan Agreement and Other Loan Documents (collectively, the “Amended Loan Agreement”) and First Allonge to Second Amended and Restated Revolving Credit Loan Note (the “Amended Note”).
+Added: The Amended Credit Facility, which will continue to be used for working capital and general corporate purposes, matures on June 30, 2023, at which time the Company must pay all outstanding principal of all outstanding loans plus all accrued and unpaid interest, and any, fees, costs and expenses.
In addition, the Company will pay regular monthly payments of all accrued and unpaid interest.
−Removed: The interest rate for any borrowings under the Credit Facility is subject to change from time to time based on the changes in the LIBOR Rate, as defined in the Loan Agreement (the
−Removed: “Index”).
+Added: The interest rate for any borrowings under the Amended Credit Facility is subject to change from time to time based on the changes in the LIBOR Rate, as defined in the Amended Loan Agreement (the “Index”).
The Index was 2.50% at December 31, 2020.
−Removed: Interest on the unpaid principal balance of the Note will be calculated using a rate of 1.50 percentage points over the Index.
−Removed: If the Index becomes unavailable during the term of the Credit Facility, interest will be based upon the Prime Rate (as defined in the Loan Agreement) after notifying the Company.
−Removed: The Credit Facility is secured by the assets of the Company.
−Removed: Among other affirmative covenants set forth in the Loan Agreement, the Company must maintain (i) a minimum Debt Service Coverage Ratio (as defined in the Loan Agreement) of not less than 2.0 to 1.0, (ii) a maximum Leverage Ratio (as defined in the Loan Agreement) of at least 2.5 to 1.0, and (iii) a minimum Collateral Coverage Ratio (as defined in the Loan Agreement) of not less than 1.5 to 1.0.
−Removed: Additionally, the Loan Agreement contains negative covenants prohibiting, among other things, the creation of certain liens, the alteration of the nature or character of the Company’s business, and transactions with the Company’s shareholders, directors, officers, subsidiaries and/or affiliates other than with respect to (i) the repurchase of the issued and outstanding capital stock of the Company from the stockholders of the Company or (ii) the declaration and payment of dividends to the stockholders of the Company.
+Added: Interest on the unpaid principal balance of the Amended Note will be calculated using a rate of 1.75 percentage points over the Index.
+Added: If the Index becomes unavailable during the term of the Amended Credit Facility, interest will be based upon the Benchmark Replacement (as defined in the Amended Loan Agreement) selected by Citibank after notifying the Company.
+Added: The Amended Credit Facility is secured by the assets of the Company.
At December 31, 2020 and 2019, the Company had no borrowings outstanding under the Credit Facility.
−Removed: The Company incurred $0.1 million and $0.1 million of interest expense, related to the Credit Facility during the years ended December 31, 2019 and 2018, respectively.
−Removed: Stockholders’
−Removed: Equity and Stock-Based Compensation
−Removed: At the annual stockholder’s meeting held on June 6, 2012, the Company’s stockholders approved the 2012 Stock-Based Compensation Plan (the “2012 Plan”).
+Added: The Company incurred $0.1 million of interest expense, related to the Credit Facility during the years ended December 31, 2020 and 2019, respectively .
+Added: Stockholders’ Equity and Stock-Based Compensation
+Added: At the annual stockholder’s meeting held on June 6, 2012, the Company’s stockholders approved the 2012 Stock-Based Compensation Plan (the “2012 Plan”).
The 2012 Plan authorizes the grant of Stock Options, Stock Units, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Bonuses and other equity-based awards.
−Removed: The total number of shares of Common Stock initially available for award under the 2012 Plan was 600,000, which was increased to 1,000,000 shares by shareholder approval at the Company’s 2018 Annual Meeting in June 2018.
+Added: The total number of shares of Common Stock initially available for award under the 2012 Plan was 600,000, which was increased to 1,000,000 shares by shareholder approval at the Company’s 2018 Annual Meeting in June 2018.
As of December 31, 2020, the number of shares of Common Stock available for future award grants to employees, officers and directors under the 2012 Plan is 384,164.
3 unchanged sentences
During the year ended December 31, 2019, the Company granted a total of 32,905 shares of Restricted Stock to officers, directors and employees.
−Removed: These shares of Restricted Stock vest immediately or over time in up to twenty equal quarterly installments.
−Removed: During the year ended December 31, 2018, 7,176 shares of Restricted Stock were forfeited as a result of directors and employees terminating employment with the Company.
−Removed: There was no options activity during the year ended December 31, 2019 and 2018 and there were no options outstanding or exercisable at December 31, 2019 and 2018, respectively, under the Company’s 2012 Plan.
