What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-06 compared with 2021-11-04 · 64 added, 137 removed, 187 unchanged (52% of the section changed)

11 unchanged sentences

We have subsidiaries in the United States, Canada, the Netherlands, the United Kingdom and Ireland, through which sales are made.

We are closely monitoring the impact of the 2019 novel coronavirus, or COVID-19, pandemic on all aspects of our business.

We continue to closely monitor the impact of the 2019 novel coronavirus, or COVID-19, pandemic on all aspects of our business.

COVID-19 has resulted and will continue to result in significant economic disruption, which could also impact our business.

While we did not incur significant disruptions to our operations during the three and nine months ended September 30, 2021 as a result of the COVID-19 pandemic, we are unable to predict the impact that the COVID-19 pandemic will have on our business, liquidity or results of operations at this time.

While we did not incur significant disruptions to our operations during the three months ended March 31, 2022 as a result of the COVID-19 pandemic, we are unable to predict the impact that the COVID-19 pandemic will have on our business, liquidity or results of operations at this time.

This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers and shareholders.

We have historically not been adversely affected by inflation, as abrupt changes in technology, rapid changes in customer preferences, short product life cycles and evolving industry standards within the IT industry have generally caused the prices of the products we sell to decline.

This requires us to sell new products and have growth in unit sales of existing products in order to increase our net sales.

We believe that most price increases could be passed on to our customers, as prices charged by us are not set by long-term contracts;

however, as a result of competitive pressure, there can be no assurance that the full effect of any such price increases could be passed on to our customers or cause a reduction in our customers spending.

Factors Influencing Our Financial Results

We derive the majority of our net sales though the sale of third-party software licenses, maintenance and service agreements.

In our Distribution segment, sales are impacted by the number of product lines we distribute, and sales penetration of those products into the reseller channel, product lifecycle competition, and demand characteristics of the products which we are authorized to distribute.

products which we are authorized to distribute.

In our Solutions segment sales are generally driven by sales force effectiveness and success in providing superior customer service and cloud solutions support, competitive pricing, and flexible payment solutions to our customers.

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In addition, we grant discounts, allowances, and rebates to certain customers, which may vary from period to period, based on volume, payment terms and other criteria.

To date, we have been able to implement cost efficiencies such as the use of drop shipments,

electronic ordering (“EDI”) and other capabilities to be able to operate our business profitably as gross margins have declined.

To date, we have been able to implement cost efficiencies such as the use of drop shipments, electronic ordering (“EDI”) and other capabilities to be able to operate our business profitably as gross margins have declined.

We evaluate the profitability of our business based on return on equity and effective margin.

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Historically we have sought to return value to investors through the payment of quarterly dividends and share repurchases.

Total dividends paid and shares repurchased were $0.7 million and $0.2 million, respectively, during the three months ended September 30, 2021.

Total dividends paid and shares repurchased were $0.7 million and $0.1 million, respectively, during the three months ended September 30, 2020.

Total dividends paid and shares repurchased were $0.7 million and $0.2 million, respectively, during the three months ended March 31, 2022.

Total dividends paid and shares repurchased were $0.8 million and less than $0.1 million, respectively, during the three months ended March 31, 2021.

The payment of future dividends and share repurchases is at the discretion of our Board of Directors and dependent on results of operations, projected capital requirements and other factors the Board of Directors may find relevant.

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Because these forward-looking statements are subject to risks and uncertainties, actual results could differ materially from those indicated by such forward-looking statements.

These risks and uncertainties include, but are not limited to, the continued acceptance of the Company’s distribution channel by vendors and customers, the timely availability and acceptance of new products, product mix, market conditions, competitive pricing pressures, contribution of key vendor relationships and support programs, including vendor rebates and discounts, as well as factors that affect the software industry in general and other factors generally.

rebates and discounts, as well as factors that affect the software industry in general and other factors generally.

Currently, one of the most significant factors is the potential adverse effect of the current COVID-19 pandemic on the Company, the global economy and financial markets.

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Financial Overview

Net sales increased 13%, or $8.0 million, to $68.9 million for the three months ended September 30, 2021 compared to $60.9 million for the same period in the prior year.

Gross profit increased 56%, or $4.1 million, to $11.3 million for the three months ended September 30, 2021 compared to $7.2 million for the same period in the prior year.

Selling, general and administrative (“SG&A”) expenses increased 30%, or $1.8 million, to $7.8 million for the three months ended September 30, 2021 compared to $6.0 million for the same period in the prior year.

