Climb Global Solutions, Inc. 10-K

Item 9A. Controls and Procedures ​ Evaluation of Disclosure Controls and Procedures. 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. This evaluation was carried out under the supervision and with the participation of 27 Table of Contents 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). 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. 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. 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. Internal control over financial reporting includes maintaining records in reasonable detail that accurately and fairly reflect our transactions and disposition of assets; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with US GAAP; providing reasonable assurance that receipts and expenditures of the Company, are made in accordance with authorizations of management and directors of the Company; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. 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. ​ 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 — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on this evaluation, the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded that the Company’s internal control over financial reporting was effective as of December 31, 2021. ​ 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, 2021, as stated in their report, which is included herein. ​ Item 9B. Other Information ​ None. ​ PART III ​ Item 10. Directors, Executive Officers and Corporate Governance ​ 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 not later than May 2, 2022 (the “Definitive Proxy Statement”) under the sections captioned “Election of Directors” and “Corporate Governance.” ​ 28 Table of Contents Item 11. Executive Compensation ​ 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.” ​ Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ​ 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.” ​ Item 13. Certain Relationships and Related Party Transactions, and Director Independence ​ 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.” ​ Item 14. Principal Accounting Fees and Services ​ 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.” ​ PART IV ​ Item 15. Exhibits, Financial Statement Schedules ​ (a) The following documents are filed as part of this Report: ​ 1. Consolidated Financial Statements (See Index to Consolidated Financial Statements on page F-1 of this report); ​ 2. Financial Statement Schedule : ​ Schedule II Valuation and Qualifying Accounts ​ All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements or notes thereto. ​ 3. Exhibits Required by Regulation S-K, Item 601: ​ Exhibit No. Description of Exhibit ​ ​ ​ 3.1 ​ Form of Amended and Restated Certificate of Incorporation of the Company. (1) ​ ​ ​ 3.1(a) ​ Certificate of Amendment of Restated Certificate of Incorporation of the Company. (2) ​ ​ ​ 3.2 ​ Amended and Restated By-Laws of the Company. (15) ​ ​ ​ 4.1 ​ Specimen of Common Stock Certificate. (1) ​ ​ ​ 4.3 ​ Description of Securities. (16) ​ ​ ​ 29 Table of Contents Exhibit No. Description of Exhibit ​ ​ ​ 10.1 ​ 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. (6) ​ ​ ​ 10.2 ​ 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. (6 ) ​ ​ ​ 10.3 ​ 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. (6) ​ ​ ​ 10.4 ​ 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. (6) ​ ​ ​ 10.5 ​ 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. (11) ​ ​ ​ 10.6 ​ 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. (11) ​ ​ ​ 10.7 ​ Code of Ethics and Business Conduct. (7) ​ ​ ​ 10.8 ​ Employment agreement dated January 15, 2020 between the Company and Dale Foster. (8) ​ ​ ​ 10.9 ​ Employment agreement dated January 2, 2018 between the Company and Charles Bass. (9) ​ ​ ​ 10.10 ​ Employment agreement dated June 8, 2021 between the Company and Andrew Clark. (9) ​ ​ ​ 10.11 ​ Offer Letter, dated January 6, 2003, from the Company to Vito Legrottaglie. (4) ​ ​ ​ 10.12 ​ Form of Officer and Director Indemnification Agreement. (10) ​ ​ ​ 10.13 ​ 2012 Stock-Based Compensation Plan. (5) ​ ​ ​ 10.14 ​ 2021 Stock-Based Compensation Plan. (12) ​ ​ ​ 10.28 ​ Form of Non-Qualified Stock Option Agreement. (3) ​ ​ ​ 21.1 ​ Subsidiaries of the Registrant. (13) ​ ​ ​ 23.1 ​ Consent of BDO USA, LLP, an Independent Registered Public Accounting Firm. (13) ​ ​ ​ 31.1 ​ 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. (14) 30 Table of Contents Exhibit No. Description of Exhibit ​ ​ ​ ​ ​ ​ 31.2 ​ Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Andrew Clark, the Vice President and Chief Financial Officer of the Company. (14) ​ ​ ​ 31.3 ​ Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Matthew Sullivan, the Vice President and Chief Accounting Officer of the Company. (14) ​ ​ ​ 32.1 ​ Certification pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Dale Foster, the Chief Executive Officer of the Company. (13) ​ ​ ​ 32.2 ​ Certification pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Andrew Clark, the Vice President and Chief Financial Officer of the Company. (13) ​ ​ ​ 32.3 ​ Certification pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Matthew Sullivan, the Vice President and Chief Accounting Officer of the Company. (13) ​ ​ ​ 101 ​ The following financial information from Wayside Technology Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 9, 2022, formatted in XBRL (Extensible Business Reporting Language) includes: (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. ​ ​ ​ 104 ​ Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. ​ (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. ​ (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. ​ (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. ​ (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. ​ (5) Incorporated by reference to Exhibit A of the Registrant’s Definitive Annual Meeting Proxy Statement filed on April 24, 2012. ​ (6) Incorporated by reference to the Registrant’s Form 8-K filed on November 20, 2017. ​ (7) Incorporated by reference to the Registrant’s Form 8-K filed on December 8, 2017. ​ (8) Incorporated by reference to the Registrant’s Form 8-K filed on January 21, 2020. ​ (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. ​ (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. ​ 31 Table of Contents (11) Incorporated by reference to the Registrant’s Form 8-K filed on September 2, 2020. ​ (12) Incorporated by reference to Appendix A of the Registrant’s Definitive Annual Meeting Proxy Statement filed on April 16, 2021. ​ (13) Furnished herewith. ​ (14) Filed herewith. ​ (15) Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on August 6, 2020. ​ (16) Incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K filed on March 16, 2021. ​ (b) The exhibits required by Item 601 of Regulation S-K are reflected above in Section (a) 3. of this Item. ​ (c) The financial statement schedule is included as reflected in Section (a) 2. of this Item. ​ 32 Table of Contents SIGNATURES ​ Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in Eatontown, New Jersey, on March 9, 2022. ​ ​ ​ ​ ​ WAYSIDE TECHNOLOGY GROUP, INC. ​ ​ ​ ​ ​ By: /s/ Dale Foster ​ ​ Dale Foster, Chief Executive Officer ​ ​ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated: ​ ​ ​ Signature ​ Title ​ Date ​ ​ ​ ​ ​ /s/ Dale Foster ​ Chief Executive Officer and Director ​ March 9, 2022 Dale Foster ​ (Principal Executive Officer) ​ ​ ​ ​ ​ ​ ​ /s/ Andrew Clark ​ Vice President and Chief Financial Officer ​ March 9, 2022 Andrew Clark ​ (Principal Financial Officer) ​ ​ ​ ​ ​ ​ ​ /s/ Matthew Sullivan ​ Vice President and Chief Accounting Officer ​ March 9, 2022 Matthew Sullivan ​ (Principal Accounting Officer) ​ ​ ​ ​ ​ ​ ​ /s/ Jeffrey Geygan ​ Chairman of the Board of Directors ​ March 9, 2022 Jeffrey Geygan ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ John McCarthy ​ Director ​ March 9, 2022 John McCarthy ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Andrew Bryant ​ Director ​ March 9, 2022 Andrew Bryant ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Ross Crane ​ Director ​ March 9, 2022 Ross Crane ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Gerri Gold ​ Director ​ March 9, 2022 Gerri Gold ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Greg Scorziello ​ Director ​ March 9, 2022 Greg Scorziello ​ ​ ​ ​ ​ ​ 33 Table of Contents ​ Items 8 and 15(a) ​ Wayside Technology Group, Inc. and Subsidiaries ​ Index to Consolidated Financial Statements and Schedule ​ ​ ​ Page Reports of Independent Registered Public Accounting Firm ( BDO USA, LLP ; Woodbridge, New Jersey ; PCAOB ID# 243 ) F-2 ​ ​ Consolidated Balance Sheets as of December 31, 2021 and 2020 F-6 ​ ​ Consolidated Statements of Earnings for the years ended December 31, 2021 and 2020 F-7 ​ ​ Consolidated Statements of Comprehensive Income for the years ended December 31, 2021 and 2020 F-8 ​ ​ Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021 and 2020 F-9 ​ ​ Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 F-10 ​ ​ Notes to Consolidated Financial Statements F-11 ​ ​ Schedule II — Valuation and Qualifying Accounts F-31 ​ ​ ​ ​ ​ F-1 Table of Contents ​ Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders Wayside Technology Group, Inc. Eatontown, New Jersey Opinion on Internal Control over Financial Reporting We have audited Wayside Technology Group, Inc. and Subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. 