What changed in this filing

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Item 9A. Controls and Procedures

2023-03-16 compared with 2022-03-09 · 153 added, 170 removed, 674 unchanged (32% of the section changed)

1 unchanged sentence

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

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.

of the period covered by this Annual Report.

This evaluation was carried out under the supervision and with the participation of various members of our management, including our Company’s Chief Executive Officer (principal executive officer), Vice President and Chief Financial Officer (principal financial officer) and Vice President and Chief Accounting Officer (principal accounting officer).

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 Annual 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.

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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, 2022, as stated in their report, which is included herein.

Changes in Internal Control over Financial Reporting .

As required by Rule 13a-15(d) under the Exchange Act, our management, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, has evaluated our internal control over financial reporting to determine whether any changes to our internal control over financial reporting occurred during the fourth quarter of the year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Based on that evaluation, no such changes to our internal control over financial reporting occurred during the fourth quarter of the year ended December 31, 2022.

As part of that evaluation, management identified changes in user access privileges that were implemented during the first quarter in 2022 at a component.

These changes in user access privileges were made in response to identified control deficiencies to ensure that appropriate segregation of duties was maintained as it relates to the preparation and review of journal entries at that component.

Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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.”

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 2022 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A within 120 days of the end of the fiscal year to which this Annual Report relates (the “Definitive Proxy Statement”) under the sections captioned “Election of Directors” and “Corporate Governance.”

Executive Compensation

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Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this Report:

Consolidated Financial Statements (See Index to Consolidated Financial Statements on page F-1 of this report);

(a) The following documents are filed as part of this Annual Report:

Consolidated Financial Statements (See Index to Consolidated Financial Statements on page F-1 of this Annual Report);

Financial Statement Schedule :

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Description of Exhibit

Share Purchase Agreement, dated August 18, 2022, by and among the seller listed therein, and Wayside Technology UK Holding Limited.

Form of Amended and Restated Certificate of Incorporation of the Company.

Certificate of Amendment of Restated Certificate of Incorporation of the Company.

Amended and Restated By-Laws of the Company.

Certificate of Amendment of Restated Certificate of Incorporation of the Company.

Amended and Restated Bylaws of the Company.

Specimen of Common Stock Certificate.

Description of Securities.

Description of Exhibit

(filed herewith) .

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.

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Employment agreement dated January 15, 2020 between the Company and Dale Foster.

Description of Exhibit

Employment agreement dated January 2, 2018 between the Company and Charles Bass.

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Subsidiaries of the Registrant.

(filed herewith)

Consent of BDO USA, LLP, an Independent Registered Public Accounting Firm.

Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Dale Foster, the Chief Executive Officer of the Company.

Description of Exhibit

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.

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.

(filed herewith)

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 (filed herewith).

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 (filed herewith).

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 (filed herewith).

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.

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 (furnished herewith).

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.

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 (furnished herewith).

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.

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:

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 (furnished herewith).

The following financial information from Climb Global Solutions, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 16, 2023, 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.

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(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.

(3) Incorporated by reference to Exhibit 10.59 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 Exhibit 10.45 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.

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(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.

(9) Incorporated by reference to Exhibit 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.

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(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.

(13) Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on December 8, 2022.

(14) Incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed on August 18, 2022.

(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.

(15) Incorporated by reference to Exhibit 3.1(a) to the Registrant’s Form 8-K filed on October 27, 2022.

(16) Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on June 8, 2021.

Compensatory plan or arrangement of management required to be filed as an exhibit to this Annual Report on Form 10-K .

Form 10-K Summary

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 16, 2023.

WAYSIDE TECHNOLOGY GROUP, INC.

CLIMB GLOBAL SOLUTIONS, INC.

/s/ Dale Foster

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Andrew Bryant

/s/ Ross Crane

March 9, 2022

/s/ Gerri Gold

3 unchanged sentences

Greg Scorziello

/s/ Kimberly Boren

March 16, 2023

Kimberly Boren

Items 8 and 15(a)

Wayside Technology Group, Inc.