Amortization and depreciation expense increased 132%, or $0.2 million, to $0.4 million for the three months ended September 30, 2021 compared to $0.2 million for the same period in the prior year.

Net income for the three months ended September 30, 2021 was $2.4 million compared to $0.5 million for the same period in the prior year.

Diluted income per share for the three months ended September 30, 2021 was $0.55 compared to $0.13 for the same period in the prior year.

Net sales increased 14%, or $8.5 million, to $71.3 million for the three months ended March 31, 2022 compared to $62.8 million for the same period in the prior year.

Gross profit increased 10%, or $1.2 million, to $12.0 million for the three months ended March 31, 2022 compared to $10.8 million for the same period in the prior year.

Selling, general and administrative (“SG&A”) expenses decreased 2%, or $0.2 million, to $8.2 million for the three months ended March 31, 2022 compared to $8.4 million for the same period in the prior year.

Amortization and depreciation expense decreased 11%, or less than $0.1 million, to $0.4 million for the three months ended March 31, 2022 compared to $0.4 million for the same period in the prior year.

Net income for the three months ended March 31, 2022 was $2.7 million compared to $1.5 million for the same period in the prior year.

Diluted income per share for the three months ended March 31, 2022 was $0.61 compared to $0.35 for the same period in the prior year.

Critical Accounting Policies and Estimates

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The Company believes the following critical accounting policies used in the preparation of its consolidated financial statements affect its more significant judgments and estimates.

The Company utilizes judgment regarding performance obligations inherent in the products for services it sells including, whether ongoing maintenance obligations performed by third party vendors are distinct from the related software licenses, and allocation of sales prices among distinct performance obligations.

licenses, and allocation of sales prices among distinct performance obligations.

These estimates require significant judgment to determine whether the software’s functionality is dependent on ongoing maintenance or if substantially all functionality is available in the original software download.

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The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.

Management determines the estimate of the allowance for uncollectible accounts

receivable by considering a number of factors, including historical experience, aging of the accounts receivable, and specific information obtained by the Company on the financial condition and the current creditworthiness of its customers.

Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including historical experience, aging of the accounts receivable, and specific information obtained by the Company on the financial condition and the current creditworthiness of its customers.

If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

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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.

If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not

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.

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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 September 30, 2021 was not material to the consolidated financial statements.

There were no contracts outstanding as of March 31, 2022.

Interest, Net

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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 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.

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.

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.

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This comparison of financial results is not necessarily indicative of future results:

Nine months ended

Three months ended

September 30,

Cost of sales

Selling, general and administrative expenses

Legal and financial advisory expenses, net - unsolicited bid and related matters

Acquisition related costs

Amortization and depreciation expense

Income from operations

Other (expense) income

Other income (expense)

Income before income taxes

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These key indicators include financial information that is prepared in accordance with US GAAP and presented in our Consolidated Financial Statements as well as non-US GAAP performance measurement tools.

Nine months ended

Three months ended

September 30,

Adjusted gross billings (Non-GAAP)

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We consider gross profit growth and effective margin to be key metrics in evaluating our business.

During the three months ended September 30, 2021, gross profit increased 56%, or $4.1 million, to $11.3 million compared to $7.2 million for the same period in the prior year while effective margin increased to 37.4% compared to 25.6% for the same period in the prior year.

During the nine months ended September 30, 2021, gross profit increased 47%, or $10.6 million,

to $33.1 million compared to $22.5 million for the same period in the prior year while effective margin decreased to 31.3% compared to 31.4% for the same period in the prior year.

During the three months ended March 31, 2022, gross profit increased 10%, or $1.2 million, to $12.0 million compared to $10.8 million for the same period in the prior year while effective margin increased to 35.5% compared to 24.4% for the same period in the prior year.

Reconciliations of Non-GAAP Financial Measures

Nine months ended

Three months ended

September 30,

Reconciliation of net sales to adjusted gross billings (Non-GAAP):

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In addition, other companies, including companies in our industry, might calculate adjusted gross billings of product and services or similarly titled measures differently, which may reduce their usefulness as comparative measures.

Nine months ended

Three months ended

September 30,

Net income reconciled to adjusted EBITDA:

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Share-based compensation

Legal and financial advisory expenses, net - unsolicited bid and related matters

Acquisition related costs

Adjusted EBITDA

We define adjusted EBITDA, as net income, plus provision for income taxes, depreciation, amortization, share-based compensation, interest, legal and financial advisory expenses, net – unsolicited bid and related matters and acquisition related costs.