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, 2021 and 2020, 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, 2021, and the related notes and schedule and our report dated March 9, 2022 expressed an unqualified opinion thereon. Basis for Opinion 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. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. 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. 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. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting 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. A company’s internal control over financial reporting includes those policies 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; (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; 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. F-2 Table of Contents ​ Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. /s/ BDO USA, LLP ​ Woodbridge, New Jersey March 9, 2022 ​ F-3 Table of Contents ​ Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders Wayside Technology Group, Inc. Eatontown, New Jersey Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Wayside Technology Group, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021 , in conformity with accounting principles generally accepted in the United States of America. 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, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 9, 2022 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. 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. We conducted our audits in accordance with the standards of the PCAOB. 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. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter 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: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a 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 separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. ​ F-4 Table of Contents ​ Goodwill Impairment Quantitative Assessment At December 31, 2021, the Company’s consolidated goodwill balance was approximately $17.2 million, which is allocated between two reporting units. As discussed in Note 2 to the consolidated financial statements, the Company tests goodwill for impairment at least annually at the reporting unit level. The Company determines the fair value of the reporting unit using a combination of an income approach, and a market approach. The determination of the fair value of the reporting units requires management to make significant estimates and assumptions related to forecasts of future cash flows, revenue growth rate, and discount rates. These assumptions are affected by expected future market and economic conditions. We identified the goodwill impairment quantitative assessment as a critical audit matter. The principal considerations for our determination were the significant assumptions management makes as part of the assessment to estimate the fair value of the reporting units. The income approach requires significant management assumptions in projecting future cash flows, revenue growth rate, and selection of the discount rates. Auditing management’s significant assumptions used in the goodwill impairment quantitative assessment involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the involvement of professionals with specialized skill or knowledge. The primary procedures we performed to address this critical matter included: ● Testing the design and operating effectiveness of controls related to management’s forecasting process, including controls over data, inputs, and assumptions utilized to determine the fair value of the reporting units. ● Evaluating the reasonableness of management’s assumptions in the calculation of fair value of reporting units, including the revenue growth rate in the projected future cash flows by comparing to i) prior period forecasts, ii) historical operating performance, iii) internal and external communications made by the Company, and iv) publicly available industry data of peer companies. ● Utilizing personnel with specialized knowledge and skill in valuation to assist in i) evaluating the appropriateness of the methodologies and valuation models utilized by management to determine the fair value of the reporting units, and ii) evaluating the reasonableness of the discount rate used in the income approach. /s/ BDO USA, LLP We have served as the Company's auditor since 2018. ​ Woodbridge, New Jersey March 9, 2022 ​ ​ ​ ​ ​ ​ ​ ​ F-5 Table of Contents ​ Wayside Technology Group, Inc. and Subsidiaries Consolidated Balance Sheets (Amounts in thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2021 2020 ​ ​ ​ ​ ​ ​ ​ ASSETS ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 29,272 ​ $ 29,348 ​ Accounts receivable, net of allowance for doubtful accounts of $ 881 and $ 892 , respectively ​ ​ 122,502 ​ 93,821 ​ Inventory, net ​ ​ 2,022 ​ 4,936 ​ Vendor prepayments and advances ​ ​ 661 ​ ​ 1,235 ​ Prepaid expenses and other current assets ​ ​ 4,871 ​ 3,837 ​ Total current assets ​ ​ 159,328 ​ 133,177 ​ ​ ​ ​ ​ ​ ​ ​ ​ Equipment and leasehold improvements, net ​ ​ 1,932 ​ 2,308 ​ Goodwill ​ ​ 17,188 ​ ​ 16,816 ​ Other intangibles, net ​ ​ 9,950 ​ ​ 10,625 ​ Right-of-use assets, net ​ ​ 1,628 ​ ​ 1,933 ​ Accounts receivable-long-term, net ​ ​ 78 ​ 304 ​ Other assets ​ ​ 459 ​ 257 ​ Deferred income tax assets ​ ​ 189 ​ 113 ​ Total assets ​ $ 190,752 ​ $ 165,533 ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ ​ Accounts payable and accrued expenses ​ $ 134,271 ​ $ 116,692 ​ Lease liability, current portion ​ ​ 475 ​ ​ 490 ​ Total current liabilities ​ ​ 134,746 ​ 117,182 ​ ​ ​ ​ ​ ​ ​ ​ ​ Lease liability, net of current portion ​ ​ 1,810 ​ ​ 2,167 ​ Deferred income tax liabilities ​ ​ 1,780 ​ ​ 1,467 ​ Total liabilities ​ ​ 138,336 ​ ​ 120,816 ​ ​ ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity: ​ ​ ​ ​ ​ ​ ​ Common stock, $ .01 par value; 10,000,000 shares authorized; 5,284,500 shares issued: 4,424,672 and 4,361,997 shares outstanding, respectively ​ ​ 53 ​ 53 ​ Additional paid-in capital ​ ​ 32,087 ​ 31,962 ​ Treasury stock, at cost, 859,828 and 922,503 shares, respectively ​ ​ ( 13,870 ) ​ ( 14,747 ) ​ Retained earnings ​ ​ 34,396 ​ 28,191 ​ Accumulated other comprehensive loss ​ ​ ( 250 ) ​ ( 742 ) ​ Total stockholders’ equity ​ ​ 52,416 ​ 44,717 ​ Total liabilities and stockholders' equity ​ $ 190,752 ​ $ 165,533 ​ The accompanying notes are an integral part of the consolidated financial statements. ​ F-6 Table of Contents ​ Wayside Technology Group, Inc. and Subsidiaries Consolidated Statements of Earnings (Amounts in thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 282,582 ​ $ 251,568 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales ​ 236,866 ​ 218,528 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 45,716 ​ 33,040 ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general, and administrative expenses ​ 32,136 ​ 23,929 ​ ​ ​ ​ ​ ​ ​ ​ ​ Legal and financial advisory expenses, net - unsolicited bid and related matters ​ ​ — ​ ​ 1,586 ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisition related costs ​ ​ — ​ ​ 1,518 ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization and depreciation expense ​ ​ 1,529 ​ ​ 704 ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 12,051 ​ 5,303 ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest, net ​ 359 ​ 121 ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign currency transaction (loss) gain ​ ​ ( 46 ) ​ ​ 796 ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before provision for income taxes ​ 12,364 ​ 6,220 ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for income taxes ​ 3,166 ​ 1,746 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 9,198 ​ $ 4,474 ​ ​ ​ ​ ​ ​ ​ ​ ​ Income per common share-Basic ​ $ 2.09 ​ $ 1.01 ​ ​ ​ ​ ​ ​ ​ ​ ​ Income per common share-Diluted ​ $ 2.09 ​ $ 1.01 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding — Basic ​ 4,272 ​ 4,288 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding — Diluted ​ 4,272 ​ 4,288 ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividends paid per common share ​ $ 0.68 ​ $ 0.68 ​ ​ ​ ​ ​ ​ The accompanying notes are an integral part of the consolidated financial statements. ​ F-7 Table of Contents ​ Wayside Technology Group, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ ​ December 31, ​ ​ 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 9,198 ​ $ 4,474 ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income: ​ ​ ​ ​ ​ ​ ​ Foreign currency translation adjustments ​ 492 ​ 388 ​ Other comprehensive income ​ 492 ​ 388 ​ ​ ​ ​ ​ ​ ​ ​ ​ Comprehensive income ​ $ 9,690 ​ $ 4,862 ​ The accompanying notes are an integral part of the consolidated financial statements. ​ ​ F-8 Table of Contents ​ ​ Wayside Technology Group, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Equity (Amounts in thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ Common Stock ​ Paid-In ​ Treasury ​ Retained ​ Comprehensive ​ ​ ​ ​ Shares Amount Capital Shares Amount Earnings (Loss) Income Total Balance at January 1, 2020 5,284,500 ​ ​ 53 ​ ​ 32,874 778,807 ​ ​ ( 13,256 ) ​ ​ 26,715 ​ ​ ( 1,130 ) ​ ​ 45,256 ​ Net income ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 4,474 ​ ​ — ​ ​ 4,474 ​ Translation adjustment ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 388 ​ ​ 388 ​ Dividends paid ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 2,998 ) ​ ​ — ​ ​ ( 2,998 ) ​ Share-based compensation expense ​ — ​ ​ — ​ ​ 1,278 ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,278 ​ Restricted stock grants (net of forfeitures) ​ — ​ ​ — ​ ​ ( 2,190 ) ​ ( 129,483 ) ​ ​ 2,190 ​ ​ — ​ ​ — ​ ​ — ​ Treasury shares repurchased ​ — ​ ​ — ​ ​ — ​ 273,179 ​ ​ ( 3,681 ) ​ ​ — ​ ​ — ​ ​ ( 3,681 ) ​ Balance at December 31, 2020 5,284,500 ​ ​ 53 ​ ​ 31,962 922,503 ​ ​ ( 14,747 ) ​ ​ 28,191 ​ ​ ( 742 ) ​ ​ 44,717 ​ Net income ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 9,198 ​ ​ — ​ ​ 9,198 ​ Translation adjustment ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 492 ​ ​ 492 ​ Dividends paid ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 2,993 ) ​ ​ — ​ ​ ( 2,993 ) ​ Share-based compensation expense ​ — ​ ​ — ​ ​ 1,546 ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,546 ​ Restricted stock grants (net of forfeitures) ​ — ​ ​ — ​ ​ ( 1,421 ) ​ ( 83,963 ) ​ ​ 1,421 ​ ​ — ​ ​ — ​ ​ — ​ Treasury shares repurchased ​ — ​ ​ — ​ ​ — ​ 21,288 ​ ​ ( 544 ) ​ ​ — ​ ​ — ​ ​ ( 544 ) ​ Balance at December 31, 2021 5,284,500 ​ $ 53 ​ $ 32,087 859,828 ​ $ ( 13,870 ) ​ $ 34,396 ​ $ ( 250 ) ​ $ 52,416 ​ ​ The accompanying notes are an integral part of the consolidated financial statements ​ F-9 Table of Contents ​ Wayside Technology Group, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ ​ December 31, ​ ​ 2021 2020 Cash flows from operating activities ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 9,198 ​ $ 4,474 ​ Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization expense ​ 1,534 ​ 713 ​ Provision for doubtful accounts ​ 26 ​ ​ 130 ​ Deferred income tax expense ​ 228 ​ ( 170 ) ​ Share-based compensation expense ​ ​ 1,546 ​ ​ 1,278 ​ Amortization of discount on accounts receivable ​ ​ ( 55 ) ​ ​ ( 164 ) ​ Amortization of right-of-use assets ​ ​ 468 ​ ​ 392 ​ Change in fair value of contingent earn-out consideration ​ ​ — ​ ​ 47 ​ Changes in operating assets and liabilities, net of acquisitions: ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 28,577 ) ​ 26,727 ​ Inventory ​ 2,914 ​ ( 1,997 ) ​ Prepaid expenses and other current assets ​ ( 1,004 ) ​ ( 739 ) ​ Vendor prepayments ​ ​ 574 ​ ​ ( 766 ) ​ Accounts payable and accrued expenses ​ 18,616 ​ 8,678 ​ Lease liability, net ​ ​ ( 534 ) ​ ​ ( 448 ) ​ Other assets and liabilities ​ ( 222 ) ​ ( 186 ) ​ Net cash and cash equivalents provided by operating activities ​ 4,712 ​ 37,969 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities ​ ​ ​ ​ ​ ​ ​ Purchase of equipment and leasehold improvements ​ ( 258 ) ​ ( 23 ) ​ Payment for acquisitions, net of cash acquired ​ ​ — ​ ​ ( 16,782 ) ​ Net cash and cash equivalents used in investing activities ​ ( 258 ) ​ ( 16,805 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities ​ ​ ​ ​ ​ ​ ​ Purchase of treasury stock ​ ( 544 ) ​ ( 3,681 ) ​ Borrowings under revolving credit facility ​ ​ — ​ ​ 6,800 ​ Repayments of borrowings under revolving credit facility ​ ​ — ​ ​ ( 6,800 ) ​ Dividends paid ​ ( 2,993 ) ​ ( 2,998 ) ​ Contingent consideration ​ ​ ( 862 ) ​ ​ — ​ Payments of deferred financing costs ​ ​ — ​ ​ ( 61 ) ​ Net cash and cash equivalents used in financing activities ​ ( 4,399 ) ​ ( 6,740 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of foreign exchange rate on cash and cash equivalents ​ ( 131 ) ​ ( 60 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (decrease) increase in cash and cash equivalents ​ ( 76 ) ​ 14,364 ​ Cash and cash equivalents at beginning of period ​ 29,348 ​ 14,984 ​ Cash and cash equivalents at end of period ​ $ 29,272 ​ $ 29,348 ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplementary disclosure of cash flow information: ​ ​ ​ ​ ​ ​ ​ Income taxes paid ​ $ 2,700 ​ $ 2,425 ​ Interest paid ​ $ 43 ​ $ 49 ​ ​ The accompanying notes are an integral part of the consolidated financial statements. F-10 Table of Contents ​ Wayside Technology Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Amounts in tables in thousands, except share and per share amounts) ​ Note 1. Description of Business ​ Wayside Technology Group, Inc. 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. The Company also is a cloud solutions provider and value-added reseller of software, hardware and services to customers worldwide. 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. The “Distribution” segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide under the name “Climb Channel Solutions”. 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”. ​ Note 2. Summary of Significant Accounting Policies ​ Principles of Consolidation and Operations ​ The consolidated financial statements include the accounts of Wayside Technology Group, Inc. and its wholly owned subsidiaries . All intercompany transactions and balances have been eliminated. ​ Business Combinations ​ 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. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. The Company may utilize third-party valuation specialists to assist the Company in the allocation. Initial purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition. Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred. ​ Use of Estimates ​ 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. 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. ​ Net Income Per Common Share ​ Our basic and diluted earnings per share are computed using the two-class method. The two-class method is an earnings allocation method that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Non-vested restricted F-11 Table of Contents ​ stock awards that include non-forfeitable rights to dividends are considered participating securities. Per share amounts are computed by dividing net income available to common shareholders by the weighted average shares outstanding during each period. Diluted and basic earnings per share are the same because the restricted shares are the only potentially dilutive security. ​ A reconciliation of the numerators and denominators of the basic and diluted per share computations follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2021 2020 Numerator: ​ ​ ​ ​ ​ ​ Net income ​ $ 9,198 ​ $ 4,474 ​ ​ ​ ​ ​ ​ ​ Less distributed and undistributed income allocated to participating securities ​ ​ 269 ​ ​ 130 ​ ​ ​ ​ ​ ​ ​ Net income attributable to common shareholders ​ ​ 8,929 ​ ​ 4,344 ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ Weighted average common shares (Basic) ​ ​ 4,272 ​ 4,288 ​ ​ ​ ​ ​ Weighted average common shares including assumed conversions (Diluted) ​ ​ 4,272 ​ 4,288 ​ ​ ​ ​ ​ ​ ​ Basic net income per share ​ $ 2.09 ​ $ 1.01 Diluted net income per share ​ $ 2.09 ​ $ 1.01 ​ Cash Equivalents ​ The Company considers all liquid short-term investments with maturities of 90 days or less when purchased to be cash equivalents. ​ Accounts Receivable ​ Accounts receivable principally represents amounts collectible from our customers. The Company performs ongoing credit evaluations of its customers but generally does not require collateral to support any outstanding obligation. From time to time, we sell accounts receivable to a financial institution on a non-recourse basis for cash, less a discount. The Company has no significant retained