Climb Global Solutions, Inc.

and Subsidiaries

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To the Board of Directors and Stockholders

Wayside Technology Group, Inc.

Climb Global Solutions, 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”).

We have audited Climb Global Solutions, Inc.’s (formerly known as Wayside Technology Group, Inc.) (the “Company”) internal control over financial reporting as of December 31, 2022, 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, 2022, based on the COSO criteria.

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To the Board of Directors and Stockholders

Wayside Technology Group, Inc.

Climb Global Solutions, 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”).

We have audited the accompanying consolidated balance sheets of Climb Global Solutions, Inc.

(formerly known as Wayside Technology Group, Inc.) (the “Company”) as of December 31, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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(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.

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.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

As described in Note 3 of the consolidated financial statements, the Company completed the acquisition of Spinnakar Limited during the year ended December 31, 2022.

The total purchase consideration for Spinnakar Limited was

approximately $13.6 million, inclusive of a $1.8 million post-closing contingent earn-out.

As a result of the acquisition, management determined the estimated fair value of the identifiable assets acquired and liabilities assumed at the acquisition date and recorded intangible assets of approximately $11.7 million in aggregate.

The primary intangible assets acquired were vendor relationships.

We identified the revenue projections, projected operating margin and the discount rate used in the determination of the fair value of certain acquired vendor relationships as a critical audit matter.

The principal considerations for our determination included the subjectivity and judgment required to determine projected revenue, projected operating margin and the discount rate used to determine the fair value of certain vendor relationships acquired.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

● Assessing the reasonableness of the revenue projections and projected operating margins for certain vendor relationships acquired by (i) evaluating historical performance of the acquired entity, (ii) obtaining publicly available information to evaluate management plans, (iii) performing a sensitivity analysis of the assumptions used in the discounted cash flow and evaluating the potential effect of changes in these assumptions, and iv) evaluating the consistency of forecasted amounts against information obtained through inquiries made of certain individuals.

● Utilizing professionals with specialized skills and knowledge to assist in (i) evaluating the appropriateness of the valuation model used by management, (ii) testing the mathematical accuracy of the Company’s calculations, and (iii) evaluating the reasonableness of the discount rate used in the cash flow model for the determination of the fair value of certain acquired vendor relationships.

/s/ BDO USA, LLP

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March 16, 2023

Wayside Technology Group, Inc.

Climb Global Solutions, Inc.

and Subsidiaries

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Lease liability, current portion

Term loan, current portion

Total current liabilities

1 unchanged sentence

Deferred income tax liabilities

Term loan, net of current portion

Non-current liabilities

Total liabilities

1 unchanged sentence

Stockholders’ equity:

Common stock, $ .01 par value;

Common stock, $ .01 par value per share;

10,000,000 shares authorized;

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The accompanying notes are an integral part of the consolidated financial statements.

Wayside Technology Group, Inc.

Climb Global Solutions, Inc.

and Subsidiaries

1 unchanged sentence

(Amounts in thousands, except per share amounts)

Year ended December 31,

Cost of sales

Selling, general, and administrative expenses

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

Acquisition related costs

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Interest, net

Foreign currency transaction (loss) gain

Foreign currency transaction loss

Income before provision for income taxes

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The accompanying notes are an integral part of the consolidated financial statements.

Wayside Technology Group, Inc.

Climb Global Solutions, Inc.

and Subsidiaries

1 unchanged sentence

(Amounts in thousands)

Other comprehensive income:

Other comprehensive (loss) income:

Foreign currency translation adjustments

Other comprehensive income

Other comprehensive (loss) income

Comprehensive income

The accompanying notes are an integral part of the consolidated financial statements.

Wayside Technology Group, Inc.

Climb Global Solutions, Inc.

and Subsidiaries

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Dividends paid

Share-based compensation expense

Share-based compensation

Restricted stock grants (net of forfeitures)

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The accompanying notes are an integral part of the consolidated financial statements

Wayside Technology Group, Inc.