We define adjusted EBITDA, as net income, plus provision for income taxes, depreciation, amortization, share-based compensation and interest.

We define effective margin as adjusted EBITDA as a percentage of gross profit.

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In addition, other companies, including companies in our industry, might calculate adjusted EBITDA, or similarly titled measures differently, which may reduce their usefulness as comparative measures.

On April 30, 2020 we completed the acquisition of Interwork Technologies Inc.

(“Interwork”) for a purchase price of $3.6 million, subject to certain working capital adjustments, and a potential earnout of $0.8 million payable approximately one year after the acquisition date.

The operating results of Interwork are included in our operating results effective May 1, 2020.

On November 6, 2020 we completed the acquisition of CDF Group Limited (“CDF”) for a purchase price of $17.4 million, subject to certain working capital adjustments.

The operating results of CDF are included in our operating results effective November 7, 2020.

Operating results of Interwork are included in our Distribution segment.

Operating results of CDF are included in either our Distribution segment or Solutions segment.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Net Sales and Adjusted Gross Billings

Net sales for the three months ended September 30, 2021 increased 13%, or $8.0 million, to $68.9 million compared to $60.9 million for the same period in the prior year.

Adjusted gross billings for the three months ended September 30, 2021 increased 33%, or $55.9 million, to $226.9 million compared to $171.0 million for the same period in the prior year.

Adjusted gross billings increased at a faster rate than net sales due to shift in product mix from hardware sales, which are recorded on a gross basis, to security, maintenance and cloud products which are recorded net of related cost of sales.

Distribution segment net sales for the three months ended September 30, 2021 increased 12%, or $7.0 million, to $64.1 million compared to $57.1 million for the same period in the prior year.

Adjusted gross billings for the Distribution segment for the three months ended September 30, 2021 increased 28%, or $46.6 million, to $212.3 million compared to $165.7 million for the same period in the prior year.

The increase in net sales and adjusted gross billings in our Distribution segment was due to both organic growth and the impact of the CDF acquisitions for the three months ended September 30, 2021.

Solutions segment net sales for the three months ended September 30, 2021 increased 25%, or $1.0 million, to $4.8 million compared to $3.8 million for the same period in the prior year.

Adjusted gross billings for the Solutions segment for the three months ended September 30, 2021 increased 176%, or $9.3 million, to $14.6 million compared to $5.3 million for the same period in the prior year.

The increase in net sales and adjusted gross billings in our Solutions segment was primarily due to the impact of the CDF acquisition for the three months ended September 30, 2021.

During the three months ended September 30, 2021, we relied on two key customers for a total of 36% of our net sales, with each of these customers accounting for 18% of our total net sales, respectively.

The Company had two major customers that accounted for 22% and 12%, respectively, of its total net sales during the three months ended September 30, 2020.

The Company had two major vendors that accounted for 20% and 9%, respectively, of total purchases during the three months ended September 30, 2021 and 21% and 12%, respectively, of total purchases during the three months ended September 30, 2020.

Gross profit for the three months ended September 30, 2021 increased 56%, or $4.1 million, to $11.3 million compared to $7.2 million for the same period in the prior year.

Distribution segment gross profit for the three months ended September 30, 2021 increased 41%, or $2.7 million, to $9.3 million compared to $6.6 million for the same period in the prior year.

The increase in Distribution segment gross profit resulted primarily from the impact of the acquisition of CDF and lower early pay discounts and other rebates and discounts offered to our customers as a percentage of adjusted gross billings.

Solutions segment gross profit for the three months ended September 30, 2021 increased 210%, or $1.4 million, to $2.0 million compared to $0.6 million for the same period in the prior year.

The increase in Solutions segment gross profit resulted primarily from increased sales from the acquisition of CDF.

Customer rebates and discounts for the three months ended September 30, 2021 were $1.9 million compared to $1.6 million for the same period in the prior year.

Net sales for the three months ended March 31, 2022 increased 14%, or $8.5 million, to $71.3 million compared to $62.8 million for the same period in the prior year.

Adjusted gross billings for the three months ended March 31, 2022 increased 13%, or $27.8 million, to $238.7 million compared to $210.9 million for the same period in the prior year.