interests or servicing liabilities related to the accounts receivable sold. Proceeds from the sale of receivables approximated their discounted book value and were included in operating cash flows on the Consolidated Statements of Cash Flows. ​ Allowances for Accounts Receivable ​ We provide an allowance for doubtful accounts related to accounts receivable for estimated losses resulting from the inability of our customers to make required payments. We take into consideration the overall quality and aging of the receivable portfolio along with specifically identified customer risks. If actual customer payment performance were to deteriorate to an extent not expected, additional allowances may be required. At the time of sale, we also record an estimate for sales returns based on historical experience, which is included in accounts payable and accrued expenses on the Consolidated Balance Sheets. If actual sales returns are greater than estimated by management, additional expense may be incurred. ​ F-12 Table of Contents ​ Foreign Currency Translation ​ 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. Cumulative translation adjustments have been classified within accumulated other comprehensive loss, which is a separate component of stockholders’ equity in accordance FASB ASC Topic No. 220, “Comprehensive Income”. Foreign currency transaction gains and losses are recorded as income or expenses as amounts are settled. ​ 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. Gains or losses from these remeasurements have been included in the Company's Consolidated Statements of Earnings. 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. ​ The Company’s cash and cash equivalents, at times, may exceed federally insured limits. 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. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. ​ Financial Instruments ​ The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of December 31, 2021 and 2020, because of the relative short maturity of these instruments. The Company’s accounts receivable-long-term is discounted to its present value at prevailing market rates at the time of sale which, approximates fair value as of December 31, 2021 and 2020. ​ Inventory ​ Inventory, consisting primarily of finished products held for resale, is stated at the lower of cost or net realizable value. ​ Vendor Prepayments and Advances ​ Vendor prepayments represents advance payments made to vendors to be applied against future purchases. Any amounts not expected to be utilized to apply against purchases within one year are reclassified to other long-term assets. ​ Equipment and Leasehold Improvements ​ 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. ​ Software Development Costs ​ The Company capitalizes certain internal and external costs incurred to acquire or create internal-use software. Capitalized software costs are amortized on a straight-line basis over the estimated useful life of the software, which is generally four to seven years . At December 31, 2021 and 2020, the Company had unamortized software development F-13 Table of Contents ​ costs of $ 0.7 million and $ 0.8 million, respectively, which are included in "Equipment and leasehold improvements" in the Company's consolidated balance sheets. ​ Accounts Receivable-Long-Term ​ Accounts receivable-long-term result from product sales with extended payment terms that are discounted to their present values at the prevailing market rates at the time of sale. In subsequent periods, the accounts receivable is increased to the amounts due and payable by the customers through the accretion of interest income on the unpaid accounts receivable due in future years. The amounts under these long-term accounts receivable due within one year are reclassified to the current portion of accounts receivable. ​ Goodwill ​ 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. The Company performs an evaluation of goodwill, utilizing either a qualitative or quantitative impairment test. The annual test for impairment is conducted as of October 1. The Company’s reporting units included in the assessment of potential goodwill impairment are the same as its operating segments. Goodwill is not amortized but is subject to periodic testing for impairment at the reporting unit level. ​ 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. 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. ​ 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. 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. ​ In the quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. 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. ​ Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including net sales growth rates, gross profit margins, operating margins, discount rates and future market conditions, among others. Any changes in the judgments, estimates or assumptions used could produce significantly different results. ​ Intangible Assets ​ 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. Intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. 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. 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. 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. F-14 Table of Contents ​ ​ Comprehensive Income ​ Comprehensive income consists of net income for the year and the impact of unrealized foreign currency translation adjustments. The foreign currency translation adjustments are not currently adjusted for income taxes as they relate to permanent investments in international subsidiaries. ​ Revenue Recognition The Company’s revenues primarily result from the sale of various technology products and services, including third-party products, third-party software and third-party maintenance, software support and services. The Company recognizes revenue as control of the third-party products and third-party software is transferred to customers, which generally happens at the point of shipment or fulfilment and at the point that our customers and vendors accept the terms and conditions of the arrangement for third-party maintenance, software support and services. The Company has contracts with certain customers where the Company’s performance obligation is to arrange for the products or services to be provided by another party. In these arrangements, as the Company assumes an agency relationship in the transaction, revenue is recognized in the amount of the net fee associated with serving as an agent. These arrangements primarily relate to third party maintenance, cloud services and certain security software whose intended functionality is dependent on third party maintenance. The Company allows its customers to return product for exchange or credit subject to certain limitations. A liability is recorded at the time of sale for estimated product returns based upon historical experience and an asset is recognized for the amount expected to be recorded upon product return. The Company also provides rebates and other discounts to certain customers which are considered variable consideration. A provision for customer rebates and other discounts is recorded as a reduction of revenue at the time of sale based on an evaluation of the contract terms and historical experience. The Company considers shipping and handling activities as costs to fulfill the sales of products. Shipping revenue is included in net sales when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of sales. Taxes imposed by governmental authorities on the Company’s revenue producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales. The Company disaggregates its operating revenue by segment, geography and timing of revenue recognition, which the Company believes provides a meaningful depiction of the nature of its revenue. For additional information, see Note 13 (Industry, Segment and Geographic Information). ​ Hardware and software products sold by the Company are generally delivered via shipment from the Company’s facilities, drop shipment directly from the vendor, or by electronic delivery of keys for software products. The majority of the Company’s business involves shipments directly from its vendors to its customers, in these transactions, the Company is generally responsible for negotiating price both with the vendor and customer, payment to the vendor, establishing payment terms with the customer, product returns, and has risk of loss if the customer does not make payment. As the principal with the customer, the Company recognizes revenue upon receiving notification from the vendor that the product was shipped. Control of software products is deemed to have passed to the customer when they acquire the right to use or copy