Climb Global Solutions, Inc.

and Subsidiaries

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Provision for doubtful accounts

Deferred income tax expense

Deferred income tax (benefit) expense

Share-based compensation expense

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Amortization of right-of-use assets

Change in fair value of contingent earn-out consideration

Changes in operating assets and liabilities, net of acquisitions:

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Purchase of treasury stock

Borrowings under revolving credit facility

Repayments of borrowings under revolving credit facility

Borrowings under term loan

Repayments of borrowings under term loan

Dividends paid

Contingent consideration

Payments of deferred financing costs

Net cash and cash equivalents used in financing activities

Effect of foreign exchange rate on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

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The accompanying notes are an integral part of the consolidated financial statements.

Wayside Technology Group, Inc.

Climb Global Solutions, Inc.

and Subsidiaries

2 unchanged sentences

Description of Business

Wayside Technology Group, Inc.

and Subsidiaries (the “Company”), was incorporated in Delaware in 1982.

Climb Global Solutions, Inc.

(formerly known as 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.

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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 offers an extensive line of products from leading software vendors and tools for virtualization/cloud computing, security, networking, storage and 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”.

The “Solutions” segment is a cloud solutions provider and value-added reseller of software, hardware and services to customers worldwide under the names “Grey Matter”.

Summary of Significant Accounting Policies

Principles of Consolidation and Operations

The consolidated financial statements include the accounts of Wayside Technology Group, Inc.

The consolidated financial statements include the accounts of Climb Global Solutions, Inc.

and its wholly owned subsidiaries .

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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

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.

Non-vested restricted 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.

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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.

If actual sales returns are greater than estimated by management, an additional return allowance may be required as an offset to net sales.

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.

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”.

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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, 2022 and 2021.

Inventory, consisting primarily of finished products held for resale, is stated at the lower of cost or net realizable value.

Inventory, consisting primarily of finished products held for resale, is valued based on the first-in-first-out method of accounting and is stated at the lower of cost or net realizable value.

Vendor Prepayments and Advances

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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

costs of $ 0.7 million and $ 0.8 million, respectively, which are included in "Equipment and leasehold improvements"

At December 31, 2022 and 2021, the Company had unamortized software development costs of $ 2.4 million and $ 0.7 million, respectively, which are included in "Equipment and leasehold improvements"

in the Company's Consolidated Balance Sheets.

As of December 31, 2022, this includes $ 2.3 million for an internal-use software project that amortization expense has not yet been recognized for as the internal-use software is not ready for its intended use.

As of December 31, 2021, there were no such costs capitalized for this project.

Accounts Receivable-Long-Term

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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.

assessing performance.

The Company's operations are classified into two reportable business segments:

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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.

Interest, net consists primarily of income from the amortization of the discount on accounts receivable long term, net of interest expense that is inclusive of fees associated with the Company’s credit facility.

The Company utilizes the asset and liability method of accounting for income taxes.

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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 December 31, 2021 was not material to the Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

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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.

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.

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 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.

Effective January 1, 2023, the company will adopt the update using a modified retrospective approach with a cumulative-effect adjustment to retained earnings.

The new credit loss standard is not expected to have a material effect on our financial position, results of operations or cash flows.

Acquisition of Spinnakar Limited

On August 18, 2022, the Company entered into a Share Purchase Agreement and purchased the entire share capital of Spinnakar Limited (“Spinnakar”) for an aggregate purchase price of approximately £ 9.8 million (equivalent to $ 11.8 million USD), subject to certain working capital and other adjustments, paid at closing plus a potential post-closing earn-out.

The allocation of the purchase price was based upon the estimated fair value of Spinnakar’s net tangible and identifiable intangible assets as of the date of the acquisition.

The transaction was accounted for under the purchase method of accounting.

The financial position and operating results of Spinnakar is included in the Company’s consolidated financial statements from the date of acquisition.

The Company recorded net revenue for Spinnakar of approximately $ 6.0 million and net income of approximately $ 0.4 million during the year ended December 31, 2022.

The impact of the acquisition’s preliminary purchase price allocations on the Company’s consolidated balance sheet and the acquisition date fair value of the total consideration transferred is depicted in the table below.

Due to the timing of the closing of the transaction in the third quarter of 2022, the Company has not yet completed its evaluation and determination of certain assets acquired and liabilities assumed, primarily the final valuation of goodwill and intangible assets and the final evaluation and assessment of income tax accounts;

therefore, the final fair value of the assets acquired and liabilities assumed, which will be completed within the measurement period of up to one year from the acquisition date, may vary from the Company’s preliminary estimates:

(in thousands)

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Other current assets

Intangible assets

Vendor relationships ( 10.4 -year weighted average useful life)

Non-compete ( 1-year useful life)

Accounts payable and other current liabilities

Deferred income tax liabilities

Taxes payable

(in thousands)

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Net cash paid for acquisition

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.

(in thousands)

Trade accounts receivable

Other current assets

Equipment and leasehold improvements, net

Intangible assets

Customer relationships ( 13-year useful life)

Trademarks ( 15-year useful life)

Non-compete ( 1-year useful life)

Accounts payable and other current liabilities

Deferred income tax liabilities

Other liabilities

(in thousands)

Supplementary information:

Cash paid to sellers

Cash acquired in acquisition

Net cash paid for acquisition

Intangible assets are comprised of approximately $ 11.7 million of vendor relationships with a weighted average amortization period of 10.4 years, representing the expected period of benefits.

Goodwill, which was allocated to the Distribution segment, is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce.

Goodwill recognized as a result of the acquisition is not deductible for income tax purposes.

The purchase consideration includes approximately $ 1.8 million fair value for potential earn-out consideration if certain targets are achieved, payable in cash.

The earn-out liability is included in non-current liabilities as of December 31, 2022, as any payments upon achievement of the certain targets wouldn’t be due within the next 12 months.

The Company incurred acquisition related costs of approximately $ 0.6 million during the year ended December 31, 2022 in conjunction with the Spinnakar acquisition, which is reflected in the accompanying consolidated statements of earnings.

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.

Goodwill and Other Intangible Assets

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Balance at January 1, 2021

Goodwill acquired

Translation adjustments

Balance December 31, 2021

Goodwill acquired

Translation adjustments

Balance December 31, 2021

Balance at December 31, 2022

Information related to the Company’s other intangibles, net is as follows:

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Customer relationships are amortized over thirteen years .

Vendor relationships are amortized between eleven and fifteen years .

Vendor relationships are amortized between eight 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 $ 1.2 million and $ 0.9 million during the years ended December 31, 2022 and 2021, respectively.

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Weighted-average discount rate

(1) During the year ended December 31, 2020, includes $ 0.5 million recognized through acquisitions.

Maturities of lease liabilities as of December 31, 2022 were as follows:

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Depreciation expense relating to equipment and leasehold improvements, net was $ 0.4 million and $ 0.5 million during the years ended December 31, 2022 and 2021, 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.

Amortization expense relating to capitalized software was $ 0.4 million and $ 0.1 million during the years ended December 31, 2022 and 2021.

Accounts receivable – long term, net consist of the following:

Total amount due from customer

Total amount due from customers

unamortized discount

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Total deferred tax liabilities

Net deferred tax (liabilities) asset

Net deferred tax liabilities

The provision for income taxes is as follows:

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State income taxes, net of federal income tax benefit

Adjustment for foreign rate change

Other permanent items

Acquisition related costs

Foreign income taxes over U.S.

statutory rate

Adjustment for foreign rate change

GILTI, net of foreign tax credits

1 unchanged sentence

Income tax expense

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

The Company’s New Jersey and Canadian tax returns are open for examination for the years 2017 through 2020.

The Company has analyzed filing positions in all the federal, state and foreign 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 returns, its Canadian tax return and its tax return in the United Kingdom as major tax jurisdictions.

As of December 31, 2022, the Company’s 2019 through 2021 Federal tax returns remain open for examination.

The Company’s various states and Canadian tax returns are open for examination for the years 2018 through 2021.

The Company’s tax return in the United Kingdom is open for examination for the years 2020 and 2021.

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The Company has approximately $ 8 .0 million of undistributed earnings in Canada and $ 1.5 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:

There was no activity related to the Company’s unrecognized tax benefits during the year ended December 31, 2022.

The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31, 2021:

Balance as of January 1

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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.

During the years ended December 31, 2022 and 2021, the Company incurred interest and penalties of zero , respectively, related to these uncertain tax benefits.

Credit Facility

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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.

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.

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.

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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.

At December 31, 2022 and 2021, Wayside UK had no borrowings outstanding under the Uncommitted Credit Facility.

On April 8, 2022, the Company entered into a $ 2.1 million term loan (the “Term Loan”) with First American Commercial Bancorp, Inc.

pursuant to a Master Loan and Security Agreement.

The proceeds from the Term Loan will be used to fund certain capital expenditures.

The borrowing under the Term Loan bears interest at a rate of 3.73 % per annum and is being repaid over forty-eight monthly installments of principal and interest through April 2026.

As of December 31, 2022, the Company had $ 1.8 million outstanding under the Term Loan.

There were no amounts outstanding under the Term Loan as of December 31, 2021.

As of December 31, 2022, future principal payments under the Term Loan are as follows:

Year ended December 31,

Stockholders’ Equity and Stock-Based Compensation

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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, 2022, 4,056 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company.

During the year ended December 31, 2021, the Company granted a total of 106,122 shares of Restricted Stock to officers, directors and employees.

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For the years ended December 31, 2022 and 2021, the Company recognized share-based compensation cost of approximately $ 1.9 million and $ 1.5 million, respectively, which is included in selling, general and administrative expenses.

The Company does not capitalize any share-based compensation cost.

Defined Contribution Plan

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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.

Other than employment agreements, 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.

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 member of our Board of Directors was formerly an executive.

This member of our Board of Directors employment with the customer ended during the second quarter of fiscal 2022 and prior to this member of Board of Directors employment ending, net sales to this customer totaled approximately $ 0.2 million, which was subsequently collected in full.

During the year ended December 31, 2021, net sales to this customer totaled $ 0.3 million and amounts due from this customer as of December 31, 2021 totaled zero .

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.

During the year ended December 31, 2022 and 2021, net sales to this customer totaled $ 1.8 million and $ 0.4 million, respectively, and amounts due from this customer as of December 31, 2022 and 2021 totaled $ 0.1 million and $ 0.2 million, respectively.

The Company also accrued referral fees totaling zero and $ 0.2 million to this customer during the year ended December 31, 2022 and 2021, respectively, and amounts owed to this customer for these referral fees as of December 31, 2022 and 2021 totaled zero and $ 0.1 million, respectively.

Industry, Segment and Geographic Financial Information

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General and administrative

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

Acquisition related costs

Amortization and depreciation expense

Acquisition related costs

Interest, net

Foreign currency transaction (loss) gain

Foreign currency transaction loss

Income before taxes

(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.

(1) Excludes general corporate expenses including acquisition related costs, amortization and depreciation expense, interest, and foreign currency transaction (loss) gain.

Selected Assets by Segment:

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Europe and United Kingdom

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.

For the year ended December 31, 2022, the Company had two customers that accounted for 21 %, and 16 %, respectively, of consolidated net sales and as of December 31, 2022, 16 % and 18 %, respectively, of total net accounts receivable.

For the year ended December 31, 2022, the Company had two vendors that accounted for 17 % and 9 %, respectively, of our consolidated purchases.

For the year ended December 31, 2021, the Company had two customers that 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, the Company had two vendors that accounted for 20 % and 10 %, respectively of our consolidated purchases.

Our top five customers accounted for 52 % and 51 % of consolidated net sales for the years ended December 31, 2022 and 2021, respectively.

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.

Quarterly Results of Operations (Unaudited)

The following table presents summarized quarterly results for 2021:

Basic net income per common share

Diluted net income per common share

The following table presents summarized quarterly results for 2020:

Basic net income per common share

Diluted net income per common share

Wayside Technology Group, Inc.

Climb Global Solutions, Inc.

and Subsidiaries

6 unchanged sentences

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

What changed 10-K

Item 9A. Controls and Procedures