Adjusted gross billings and net sales increased at a similar rate due to consistency in the product mix between hardware sales, which are recorded on a gross basis, and security, maintenance and cloud products, which are recorded net of related cost of sales.

Distribution segment net sales for the three months ended March 31, 2022 increased 20%, or $11.0 million, to $65.8 million compared to $54.8 million for the same period in the prior year.

Adjusted gross billings for the Distribution segment for the three months ended March 31, 2022 increased 15%, or $28.5 million, to $221.8 million compared to $193.3 million

for the same period in the prior year.

The increase in net sales and adjusted gross billings in our Distribution segment was due to organic growth from our existing vendor partnerships.

Solutions segment net sales for the three months ended March 31, 2022 decreased 31%, or $2.5 million, to $5.5 million compared to $8.0 million for the same period in the prior year.

Adjusted gross billings for the Solutions segment for the three months ended March 31, 2022 decreased 4%, or $0.6 million, to $16.9 million compared to $17.5 million for the same period in the prior year.

The decrease in net sales and adjusted gross billings in our Solutions segment was primarily due to the impact of a large one-time sale during the three months ended March 31, 2021.

During the three months ended March 31, 2022, the Company had two major customers that accounted for 24% and 14%, respectively, of our total net sales.

The Company had two major customers that accounted for 20% and 13%, respectively, of its total net sales during the three months ended March 31, 2021.

The Company had two major vendors that accounted for 22% and 10%, respectively, of total purchases during the three months ended March 31, 2022 and 24% and 19%, respectively, of total purchases during the three months ended March 31, 2021.

Gross profit for the three months ended March 31, 2022 increased 10%, or $1.2 million, to $12.0 million compared to $10.8 million for the same period in the prior year.

Distribution segment gross profit for the three months ended March 31, 2022 increased 22%, or $1.7 million, to $9.6 million compared to $7.9 million for the same period in the prior year.

The increase in Distribution segment gross profit was due to organic growth from our existing vendor partnerships and lower early pay discounts and other rebates and discounts offered to our customers as a percentage of adjusted gross billings.

Solutions segment gross profit for the three months ended March 31, 2022 decreased 20%, or $0.6 million, to $2.4 million compared to $3.0 million for the same period in the prior year.

The decrease in gross profit in our Solutions segment was primarily due to the impact of a large one-time sale during the three months ended March 31, 2021.

Customer rebates and discounts for the three months ended March 31, 2022 were $1.9 million compared to $2.1 million for the same period in the prior year.

Customer rebates and discounts vary based on terms of rebate and early pay discount programs offered to customers and timing of payments ultimately received from our customers.

Vendor rebates and discounts for the three months ended September 30, 2021 were $1.0 million compared to $0.6 million for the same period in the prior year.

Vendor rebates and discounts for the three months ended March 31, 2022 were $1.0 million compared to $0.9 million for the same period in the prior year.

Vendor rebates are dependent on programs offered by our vendors and in some cases reaching certain volume targets set by our vendors.

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Selling, General and Administrative Expenses

SG&A expenses for the three months ended September 30, 2021 increased 30%, or $1.8 million, to $7.8 million compared to $6.0 million for the same period in the prior year, primarily due to the impact of the acquisition of CDF.

SG&A expenses were 3.4% of adjusted gross billings for the three months ended September 30, 2021, compared to 3.5% for the same period in the prior year.

SG&A expenses for the three months ended March 31, 2022 decreased 2%, or $0.2 million, to $8.2 million compared to $8.4 million for the same period in the prior year.

SG&A expenses were 3.5% of adjusted gross billings for the three months ended March 31, 2022, compared to 4.0% for the same period in the prior year.

The Company expects that its SG&A expenses, as a percentage of adjusted gross billings, may vary depending on changes in sales volume, as well as the levels of continuing investments in key growth initiatives.

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Amortization and Depreciation Expense

Amortization and depreciation expense for the three months ended September 30, 2021 increased 132%, or $0.2 million, to $0.4 million compared to $0.2 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the CDF acquisition.

Legal and Financial Advisory Expenses, Net – Unsolicited Bid and Related Matters

There were no legal and financial advisory expenses, net – unsolicited bid and related matters incurred during the three months ended September 30, 2021 compared to a recovery of $0.1 million relating to reimbursement for insurance proceeds realized during the same period in the prior year.

Acquisition Related Costs

There were no acquisition related costs incurred during the three months ended September 30, 2021 compared to $0.3 million for the same period in the prior year.