+Added: These shares of Restricted Stock vest immediately or over time in up to sixteen equal quarterly installments.
+Added: During the year ended December 31, 2019, 16,530 shares of Restricted Stock were forfeited as a result of officers, directors and employees terminating employment with the Company.
+Added: There was no options activity during the year ended December 31, 2020 and 2019 and there were no options outstanding or exercisable at December 31, 2020 and 2019, respectively, under the Company’s 2012 Plan.
Under the various plans, options that are cancelled can be reissued.
At December 31, 2020, no cancelled options were reserved for future reissuance.
−Removed: A summary of nonvested shares of Restricted Stock awards outstanding under the Company’s 2012 Plan as of December 31, 2019, and 2018 and changes during the years ended December 31, 2019 and 2018 is as follows:
+Added: A summary of nonvested shares of Restricted Stock awards outstanding under the Company’s 2012 Plan as of December 31, 2020, and 2019 and changes during the years ended December 31, 2020 and 2019 is as follows:
Average Grant
10 unchanged sentences
The unrecognized compensation cost is expected to be recognized over a weighted-average period of 2.6 years.
−Removed: For the years ended December 31, 2019 and 2018, the Company recognized share-based compensation cost of approximately $0.8 million and $2.8 million, respectively.
−Removed: During the year ended December 31, 2018, $1.7 million of stock compensation expense related to the accelerated vesting of shares upon resignation of the Company’s former Chief Executive Officer, was included in separation expense in the accompanying Consolidated Statements of Earnings.
−Removed: All other share-based compensation is included in selling, general and administrative expenses.
+Added: For the years ended December 31, 2020 and 2019, the Company recognized share-based compensation cost of approximately $1.3 million and $0.8 million, respectively, which is included in selling, general and administrative expenses.
The Company does not capitalize any share-based compensation cost.
Defined Contribution Plan
−Removed: The Company maintains a defined contribution plan covering substantially all domestic employees.
+Added: The Company maintains a defined contribution plan covering substantially all employees.
Participating employees may make contributions to the plan, through payroll deductions.
−Removed: Matching contributions are made by the Company equal to 50% of the employee’s contribution to the extent such employee contribution did not exceed 6% of their compensation.
+Added: Matching contributions are made by the Company equal to 50% of the employee’s contribution to the extent such employee contribution did not exceed 6% of their compensation.
During the years ended December 31, 2020 and 2019, the Company expensed approximately $0.3 million, respectively, related to this plan.
Commitments and Contingencies
−Removed: Operating leases primarily relate to the lease of the space used for our operations in Eatontown, New Jersey;
−Removed: Mesa, Arizona;
−Removed: Oakville, Canada;
−Removed: and Amsterdam, Netherlands.
−Removed: Future minimum rental commitments under non-cancellable operating leases as of December 31, 2018 are as follows:
−Removed: Rent expense for the years ended December 31, 2019 and 2018 was approximately $483 thousand and $496 thousand, respectively.
Employment Agreements
−Removed: The Company has entered into employment agreements with five of its executive officers.
−Removed: If the Company terminates their respective employment for any reason other than for cause, these executive officers are entitled to severance payments ranging from six to twelve months at each executive officer’s then applicable base salary.
+Added: The Company has entered into employment agreements with four of its executive officers.
+Added: If the Company terminates their respective employment for any reason other than for cause, these executive officers are entitled to severance payments ranging from six to twelve months at each executive officer’s then applicable base salary.
Certain of these executive officers are entitled to additional severance payments if the Company terminates their respective employment for any reason other than for cause during the term of their employment and on or within twelve months following a change in control.
7 unchanged sentences
The Company distributes software developed by others through resellers indirectly to customers worldwide.
−Removed: We also resell computer software and hardware developed by others and provide technical services directly to customers in the USA and Canada.
+Added: We also resell computer software and hardware developed by others and provide technical services directly to customers worldwide.
We also operate a sales branch in Europe to serve our customers in this region of the world.
Geographic revenue and identifiable assets related to operations as of and for the years ended December 31, 2020 and 2019 were as follows.
−Removed: Revenue is allocated to a geographic area based on the location of the sale, which is generally the customer’s country of domicile.
+Added: Revenue is allocated to a geographic area based on the location of the sale, which is generally the customer’s country of domicile.
No one country other than the USA represents more than 10% of net sales for 2020 or 2019.
Net sales to Unaffiliated Customers:
−Removed: Rest of the world
+Added: Europe and United Kingdom
Identifiable Assets by Geographic Areas at December 31,
−Removed: USA and rest of the world
−Removed: FASB ASC Topic 280, “Segment Reporting,”
−Removed: requires that public companies report profits and losses and certain other information on their “reportable operating segments”
−Removed: in their annual and interim financial statements.
−Removed: organization used by the Company’s Chief Operating Decision Maker (CODM) to assess performance and allocate resources determines the basis for reportable operating segments.
−Removed: The Company’s CODM is the Chief Executive Officer.
+Added: Europe and United Kingdom
+Added: FASB ASC Topic 280, “Segment Reporting,” requires that public companies report profits and losses and certain other information on their “reportable operating segments” in their annual and interim financial statements.
+Added: organization used by the Company’s Chief Operating Decision Maker (CODM) to assess performance and allocate resources determines the basis for reportable operating segments.
+Added: The Company’s CODM is the Chief Executive Officer.
The Company is organized into two reportable operating segments.
−Removed: The “Lifeboat Distribution”
−Removed: segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide.
−Removed: The “TechXtend”
−Removed: segment is a value-added reseller of software, hardware and services for corporations, government organizations and academic institutions in the USA and Canada.
+Added: The “Distribution” segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide.
+Added: The “Solutions” segment is a cloud solutions provider and value-added reseller of software, hardware and services to customers worldwide.
As permitted by FASB ASC Topic 280, the Company has utilized the aggregation criteria in combining its operations in Canada with the domestic segments as they provide the same products and services to similar clients and are considered together when the CODM decides how to allocate resources.
−Removed: Segment income is based on segment revenue less the respective segment’s cost of revenues as well as segment direct costs (including such items as payroll costs and payroll related costs, such as profit sharing, incentive awards and insurance) and excluding general and administrative expenses not attributed to a business unit.
−Removed: The Company only identifies accounts receivable and inventory by segment as shown below as “Selected Assets”
+Added: Segment income is based on segment revenue less the respective segment’s cost of revenues as well as segment direct costs (including such items as payroll costs and payroll related costs, such as profit sharing, incentive awards and insurance) and excluding general and administrative expenses not attributed to a business unit.
+Added: The Company only identifies accounts receivable and inventory by segment as shown below as “Selected Assets” by segment;
it does not allocate its other assets, including capital expenditures by segment.
−Removed: Year ended December 31,
−Removed: Lifeboat Distribution
Gross Profit:
−Removed: Lifeboat Distribution
Direct Costs:
−Removed: Lifeboat Distribution
Segment Income Before Taxes:
−Removed: Lifeboat Distribution
Segment Income Before Taxes
General and administrative
−Removed: Separation expenses
+Added: Legal and financial advisory expenses, net - unsolicited bid and related matters
+Added: Acquisition related costs
+Added: Amortization and depreciation expense
Interest, net
1 unchanged sentence
Income before taxes
−Removed: (1) Excludes general corporate expenses including separation, interest, and foreign currency transaction expenses.
+Added: (1) Excludes general corporate expenses including legal and financial advisory expenses, net – unsolicited bid and related matters, acquisition related costs, amortization and depreciation expense, interest, and foreign currency transaction gains.
Selected Assets by Segment:
−Removed: Lifeboat Distribution
Segment Select Assets
+Added: Goodwill and Intangible Assets
Corporate Assets
Disaggregation of Revenue:
−Removed: Year ended December 31,
−Removed: Lifeboat Distribution
Hardware, software and other products
5 unchanged sentences
The Company had two customers that each accounted for more than 10% of total consolidated net sales for the year ended December 31, 2020.
−Removed: For the year ended December 31, 2019, CDW Corporation (“CDW”) and Software House International Corporation (“SHI”), accounted for 26%, and 16%, respectively, of consolidated net sales and as of December 31, 2019, 43% and 12%, respectively, of total net accounts receivable.
+Added: For the year ended December 31, 2020, CDW Corporation (“CDW”) and Software House International Corporation (“SHI”), accounted for 24%, and 14%, respectively, of consolidated net sales and as of December 31, 2020, 19% and 9%, respectively, of total net accounts receivable.
For the year ended December 31, 2020, Sophos and SolarWinds accounted for 20% and 12%, respectively of our consolidated purchases.
2 unchanged sentences
Our top five customers accounted for 52% and 56% of consolidated net sales for the years ended December 31, 2020 and 2019, respectively.
+Added: Unsolicited Bid and Shareholder Demand
+Added: On July 15, 2019 and August 23, 2019, the Company received letters from Shepherd Kaplan Krochuk, LLC (“SKK”) and North & Webster SSG, LLC (“N&W”) announcing an unsolicited bid to acquire the Company.
+Added: The proposal was subject to a number of contingencies, including the need for SKK and N&W to secure financing to complete a transaction.
+Added: On November 27, 2019, SKK, N&W, and Messrs.
+Added: Shepherd, Kaplan, Krochuk and Kidston (collectively, the “SKK 13D Group”) entered into a Joint Filing Agreement and filed a Schedule 13D with the SEC, disclosing an aggregate 5.8% ownership stake in the Company.
+Added: Also on November 27, 2019, Mr.
+Added: Nynens entered into an agreement with SKK and N&W (the “November 27 Agreement”), granting SKK an irrevocable proxy to vote his shares of Common Stock (i) in favor of any acquisition proposal by SKK, (ii) against any third-party acquisition, and (iii) as directed by SKK with respect to the election of directors nominated by persons other than the Company.
+Added: On December 20, 2019, Mr.
+Added: Nynens delivered a nomination notice to the Company regarding his intent to nominate Kim J.
+Added: McCauley, Delynn Copley, Dennis M.
+Added: Crowley, III and Nilesh Shah at the Meeting.
+Added: On February 11, 2020, after considering the proposals with its financial advisers, the Board responded to SKK and N&W that the expired proposal received on December 10, 2019 would not have been in the best interests of the Company’s stockholders because it undervalues the Company, and did not serve as a basis for further diligence or discussion.
+Added: On January 22, 2020, the Company received a letter from one of its stockholders demanding that the Board investigate and bring an action against Mr.
+Added: Nynens for breaches of certain restrictive covenants contained in his Separation and Release Agreement, dated May 11, 2018, including his covenant not to seek future employment with the Company.
+Added: As a result, the Company filed a lawsuit (the “Lawsuit”) against Mr.
+Added: Nynens, SKK, and N&W in the Superior Court of New Jersey Monmouth County, on February 14, 2020.
+Added: On April 16, 2020 (the “Effective Date”), the Company entered into a Settlement Agreement (the “Settlement Agreement”) with Mr.
+Added: Nynens, SKK, N&W, and each of Dennis Crowley, David Shepherd, David Kaplan, Timothy Krochuk and Samuel Kidston (collectively with SKK and N&W, the “SKK Parties”).
+Added: Pursuant to the Settlement Agreement, the Company agreed to voluntarily dismiss the Lawsuit with prejudice, and to purchase all of Mr.
+Added: Nynens’ 261,631 shares of the Common Stock owned, of record or beneficially, as of the Effective Date, at fair market value, as defined in the agreement.
+Added: Nynens and the SKK Parties terminated the November 27 Agreement and the Joint Filing Agreement.
+Added: Additionally, Mr.
+Added: Nynens agreed to withdraw the notice of intent to nominate director candidates for election at the 2020 annual meeting of stockholders of the Company, submitted by Mr.
+Added: Nynens on December 20, 2019, and to cease all solicitation of proxies and other activities in connection with such annual meeting.
+Added: For further information, see the Current Report on Form 8-K filed by the Company on April 17, 2020.
+Added: On April 23, 2020, the Company purchased all of Nynens’ 261,631 shares of Common Stock at $13.19 per share pursuant to the Settlement Agreement, representing approximately 5.8% of the issued and outstanding Common Stock of the Company, for an aggregate purchase price of $3.5 million.
+Added: The Company incurred approximately $1.6 million in legal and advisory expenses, net during the year ended December 31, 2020 related to the above matter.
+Added: In connection with the above matter, the Company made certain claims for reimbursement under its insurance policies.
+Added: During the year ended December 31, 2020, reimbursement for insurance proceeds realized totaling $0.3 million has been recorded.
Quarterly Results of Operations (Unaudited)
3 unchanged sentences
The following table presents summarized quarterly results for 2019:
−Removed: Net income (loss)
−Removed: Basic net income (loss) per common share
−Removed: Diluted net income (loss) per common share
−Removed: Separation Charges
−Removed: On May 11, 2018, the Company entered into a Separation and Release Agreement (the “2018 Separation Agreement”) with its former Chairman of the Board, President and Chief Executive Officer upon his resignation from the Company.
−Removed: The Separation Agreement supersedes and replaces the Employment Agreement, dated January 12, 2006, between the former Chairman of the Board, President and Chief Executive Officer and the Company.