the software under license as substantially all product functionality is available to the customer at the time of sale. ​ The Company performs an analysis of the number of days of sales in-transit to customers at the end of each reporting period based on an analysis of commercial delivery terms that include drop-shipment arrangements. This analysis is the basis upon which the Company estimates the amount of net sales in-transit at the end of the period and adjusts revenue and the related costs to reflect only what has been delivered to the customer. Changes in delivery patterns may result in a different number of business days estimated to make this adjustment. The Company also performs a weighted average analysis of the estimated number of days between order fulfillment and beginning of the renewal term for term licenses recorded on a gross basis, and a deferral estimate is recorded for term license renewals fulfilled prior to commencement date. F-15 Table of Contents ​ Generally, software products are sold with accompanying third-party delivered software assurance, which is a product that allows customers to upgrade, at no additional cost, to the latest technology if new capabilities are introduced during the period that the software assurance is in effect. The Company evaluates whether the software assurance is a separate performance obligation by assessing if the third-party delivered software assurance is critical or essential to the core functionality of the software itself. This involves considering if the software provides its original intended functionality to the customer without the updates, if the customer would ascribe a higher value to the upgrades versus the up-front deliverable, if the customer would expect frequent intelligence updates to the software (such as updates that maintain the original functionality), and if the customer chooses to not delay or always install upgrades. If the Company determines that the accompanying third-party delivered software assurance is critical or essential to the core functionality of the software license, the software license and the accompanying third-party delivered software assurance are recognized as a single performance obligation. The value of the product is primarily the accompanying support delivered by a third party and therefore the Company is acting as an agent in these transactions and recognizes them on a net basis at the point the associated software license is delivered to the customer. The Company sells cloud computing solutions that utilize third-party vendors to enable customers to access data center functionality in a cloud-based solution, including storage, computing and networking and access to software in the cloud that enhances office productivity, provides security or assists in collaboration. The Company recognizes revenue for cloud computing solutions for arrangements with one-time invoicing to the customer at the time of invoice on a net basis as the Company is acting as an agent in the transaction. For monthly subscription-based arrangements, the Company is acting as an agent in the transaction and recognizes revenue as it invoices the customer for its monthly usage on a net basis. For software licenses where the accompanying third-party delivered software assurance is not critical or essential to the core functionality, the software assurance is recognized as a separate performance obligation, with the associated revenue recognized on a net basis at the point the related software license is delivered to the customer. The Company also sells some of its products and services as part of bundled contract arrangements containing multiple deliverables, which may include a combination of products and services. For each deliverable that represents a distinct performance obligation, total arrangement consideration is allocated based upon the standalone selling prices (“SSP”) of each performance obligation. SSP is determined based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through established standard prices, we use judgement and estimate the standalone selling price considering available information such as market pricing and pricing related to similar products. ​ Freight The Company records freight billed to its customers as net sales and the related freight costs as cost of sales when the underlying product revenue is recognized. For freight not billed to its customers, the Company records the freight costs as cost of sales. The Company’s typical shipping terms result in shipping being performed before the customer obtains control of the product. The Company considers shipping to be a fulfillment activity and not a separate performance obligation. ​ Commissions ​ The Company pays commissions and related payroll taxes to sales personnel when customers are invoiced. These costs are recorded as selling general and administrative expenses in the period earned as all our performance obligations are complete within a short window of processing the order. ​ Stock-Based Compensation ​ The Company has stockholder-approved stock incentive plans for employees and directors. 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. ​ F-16 Table of Contents ​ Operating Segments ​ 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. The Company's operations are classified into two reportable business segments: Distribution and Solutions. For additional information, see Note 13 (Industry, Segment and Geographic Information). ​ Treasury Stock ​ Treasury stock is accounted for at cost. Shares repurchased by the Company are held in treasury for general corporate purposes, including issuances under equity incentive plans. The reissuance of shares from treasury stock is based on the weighted average purchase price of the shares. ​ Interest, net ​ 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. ​ Income Taxes ​ The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. 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. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense when assessed. The Company accounts for uncertainties in accordance with FASB ASC 740 “Income Taxes”. This standard clarified the accounting for uncertainties in income taxes. The standard prescribes criteria for recognition and measurement of tax positions. It also provides guidance on derecognition, classification, interest and penalties, and disclosures related to income taxes associated with uncertain tax positions. The Company classifies all deferred tax asset or liabilities as non-current on the balance sheet. ​ Foreign Exchange ​ 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. 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. These contracts generally have terms of no more than two months. The Company does not apply hedge accounting to these contracts and therefore the changes in fair value are recorded in earnings. 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. The fair value of forward purchase contracts at December 31, 2021 was not material to the Consolidated Financial Statements. ​ Recently Issued Accounting Pronouncements ​ In June 2016, the FASB issued Accounting Standards Update No. 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. 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 F-17 Table of Contents ​ 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. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its Consolidated Financial Statements, particularly its recognition of allowances for accounts receivable. ​ 3. Acquisitions ​ Acquisition of Interwork Technologies ​ On April 30, 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”) 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 dollars (equivalent to $ 0.8 million USD) earn-out. The earn-out liability was paid for approximately $ 0.9 million during the year ended December 31, 2021. The purchase price allocation is final, with no measurement period adjustments made to the account balances recorded at the acquisition date. ​ The impact of the acquisition’s final purchase price allocations on the Company’s Consolidated Balance Sheet and the acquisition date fair value of the total consideration transferred were as follows: ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ Cash ​ $ 1,009 Trade accounts receivable ​ ​ 9,534 Other current assets ​ ​ 628 Intangible assets ​ ​ ​ Vendor relationships ( 14-year weighted average useful life) ​ ​ 3,797 Non-compete ( 1-year useful life) ​ ​ 8 Goodwill ​ ​ 3,857 Other assets ​ ​ 117 Accounts payable and other current liabilities ​ ​ ( 15,051 ) Deferred income tax liabilities ​ ​ ( 389 ) Taxes payable ​ ​ ( 600 ) Net assets ​ $ 2,910 ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ Supplementary information: ​ ​ ​ Cash paid to sellers ​ $ 2,150 Contingent earn-out ​ ​ 760 Total purchase consideration ​ $ 2,910 ​ ​ ​ ​ Cash paid to sellers ​ ​ 2,150 Cash acquired in acquisition ​ ​ ( 1,009 ) Net cash paid for acquisition ​ $ 1,141 ​ ​ F-18 Table of Contents ​ Acquisition of CDF Group Limited ​ 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. The purchase price allocation is final, with no measurement period adjustments made to the account balances recorded at the acquisition date. ​ The impact of the acquisition’s final purchase price allocations on the Company’s Consolidated Balance Sheet and the acquisition date fair value of the total consideration transferred were as follows: ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ Cash ​ $ 8,463 Trade accounts receivable ​ ​ 8,093 Other current assets ​ ​ 260 Equipment and leasehold improvements, net ​ ​ 1,367 Intangible assets ​ ​ ​ Customer relationships ( 13-year useful life) ​ ​ 6,357 Trademarks ( 15-year useful life) ​ ​ 504 Non-compete ( 1-year useful life) ​ ​ 42 Goodwill ​ ​ 12,774 Other assets ​ ​ 375 Accounts payable and other current liabilities ​ ​ ( 12,364 ) Deferred income tax liabilities ​ ​ ( 1,461 ) Other liabilities ​ ​ ( 306 ) Net assets ​ $ 24,104 ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ Supplementary information: ​ ​ ​ Cash paid to sellers ​ $ 24,104 Cash acquired in acquisition ​ ​ ( 8,463 ) Net cash paid for acquisition ​ $ 15,641 ​ There were no acquisition related costs incurred during the year ended December 31, 2021. 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. ​ ​ ​ F-19 Table of Contents ​ 4. Goodwill and Other Intangible Assets 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. The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020. ​ ​ ​ ​ ​ Balance at January 1, 2020 ​ $ — Goodwill acquired ​ ​ 16,631 Translation adjustments ​ ​ 185 Balance December 31, 2020 ​ $ 16,816 Translation adjustments ​ ​ 372 Balance December 31, 2021 ​ $ 17,188 ​ Information related to the Company’s other intangibles, net is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2021 ​ ​ Gross Carrying Amount ​ Accumulated Amortization ​ Net Carrying Amount Customer and vendor relationships ​ $ 10,550 ​ $ 1,079 ​ $ 9,471 Trade name ​ ​ 519 ​ ​ 40 ​ ​ 479 Non-compete ​ ​ 52 ​ ​ 52 ​ ​ — Total ​ $ 11,121 ​ $ 1,171 ​ $ 9,950 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2020 ​ ​ Gross Carrying Amount ​ Accumulated Amortization ​ Net Carrying Amount Customer and vendor relationships ​ $ 10,361 ​ $ 272 ​ $ 10,089 Trade name ​ ​ 504 ​ ​ 5 ​ ​ 499 Non-compete ​ ​ 50 ​ ​ 13 ​ ​ 37 Total ​ $ 10,915 ​ $ 290 ​ $ 10,625 ​ Customer relationships are amortized over thirteen years . Vendor relationships are amortized between eleven and fifteen years . Trade name is amortized over fifteen years . Non-compete is amortized over one year . The Company recognized total amortization expense for other intangibles, net of $ 0.9 million and $ 0.3 million during the years ended December 31, 2021 and 2020, respectively. Estimated future amortization expense of the Company’s other intangibles, net as of December 31, 2021 is as follows: ​ ​ ​ ​ ​ 2022 $ 819 2023 ​ 819 2024 ​ 819 2025 ​ 819 2026 ​ 819 Thereafter ​ 5,855 Total ​ $ 9,950 ​ F-20 Table of Contents ​ ​ 5. Right-of-use Asset and Lease Liability ​ The Company has entered into operating leases for office and warehouse facilities, which have terms at lease commencement that range from 3 years to 11 years . The Company determines if an arrangement is a lease at inception. 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. ​ 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. As our leases do not provide a readily determinable implicit rate, we use an incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. The operating lease asset also includes any lease payments made and excludes lease incentives. Operating lease expense is recognized on a straight-line basis over the lease term and included in selling, general and administrative expenses. ​ Information related to the Company’s right-of-use assets and related lease liabilities were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ ​ 2021 ​ ​ 2020 Cash paid for operating lease liabilities ​ $ 598 ​ $ 503 Right-of-use assets obtained in exchange for new operating lease obligations (1) ​ $ 163 ​ $ 537 Weighted-average remaining lease term ​ ​ 5.1 years ​ ​ 6.1 years Weighted-average discount rate ​ ​ 3.5 % ​ ​ 3.5 % ​ (1) During the year ended December 31, 2020, includes $ 0.5 million recognized through acquisitions. ​ Maturities of lease liabilities as of December 31, 2021 were as follows: ​ ​ ​ ​ ​ 2022 $ 560 2023 ​ 598 2024 ​ 544 2025 ​ 554 2026 ​ 551 Thereafter ​ 125 ​ ​ ​ 2,932 Less: imputed interest ​ ​ ( 647 ) Total lease liabilities ​ $ 2,285 ​ ​ ​ ​ Lease liabilities, current portion ​ ​ 475 Lease liabilities, net of current portion ​ ​ 1,810 Total lease liabilities ​ $ 2,285 ​ ​ F-21 Table of Contents ​ 6. Balance Sheet Detail ​ Equipment and leasehold improvements, net consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2021 2020 Equipment ​ $ 2,627 ​ $ 2,482 Capitalized software ​ ​ 816 ​ ​ 777 Leasehold improvements ​ 1,762 ​ 1,760 ​ ​ 5,205 ​ 5,019 Less accumulated depreciation and amortization ​ ( 3,273 ) ​ ( 2,711 ) ​ ​ $ 1,932 ​ $ 2,308 ​ Depreciation expense relating to equipment and leasehold improvements, net was $ 0.5 million and $ 0.4 million during the years ended December 31, 2021 and 2020, respectively. Amortization expense relating to capitalized software was $ 0.1 million and less than $ 0.1 million during the years ended December 31, 2021 and 2020. ​ Accounts receivable – long term, net consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ ​ ​ 2021 2020 ​ ​ Total amount due from customer ​ $ 484 ​ $ 1,853 ​ ​ ​ Less: unamortized discount ​ ( 8 ) ​ ( 49 ) ​ ​ ​ Less: current portion included in accounts receivable ​ ( 398 ) ​ ( 1,500 ) ​ ​ ​ ​ ​ $ 78 ​ $ 304 ​ ​ ​ ​ Accounts payable and accrued expenses consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ 2021 2020 Trade accounts payable ​ $ 125,908 ​ $ 107,045 ​ Accrued expenses ​ 8,363 ​ 9,647 ​ ​ ​ $ 134,271 ​ $ 116,692 ​ ​ Accumulated other comprehensive loss consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2021 2020 ​ Foreign currency translation adjustments ​ $ 492 ​ $ 388 ​ ​ ​ $ 492 ​ $ 388 ​ ​ 7. Income Taxes ​ Deferred tax attributes resulting from differences between the tax basis of assets and liabilities and the reported amounts in the Consolidated Balance Sheets are as follows: ​ F-22 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2021 2020 Deferred tax assets: ​ ​ ​ ​ ​ ​ ​ Accruals and reserves ​ $ 501 ​ $ 483 ​ Deferred rent credit ​ ​ 163 ​ ​ 175 ​ Depreciation and amortization ​ ​ 24 ​ ​ 7 ​ Total deferred tax assets ​ ​ 688 ​ ​ 665 ​ Deferred tax liabilities: ​ ​ ​ ​ ​ ​ ​ Accruals and reserves ​ ​ ( 67 ) ​ ​ ( 9 ) ​ Depreciation and amortization ​ ​ ( 2,212 ) ​ ( 2,010 ) ​ Total deferred tax liabilities ​ ​ ( 2,279 ) ​ ​ ( 2,019 ) ​ Net deferred tax (liabilities) asset ​ $ ( 1,591 ) ​ $ ( 1,354 ) ​ ​ The provision for income taxes is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2021 2020 Current: ​ ​ ​ ​ ​ ​ ​ Federal ​ $ 1,692 ​ $ 1,339 ​ State ​ 572 ​ 263 ​ Foreign ​ 674 ​ 314 ​ ​ ​ 2,938 ​ 1,916 ​ Deferred: ​ ​ ​ ​ ​ ​ ​ Federal ​ ( 45 ) ​ ( 134 ) ​ State ​ ​ ( 12 ) ​ ​ ( 28 ) ​ Foreign ​ 285 ​ ( 8 ) ​ ​ ​ 228 ​ ( 170 ) ​ ​ ​ $ 3,166 ​ $ 1,746 ​ Effective Tax Rate ​ 25.6 % 28.1 % ​ The reasons for the difference between total tax expense and the amount computed by applying the U.S. statutory federal income tax rate to income before income taxes are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2021 2020 Statutory rate applied to pretax income ​ $ 2,596 ​ $ 1,309 ​ State income taxes, net of federal income tax benefit ​ 442 ​ 182 ​ Adjustment for foreign rate change ​ ​ 353 ​ ​ — ​ Other permanent items ​ ​ 19 ​ ​ 19 ​ Acquisition related costs ​ ​ — ​ ​ 319 ​ Dividends ​ ​ ( 17 ) ​ ​ ( 19 ) ​ Foreign income taxes over U.S. statutory rate ​ ( 18 ) ​ ( 1 ) ​ GILTI, net of foreign tax credits ​ ​ ( 38 ) ​ ​ — ​ Stock compensation ​ ​ ( 135 ) ​ ​ ( 59 ) ​ Other items ​ ( 36 ) ​ ( 4 ) ​ Income tax expense ​ $ 3,166 ​ $ 1,746 ​ ​ 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. 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. As of December 31, 2021, the Company’s 2018 through 2020 Federal tax returns remain open for F-23 Table of Contents ​ examination. The Company’s New Jersey and Canadian tax returns are open for examination for the years 2017 through 2020. The Company’s tax return in the United Kingdom is open for examination for the years 2019 and 2020. 