Acquisition related costs incurred in this period in the prior year were in conjunction with the acquisition of CDF.

For the three months ended September 30, 2021 and 2020, the Company recorded a provision for income taxes of $0.8 million and $0.2 million, respectively.

The effective tax rate for the three months ended September 30, 2021 and 2020 was 23.7% and 31.1%, respectively.

The provision for income taxes in the current year was impacted by the result of changes in the mix of jurisdictions in which taxable income was earned.

The provision for income taxes in the prior year was impacted by limitations on the deductibility of certain facilitative acquisition related costs in the prior year.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net Sales and Adjusted Gross Billings

Net sales for the nine months ended September 30, 2021 increased 15%, or $27.0 million, to $207.1 million compared to $180.1 million for the same period in the prior year.

Adjusted gross billings for the nine months ended September 30, 2021 increased 34%, or $170.0 million, to $672.9 million compared to $502.9 million for the same period in the prior year.

Distribution segment net sales for the nine months ended September 30, 2021 increased 12%, or $20.3 million, to $188.8 million compared to $168.5 million for the same period in the prior year.

Adjusted gross billings for the Distribution segment for the nine months ended September 30, 2021 increased 29%, or $138.7 million, to $625.1 million compared to

$486.4 million for the same period in the prior year primarily due to both organic growth and the impact of the acquisitions of Interwork and CDF.

Solutions segment net sales for the nine months ended September 30, 2021 increased 58%, or $6.7 million, to $18.3 million compared to $11.6 million for the same period in the prior year.

The increase in net sales in our Solutions segment was primarily due to sales from the CDF acquisition for the nine months ended September 30, 2021.

Adjusted gross billings for the Solutions segment for the nine months ended September 30, 2021 increased 191%, or $31.4 million, to $47.9 million compared to $16.5 million for the same period in the prior year.

During the nine months ended September 30, 2021, we relied on two key customers for a total of 34% of our net sales, with one of these customers accounting for 18% and the other customer accounting for 16% of our total net sales.

The Company had two major customers that accounted for 26% and 14%, respectively, of its total net sales during the nine months ended September 30, 2020.

The Company had two major vendors that accounted for 20% and 9%, respectively, of total purchases during the nine months ended September 30, 2021 and 20% and 9%, respectively, of total purchases during the nine months ended September 30, 2020.

Gross profit for the nine months ended September 30, 2021 increased 47%, or $10.6 million, to $33.1 million compared to $22.5 million for the same period in the prior year.

Distribution segment gross profit for the nine months ended September 30, 2021 increased 27%, or $5.6 million, to $26.0 million compared to $20.4 million for the same period in the prior year.

The increase in Distribution segment gross profit resulted primarily from the impact of the acquisitions of Interwork and CDF.

Solutions segment gross profit for the nine months ended September 30, 2021 increased 237%, or $5.0 million, to $7.1 million compared to $2.1 million for the same period in the prior year.

The increase in Solutions segment gross profit resulted primarily from increased sales from the acquisition of CDF.

Customer rebates and discounts for the nine months ended September 30, 2021 were $6.4 million compared to $4.0 million for the same period in the prior year.

This increase is attributable to a change in payment terms with one of our larger customers during the second quarter of 2020, which resulted in a cash inflow of approximately $30 million from the date the program was implemented, as well as increased rebates and discounts to national resellers.

Customer rebates and discounts vary based on terms of rebate and early pay discount programs offered to customers and timing of payments ultimately received from our customers.

Vendor rebates and discounts for the nine months ended September 30, 2021 were $2.9 million compared to $2.5 million for the same period in the prior year.

Vendor rebates are dependent on programs offered by our vendors and in some cases reaching certain volume targets set by our vendors.

The Company monitors vendor rebate levels, competitive pricing, and gross profit margins carefully.

We anticipate that price competition in our market will continue in both of our business segments.

Selling, General and Administrative Expenses

SG&A expenses for the nine months ended September 30, 2021 increased 44%, or $7.4 million, to $24.3 million compared to $16.9 million for the same period in the prior year, primarily due to the impact of the acquisition of CDF and Interwork, as well as $0.5 million of employee separation expenses.

SG&A expenses were 3.6% of adjusted gross billings for the nine months ended September 30, 2021, compared to 3.4% for the same period in the prior year.

The Company expects that its SG&A expenses, as a percentage of net sales, may vary depending on changes in sales volume, as well as the levels of continuing investments in key growth initiatives.