−Removed: The former Chairman of the Board, President and Chief Executive Officer was entitled to receive (a) a cash payment of $0.7 million, payable in 12 consecutive, equal monthly installments on the fifteenth day of each month, commencing June 15, 2018;
−Removed: provided that the monthly payments were delayed until the earlier to occur of the former Chairman of the Board, President and Chief Executive Officer’s death or November 19, 2018 (the “Delay Period”), and upon the expiration of the Delay Period, all payments that were delayed were paid in a lump sum, (b) a one-time, lump sum cash payment of $0.03 million (the former Chairman of the Board, President and Chief Executive Officer’s then current monthly salary) payable within 30 days after the separation date so long as the former Chairman of the Board, President and Chief Executive Officer performed certain transition services to the extent reasonably requested by the Company, which was paid;
−Removed: and (c) payment of accrued vacation equal to $0.04 million;
−Removed: and all stock options and stock awards issued to the former Chairman of the Board, President and Chief Executive Officer, consisting solely of 109,084 shares of restricted Common Stock issued under the 2012 Plan, became fully vested and immediately exercisable and remain exercisable through their original terms.
−Removed: There was no expense recorded during the year ended December 31, 2019 related to the 2018 Separation Agreement.
−Removed: The Company recorded separation expenses of $2.4 million during the year ended December 31, 2018 relating to the 2018 Separation Agreement, consisting of $1.7 million for accelerated vesting of restricted stock grants and $0.7 million for other cash payments made over the subsequent twelve months.
−Removed: On May 24, 2019, the Company entered into a Separation and Release Agreement (“2019 Separation Agreement”) with its former President, Chief Executive Officer and member of the Board upon his resignation from the Company effective June 6, 2019.
−Removed: The 2019 Separation Agreement supersedes and replaces the Employment Agreement,
−Removed: dated October 5, 2018, between the former President, Chief Executive Officer and member of the Board and the Company.
−Removed: The former President, Chief Executive Officer and member of the Board was entitled to receive a one-time cash payment of $0.1 million, payable in six equal monthly installments, all of which have been paid through December 31, 2019.
−Removed: The Company recorded separation expenses of $0.1 million during the year ended December 31, 2019 relating to the 2019 Separation Agreement for the cash payments to be made over the subsequent six months.
−Removed: There was no expense recorded during the year ended December 31, 2018 related to the 2019 Separation Agreement.
−Removed: Subsequent Events
−Removed: Shareholder Demand Letter
−Removed: By letter dated January 22, 2020, a shareholder of the Company demanded that the Board of Directors investigate and bring an action against the Company’s former Chairman, President and Chief Executive Officer, Simon Nynens, for his breaches of certain restrictive covenants contained in the separation agreement he entered into with the Company on or about May 11, 2018.
−Removed: Following receipt of the shareholder demand, the Company filed a lawsuit against Mr.
−Removed: Nynens, Shepherd Kaplan Krochuk, LLC (“SKK”), and North & Webster SSG, LLC (“N&W,”
−Removed: and together with SKK, the “N&W Group”) on February 14, 2020, in the Superior Court of New Jersey Monmouth County.
−Removed: The Company’s complaint asserts claims against Mr.
−Removed: Nynens for his breaches of his separation agreement with the Company and claims for tortious interference against the N&W Group for inducing Mr.
−Removed: Nynens to commit those breaches.
−Removed: In connection with its claims, the Company seeks monetary damages, injunctive relief, and a declaratory judgment against Mr.
−Removed: Nynens and the N&W Group.
−Removed: The litigation is in its early stages.
−Removed: Previously, the Company had received unsolicited acquisition proposals from the N&W Group to acquire all of the outstanding shares of common stock of the Company.
−Removed: The Company received the most recent unsolicited acquisition proposal from the N&W Group on December 10, 2019, and that proposal expired on its own terms on December 16, 2019.
−Removed: Prior to that, Mr.
−Removed: Nynens entered into an agreement with the N&W Group on November 27, 2019, granting SKK an irrevocable proxy to vote his shares of our common stock in favor of any acquisition proposal by SKK, against any third-party acquisition, and as directed by SKK with respect to the election of directors nominated by persons other than the Company.
−Removed: On December 20, 2019, Mr.
−Removed: Nynens nominated four individuals for election to our Board of Directors at the 2020 annual meeting of stockholders.
−Removed: The Company and its Board of Directors have hired financial advisors and legal counsel to advise on resolution of the matters.
−Removed: The ultimate outcome of these matters and related costs cannot be determined at this time, and accordingly no provision has been recorded for estimated expenses to resolve the matter.
+Added: Basic net income per common share
+Added: Diluted net income per common share
Wayside Technology Group, Inc.
7 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.