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. ​ For financial reporting purposes, income before income taxes includes the following components: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2021 2020 United States ​ $ 9,355 ​ $ 4,767 ​ Foreign ​ 3,009 ​ 1,453 ​ ​ ​ $ 12,364 ​ $ 6,220 ​ ​ ​ The Company has approximately $ 7.4 million of undistributed earnings in Canada and $ 2.2 million of undistributed earnings in the United Kingdom, which it continues to reinvest indefinitely, and therefore no withholding taxes related to its repatriation has been recorded. ​ The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 Balance as of January 1 ​ $ - ​ $ 49 Additions related to prior period tax positions ​ - ​ ​ - Reductions related to settlements with tax authorities ​ - ​ ​ ( 49 ) Balance as of December 31 ​ $ - ​ $ - ​ During the years ended December 31, 2021 and 2020, the Company incurred interest and penalties of zero and less than $ 0.1 million, respectively, related to these uncertain tax benefits. ​ 8. Credit Facility ​ On November 15, 2017, the Company entered into a $ 20 million revolving credit facility (the “Credit Facility”) with Citibank, N.A. (“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. 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”). ​ 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. 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, with the LIBOR Rate not to be less than 0.75 percentage points. Interest on the unpaid principal balance of the Amended Note will be calculated using a rate of 1.75 percentage points over the LIBOR Rate, with the interest rate being 2.50 % at December 31, 2021. If the LIBOR Rate 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. The Amended Credit Facility is secured by the assets of the Company. F-24 Table of Contents ​ At December 31, 2021 and 2020, the Company had no borrowings outstanding under the Credit Facility. The Company incurred $ 0.1 million of interest expense, related to the Credit Facility during the years ended December 31, 2021 and 2020, respectively . On April 13, 2021, Wayside Technology UK Holdings Limited (“Wayside UK”), a wholly-owned subsidiary of the Company, entered into an uncommitted short term credit facility of £ 8 million (“Uncommitted Credit Facility”) with Citibank N.A., London Branch (“Citibank London”) pursuant to certain terms and conditions. Obligations under the Uncommitted Credit Facility are guaranteed by the Company and will be used for working capital and general corporate purposes and have a maturity date of April 13, 2022, at which time Wayside UK must pay all outstanding principal of all outstanding loans plus all accrued and unpaid interest, and any interest, fees, costs and expenses, if any. ​ Interest on the unpaid principal balance of the Uncommitted Credit Facility will be calculated using a rate of 1.85 percentage points over the Daily Rate, as defined in the Uncommitted Credit Facility. Amounts borrowed under the Uncommitted Credit Facility will be guaranteed by the Company. The Uncommitted Credit Facility may be cancelled at any time by Citibank London. Citibank London has the sole discretion to accept or reject any requested utilization of the Uncommitted Credit Facilitation. ​ At December 31, 2021, Wayside UK had no borrowings outstanding under the Uncommitted Credit Facility. ​ 9. Stockholders’ Equity and Stock-Based Compensation ​ The 2021 Omnibus Incentive Plan (the “2021 Plan”) authorizes the grant of Stock Options, Stock Units, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Bonuses and other equity-based awards. The 2021 Plan was approved by the Company’s stockholders at the 2021 Annual Meeting in June 2021. The total number of shares of the Company’s common stock, par value $ 0.01 per share (“Common Stock”) initially available for award under the 2021 Plan was 500,000 shares. As of December 31, 2021, the number of shares of Common Stock available for future award grants to employees, officers and directors under the 2021 Plan is 448,043 . ​ The 2012 Stock-Based Compensation 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. The total number of shares of the Company’s Common Stock initially available for award under the 2012 Plan was 600,000 , which was increased to 1,000,000 shares by stockholder approval at the Company’s 2018 Annual Meeting in June 2018. Immediately prior to the replacement of the 2012 Plan by the 2021 Plan, there were 352,158 shares of Common Stock available under the 2012 Plan. The 2012 Plan has been replaced by the 2021 Plan and none of the remaining shares of Common Stock authorized under the 2012 Plan will be transferred to or used under the 2021 Plan nor will any awards under the 2012 Plan that are forfeited increase the shares available for awards under the 2021 Plan. As of December 31, 2021, the number of shares of Common Stock available under the 2012 Plan is zero . ​ During the year ended December 31, 2021, the Company granted a total of 106,122 shares of Restricted Stock to officers, directors and employees. These shares of Restricted Stock vest immediately or over time in up to sixteen equal quarterly installments. During the year ended December 31, 2021, 22,159 shares of Restricted Stock were forfeited as a result of officers and employees terminating employment with the Company. ​ During the year ended December 31, 2020, the Company granted a total of 134,165 shares of Restricted Stock to officers, directors and employees. These shares of Restricted Stock vest immediately or over time in up to sixteen equal quarterly installments. During the year ended December 31, 2020, 4,682 shares of Restricted Stock were forfeited as a result of officers and employees terminating employment with the Company. ​ There was no options activity during the year ended December 31, 2021 and 2020 and there were no options outstanding or exercisable at December 31, 2021 and 2020, respectively, under both the Company’s 2012 Plan and 2021 Plan. ​ F-25 Table of Contents ​ Under the various plans, options that are cancelled can be reissued. At December 31, 2021, no cancelled options were reserved for future reissuance. ​ A summary of nonvested shares of Restricted Stock awards outstanding under the Company’s 2012 Plan as of December 31, 2021, and 2020 and changes during the years ended December 31, 2021 and 2020 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average Grant ​ ​ ​ ​ Date ​ ​ Shares ​ Fair Value Nonvested shares at January 1, 2020 63,922 ​ $ 14.94 ​ Granted in 2020 134,165 ​ 14.31 ​ Vested in 2020 ( 70,613 ) ​ 16.36 ​ Forfeited in 2020 ( 4,682 ) ​ 16.85 ​ Nonvested shares at December 31, 2020 122,792 ​ $ 13.37 ​ Granted in 2021 106,122 ​ 22.96 ​ Vested in 2021 ( 84,653 ) ​ 17.47 ​ Forfeited in 2021 ( 22,159 ) ​ 16.14 ​ Nonvested shares at December 31, 2021 122,102 ​ $ 18.35 ​ ​ As of December 31, 2021, there was approximately $ 2.1 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 2.8 years. ​ For the years ended December 31, 2021 and 2020, the Company recognized share-based compensation cost of approximately $ 1.5 million and $ 1.3 million, respectively, which is included in selling, general and administrative expenses. The Company does not capitalize any share-based compensation cost. ​ 10. Defined Contribution Plan ​ The Company maintains a defined contribution plan covering substantially all employees. Participating employees may make contributions to the plan, through payroll deductions. 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, 2021 and 2020, the Company expensed approximately $ 0.3 million, respectively, related to this plan. ​ 11. Commitments and Contingencies ​ Employment Agreements ​ The Company has entered into employment agreements with four of its executive officers. 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. ​ Other ​ As of December 31, 2021, the Company has no standby letters of credit, has no standby repurchase obligations or other commercial commitments. The Company has a line of credit see Note 8 (Credit Facility). Other than employment arrangements, other management compensation arrangements and related party transactions as disclosed in Note 12, the Company is not engaged in any other transactions with related parties. ​ F-26 Table of Contents ​ 12. Related Party Transactions ​ The Company made sales to a customer where a member of our Board of Directors is an executive. During the years ended December 31, 2021 and 2020, net sales to this customer totaled $ 0.3 million and $ 0.1 million, respectively, and amounts due from this customer as of December 31, 2021 and 2020 totaled zero and $ 0.1 million, respectively, and the December 31, 2020 balance was settled in cash subsequent to year end. ​ The Company made sales to a customer where a family member of one of our executive’s has a minority ownership position. During the year ended December 31, 2021, net sales to this customer totaled $ 0.4 million and amounts due from this customer as of December 31, 2021 totaled $ 0.2 million, which are expected to be settled in cash subsequent to the year end. The Company also accrued referral fees totaling $ 0.2 million to this customer during the year ended December 31, 2021 and amounts owed to this customer for these referral fees as of December 31, 2021 totaled $ 0.1 million, which are expected to be settled in cash subsequent to the year end. ​ 13. Industry, Segment and Geographic Financial Information ​ The Company distributes software developed by others through resellers indirectly to customers worldwide. We also resell computer software and hardware developed by others and provide technical services directly to customers worldwide. ​ 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. The internal organization used by the public company’s Chief Operating Decision Maker (CODM) to assess performance and allocate resources determines the basis for reportable operating segments. The Company’s CODM is the Chief Executive Officer. ​ The Company is organized into two reportable operating segments. The “Distribution” segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide. 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, Europe and the United Kingdom with the domestic segments as the international operations provide the same products and services to similar clients and are considered together when the Company’s CODM decides how to allocate resources. F-27 Table of Contents ​ Segment income is based on segment net sales less the respective segment’s cost of sales 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 an individual segment business unit. The Company only identifies accounts receivable, vendor prepayments and inventory by segment as shown below as “Selected Assets” by segment; it does not allocate its other assets, including capital expenditures by segment. The following segment reporting information of the Company is provided: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ 2021 2020 Net Sales: ​ ​ ​ ​ ​ ​ Distribution ​ $ 259,360 ​ $ 233,740 Solutions ​ 23,222 ​ 17,828 ​ ​ 282,582 ​ 251,568 Gross Profit: ​ ​ ​ ​ ​ ​ Distribution ​ $ 36,526 ​ $ 29,136 Solutions ​ 9,190 ​ 3,904 ​ ​ 45,716 ​ 33,040 Direct Costs: ​ ​ ​ ​ ​ ​ Distribution ​ $ 14,610 ​ $ 12,453 Solutions ​ 4,741 ​ 1,767 ​ ​ 19,351 ​ 14,220 Segment Income Before Taxes: (1) ​ ​ ​ ​ ​ ​ Distribution ​ $ 21,916 ​ $ 16,683 Solutions ​ 4,449 ​ 2,137 Segment Income Before Taxes ​ 26,365 ​ 18,820 ​ ​ ​ ​ ​ ​ ​ General and administrative ​ $ 12,785 ​ $ 9,709 Legal and financial advisory expenses, net - unsolicited bid and related matters ​ ​ — ​ ​ 1,586 Acquisition related costs ​ ​ — ​ ​ 1,518 Amortization and depreciation expense ​ ​ 1,529 ​ ​ 704 Interest, net ​ ​ 359 ​ ​ 121 Foreign currency transaction (loss) gain ​ ( 46 ) ​ 796 Income before taxes ​ $ 12,364 ​ $ 6,220 ​ (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 (loss) gain. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ As of ​ ​ ​ December 31, ​ December 31, ​ Selected Assets by Segment: ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Distribution ​ $ 133,506 ​ $ 106,930 ​ Solutions ​ 18,895 ​ 20,807 ​ Segment Select Assets ​ 152,401 ​ 127,737 ​ Corporate Assets ​ 38,351 ​ 37,796 ​ Total Assets ​ $ 190,752 ​ $ 165,533 ​ ​ F-28 Table of Contents ​ Geographic areas and net sales mix related to operations for the year ended December 31, 2021 and 2020 were as follows. Net sales is allocated to a geographic area based on the location of the sale, which is generally the customer’s country of domicile. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, 2021 ​ ​ ​ Distribution Solutions ​ Total ​ Geography ​ ​ ​ ​ ​ ​ ​ ​ USA ​ $ 210,247 ​ $ 11,057 ​ $ 221,304 ​ Europe and United Kingdom ​ 26,055 ​ 10,652 ​ 36,707 ​ Canada ​ 23,058 ​ 1,513 ​ 24,571 ​ Total net sales ​ $ 259,360 ​ $ 23,222 ​ $ 282,582 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Timing of Revenue Recognition ​ ​ ​ ​ ​ ​ ​ ​ Transferred at a point in time where the Company is principal (1) ​ $ 234,322 ​ $ 16,360 ​ $ 250,682 ​ Transferred at a point in time where the Company is agent (2) ​ 25,038 ​ 6,862 ​ 31,900 ​ Total net sales ​ $ 259,360 ​ $ 23,222 ​ $ 282,582 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, 2020 ​ ​ ​ Distribution Solutions ​ Total ​ Geography ​ ​ ​ ​ ​ ​ ​ ​ USA ​ $ 207,362 ​ $ 13,991 ​ $ 221,353 ​ Europe and United Kingdom ​ 14,787 ​ 2,060 ​ 16,847 ​ Canada ​ 11,591 ​ 1,777 ​ 13,368 ​ Total net sales ​ $ 233,740 ​ $ 17,828 ​ $ 251,568 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Timing of Revenue Recognition ​ ​ ​ ​ ​ ​ ​ ​ Transferred at a point in time where the Company is principal (1) ​ $ 214,403 ​ $ 16,059 ​ $ 230,462 ​ Transferred at a point in time where the Company is agent (2) ​ 19,337 ​ 1,769 ​ 21,106 ​ Total net sales ​ $ 233,740 ​ $ 17,828 ​ $ 251,568 ​ ​ (1) Includes net sales from third-party hardware and software products. ​ (2) Includes net sales from third-party maintenance, software support and services. ​ Geographic identifiable assets related to operations as of December 31, 2021 and 2020 were as follows. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, Identifiable Assets by Geographic Areas ​ 2021 2020 ​ USA ​ $ 122,445 ​ $ 114,126 ​ Canada ​ ​ 24,923 ​ ​ 18,514 ​ Europe and United Kingdom ​ ​ 43,384 ​ ​ 32,893 ​ Total ​ $ 190,752 ​ $ 165,533 ​ ​ F-29 Table of Contents ​ The Company had two customers that each accounted for more than 10% of total consolidated net sales for the year ended December 31, 2021. For the year ended December 31, 2021, CDW Corporation (“CDW”) and Software House International Corporation (“SHI”), accounted for 18 %, and 17 %, respectively, of consolidated net sales and as of December 31, 2021, 18 % and 22 %, respectively, of total net accounts receivable. For the year ended December 31, 2021, Sophos and SolarWinds accounted for 20 % and 10 %, respectively of our consolidated purchases. ​ 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. ​ Our top five customers accounted for 51 % and 52 % of consolidated net sales for the years ended December 31, 2021 and 2020, respectively. ​ 14. Unsolicited Bid and Shareholder Demand ​ On April 16, 2020 (the “Effective Date”), the Company entered into a Settlement Agreement (the “Settlement Agreement”) with Simon Nynens, Shepherd Kaplan Krochuk, LLC, North & Webster SSG, LLC, and each of Dennis Crowley, David Shepherd, David Kaplan, Timothy Krochuk and Samuel Kidston relating to an unsolicited bid and shareholder demand. Pursuant to the Settlement Agreement, the Company agreed to purchase all of Mr. 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. ​ 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. ​ The Company incurred zero and $ 1.6 million in legal and advisory expenses, net during the year ended December 31, 2021 and 2020, respectively, related to the above matter. ​ ​ 15. Quarterly Results of Operations (Unaudited) ​ The following table presents summarized quarterly results for 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Second Third Fourth Net sales ​ $ 62,813 ​ $ 75,350 ​ $ 68,911 ​ $ 75,508 ​ Gross profit ​ 10,843 ​ 10,979 ​ 11,319 ​ 12,575 ​ Net income ​ 1,520 ​ 1,791 ​ 2,440 ​ 3,447 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic net income per common share ​ $ 0.35 ​ $ 0.41 ​ $ 0.55 ​ $ 0.78 ​ Diluted net income per common share ​ $ 0.35 ​ $ 0.41 ​ $ 0.55 ​ $ 0.78 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The following table presents summarized quarterly results for 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Second Third Fourth Net sales ​ $ 62,618 ​ $ 56,586 ​ $ 60,919 ​ $ 71,445 ​ Gross profit ​ 8,164 ​ 7,114 ​ 7,237 ​ 10,525 ​ Net income ​ 836 ​ 581 ​ 530 ​ 2,527 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic net income per common share ​ $ 0.18 ​ $ 0.13 ​ $ 0.13 ​ $ 0.58 ​ Diluted net income per common share ​ $ 0.18 ​ $ 0.13 ​ $ 0.13 ​ $ 0.58 ​ ​ ​ ​ F-30 Table of Contents ​ ​ Wayside Technology Group, Inc. and Subsidiaries Schedule II--Valuation and Qualifying Accounts (Amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Charged to ​ ​ ​ ​ ​ ​ Beginning ​ Cost and ​ ​ ​ ​ Ending Description ​ Balance ​ Expense ​ Deductions ​ Balance Year ended December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for doubtful accounts ​ $ 765 ​ $ 130 ​ $ 3 ​ $ 892 ​ Year ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for doubtful accounts ​ $ 892 ​ $ 26 ​ $ 37 ​ $ 881 ​ ​ ​ ​ ​ ​ ​ ​ F-31