We plan to continue to expand our investment in business development, sales and marketing to maximize our market penetration.

Amortization and Depreciation Expense

Amortization and depreciation expense for the nine months ended September 30, 2021 increased 192%, or $0.8 million, to $1.2 million compared to $0.4 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the Interwork and CDF acquisitions.

Legal and Financial Advisory Expenses, Net – Unsolicited Bid and Related Matters

There were no legal and financial advisory expenses, net – unsolicited bid and related matters incurred during the nine months ended September 30, 2021 compared to $1.8 million for the same period in the prior year.

Acquisition Related Costs

There were no acquisition related costs incurred during the nine months ended September 30, 2021 compared to $1.0 million for the same period in the prior year.

Acquisition related costs incurred in the prior year were in conjunction with the acquisitions of Interwork and CDF.

For the nine months ended September 30, 2021 and 2020, the Company recorded a provision for income taxes of $2.2 million and $0.9 million, respectively.

The effective tax rate for the nine months ended September 30, 2021 and 2020 was 27.3% and 31.2%, respectively.

The provision for income taxes in the current year was impacted by a deferred tax adjustment due to an increase in the corporate tax rate in a foreign jurisdiction the Company operates in that will impact the rate at which deferred taxes are reversed in future periods, partially offset by changes in the mix of jurisdictions in which taxable income was earned.

The provision for income taxes in the prior year was impacted by limitations on the deductibility of certain facilitative acquisition related costs in the prior year.

Amortization and depreciation expense for the three months ended March 31, 2022 decreased 11%, or less than $0.1 million, to $0.4 million compared to $0.4 million for the same period in the prior year.

For the three months ended March 31, 2022 and 2021, the Company recorded a provision for income taxes of $0.8 million and $0.4 million, respectively.

The effective tax rate for the three months ended March 31, 2022 and 2021 was 22.7% and 22.1%, respectively.

The change in the provision for income taxes was impacted by the result of changes in the mix of jurisdictions in which taxable income was earned.

Liquidity and Capital Resources

Our cash and cash equivalents increased to $29.9 million as of September 30, 2021 compared to $29.3 million as of December 31, 2020.

Our cash and cash equivalents increased to $37.0 million as of March 31, 2022 compared to $29.3 million as of December 31, 2021.

The increase in cash and cash equivalents was primarily the result of $9.2 million of cash and cash equivalents provided by operating activities, $0.2 million of cash used in investing activities and $1.0 million of cash used for dividends.

Net cash and cash equivalents provided by operating activities for the nine months ended September 30, 2021 was $7.5 million, comprised primarily of net income adjusted for non-cash items of $8.8 million, partially offset by changes in operating assets and liabilities of $1.3 million.

Net cash and cash equivalents used in investing activities during the nine months ended September 30, 2021 consisted of $3.0 million of vendor advances and $0.2 million of purchases of fixed assets.

Net cash and cash equivalents used in financing activities during the nine months ended September 30, 2021 was $3.5 million, comprised of dividend payments on our Common Stock of $2.2 million, contingent consideration paid of $0.9 million and purchases of treasury stock of $0.4 million.

Net cash and cash equivalents provided by operating activities for the three months ended March 31, 2022 was $9.2 million, comprised primarily of net income adjusted for non-cash items of $3.8 million and changes in operating assets and liabilities of $5.4 million.

Net cash and cash equivalents used in investing activities during the three months ended March 31, 2022 consisted of $0.2 million of purchases of fixed assets.

Net cash and cash equivalents used in financing activities during the three months ended March 31, 2022 was $1.0 million, comprised of dividend payments on our Common Stock of $0.8 million and purchases of treasury stock of $0.2 million.

On November 15, 2017, the Company entered into a $20,000,000 revolving credit facility (the “Credit Facility”) with Citibank, N.A.

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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.

As of September 30, 2021, no borrowings were outstanding under the Credit Facility.

As of March 31, 2022, no borrowings were outstanding under the Credit Facility.

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 £8,000,000 (“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, 2023, 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.

As of September 30, 2021, no borrowings were outstanding under the Uncommitted Credit Facility.

As of March 31, 2022, no borrowings were outstanding under the Uncommitted Credit Facility.

We anticipate that our working capital needs will increase as we invest in the growth of our business.

5 unchanged sentences

Off-Balance Sheet Arrangements

As of September 30, 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

As of March 31, 2022, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Quantitative and Qualitative Disclosures about Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis