What changed in this filing

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Item 1A. Risk Factors

2024-03-05 compared with 2023-03-16 · 39 added, 48 removed, 209 unchanged (29% of the section changed)

Investors should carefully consider the risk factors set forth below as well as the other information contained in this report.

Investors should carefully consider the risk factors set forth below as well as the other information contained in this Annual Report.

Any of the following risks could materially and adversely affect our business, financial condition or results of operations and could cause our results to differ from the “forward-looking statements” contained in this Annual Report.

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Risks Related to our Business and Industry

We serve customers and have locations throughout the world and are subject to terrorist attacks, acts of war, natural disasters, global pandemic and other similar risks, including without limitation, COVID-19, which could materially adversely affect our business, financial condition, and results of operations.

We serve customers and have locations throughout the world and are subject to terrorist attacks, acts of war, natural disasters, global pandemic and other similar risks, which could materially adversely affect our business, financial condition, and results of operations.

Terrorist attacks, acts of war, natural disasters, global pandemics or other disasters or public health concerns in regions of the world where we have operations could result in the disruption of our business.

Such acts, including Russia’s February 2022 invasion of Ukraine, have created, and continue to create, economic and political uncertainties and have contributed to global economic instability.

Such acts, including Russia’s military invasion of Ukraine and the Israel-Hamas war, have created, and continue to create, economic and political uncertainties and have contributed to global economic instability.

Specifically, these acts, pandemics, disasters and health concerns can result in increased travel restrictions and extended shutdowns of certain businesses in the region, as well as social, economic, or labor instability.

Disruptions in affected regions over a prolonged period could have a material adverse impact on our business and our financial results.

The global COVID-19 pandemic continues to impact the Company's business, through significant shortages, disruptions, constraints, extended lead times, and unpredictability across the global supply chain;

which has resulted in rapidly changing market conditions, including frequent, and unpredictable, increases in the price of products and services the Company sells.

Further disruptions to the supply chain due to the COVID-19 pandemic and its variants, or other global or domestic events could materially adversely impact the Company’s business, and the Company may not be able to mitigate or prevent disruptions that may arise from shortages, or the other related impacts discussed above, particularly if the Company is unable to pass price increases on to customers, or if the Company experiences significant decreases in price, or other pricing pressures caused by disruption of the global markets in which it operates.

Even after the COVID-19 pandemic has subsided and the U.S.

Administration announced that the Covid public health emergency is set to expire on May 11, 2023, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.

Refer to "COVID-19 Pandemic Update"

in Management's Discussion & Analysis of Financial Condition and Results of Operations for a further discussion about the Company's description about the impacts of COVID-19.

Changes in the information technology industry and/or economic environment may reduce demand for the products and services we sell.

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Our inability to obtain a sufficient quantity of products, or an allocation of products from a manufacturer in a way that favors one of our competitors, or competing distribution channels, relative to us, could cause us to be unable to fill clients’ orders in a timely manner, or at all, which could have a material adverse effect on our business, results of operations and financial condition.

We also rely on our vendor partners

to provide funds for us to market their products, including through our on-line marketing efforts, and to provide purchasing incentives to us.

We also rely on our vendor partners to provide funds for us to market their products, including through our on-line marketing efforts, and to provide purchasing incentives to us.

If any of the vendor partners that have historically provided these benefits to us decides to reduce such benefits, our expenses would increase, adversely affecting our results of operations.

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Generally, pricing is very aggressive in the industry, and we expect pricing pressures to continue.

There can be no assurance that we will be able to negotiate prices as favorable as those negotiated by our competitors or that we will be able to offset the effects of price reductions with an increase in the number of clients, higher net sales, cost reductions, or greater sales of services, which service sales typically are delivered at higher gross margins, or otherwise.

services, which service sales typically are delivered at higher gross margins, or otherwise.

Price reductions by our competitors that we either cannot or choose not to match, could result in an erosion of our market share and/or reduced sales or, to the extent we match, such reductions, could result in reduced operating margins, any of which could have a material adverse effect on our business, results of operations and financial condition.

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If these contracts or our relationships with these vendors terminate for any reason, or if any of our other significant vendor relationships terminate for any reason, and we are not able to sell or procure a sufficient supply of those products from alternative sources, or at all, our financial position and results of operations would be adversely affected.

Our vendors are subject to many if not all of the same (or similar) risks and uncertainties to which we are subject, as well as other risks and uncertainties, and we compete with others for their business.

Our vendors are subject to many if not all of the same (or similar) risks and uncertainties to which we are subject,

as well as other risks and uncertainties, and we compete with others for their business.

Accordingly, we are at a continual risk of loss of their business on account of a number of factors and forces, many of which are largely beyond our control.

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We may explore additional growth through acquisitions.

During the current year, we completed one acquisition to expand our sales presence in the United Kingdom distribution operations and bring key vendor partner relationships to our portfolio.

During the year ended December 31, 2023, we completed one acquisition to expand our sales presence in Ireland and the United Kingdom distribution operations and bring key vendor partner relationships to our portfolio.

As part of our strategic growth plan, we may pursue the acquisition of companies that either complement or expand our existing business.

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sales represent an increasing portion of its revenues, and consequently, the company is exposed to risks associated with operating internationally.

In 2022 and 2021, approximately 22% of the Company’s net sales came from its operations outside the United States.

In 2023 and 2022, approximately 26% and 22% of the Company’s net sales came from its operations outside the United States, respectively.

As a result of the Company’s international sales and locations, its operations are subject to a variety of risks that are specific to international operations, including the following:

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● volatility associated with sovereign debt of certain international economies;

● the uncertainty surrounding the implementation and effects of Brexit;

● potential military conflicts and political risks;

● currency fluctuations, which the company attempts to minimize through traditional hedging instruments.

The terms of our debt arrangement impose restrictions on our ability to operate which in turn could negatively affect our ability to respond to business and market conditions and therefore could have an adverse effect on our business and operating results.

As of December 31, 2023, we had approximately $1.3 million outstanding under our term loan with First American Commercial Bancorp and there were no amounts outstanding under our revolving credit agreement with JPMorgan Chase Bank, N.A.

The terms of one or more of the agreements under which this indebtedness was incurred may limit or restrict, among other things, our (or our subsidiaries', as applicable) ability to incur additional indebtedness or liens, or enter into certain transactions.

We are also required to maintain specified financial ratios and satisfy certain financial condition tests under certain of our debt facilities.

Our inability to meet these ratios and tests could result in the acceleration of the repayment

of the related debt, termination of the applicable facility, an increase in our effective cost of funds or the cross-default of other debt facilities and securitization arrangements.

As a result, our ability to operate may be restricted and our ability to respond to business and market conditions may be limited, which could have an adverse effect on our business and operating results.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.

Interest rates have increased and may continue to increase in the future.

As a result, interest rates on the obligations under certain of our credit facilities, or other variable rate debt incurrences or offerings could increase.

If interest rates increase and we borrow amounts under certain of our credit facilities, debt service obligations and our interest expense will increase.

Our net income and cash flows, including cash available for servicing indebtedness, will correspondingly decrease.

An increase in interest rates may increase our future borrowing costs and restrict our access to capital.

Additionally, current market conditions, the global economy, and overall credit conditions could limit our availability of capital, which could cause increases in interest margin spreads over underlying indices, effectively increasing the cost of our borrowing.

Legal and Regulatory Risks

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Attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats.

As our employees continue to work on a hybrid environment, which includes splitting time between working from the office and working from home, we are highly reliant on the availability and functionality of our information systems to enable for our operations.

Our employees work in a hybrid environment, which includes splitting time between working from the office and working from home, we are highly reliant on the availability and functionality of our information systems to enable our operations.

Working from home may increase risk of data loss, including privacy-related events.

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Our operations are subject to numerous complex federal, state, provincial, local and foreign laws and regulations in a number of areas, including labor and employment, advertising, e-commerce, tax, trade, import and export requirements, economic and trade sanctions, anti-corruption, data privacy requirements (including those under the European Union General Data Protection Regulation and the California Consumer Privacy Act), anti-competition, environmental and health and safety.

The evaluation of, and compliance with these laws, regulations and similar requirements may be onerous and expensive, and these laws and regulations may have other adverse impacts on our business, results of operations or cash flows.

The evaluation of, and compliance with these laws, regulations and similar requirements may be onerous and expensive, and these laws and regulations may have other adverse impacts on our

business, results of operations or cash flows.

Furthermore, these laws and regulations are evolving and may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business, and the risk of noncompliance.

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Certain of the Company's products and services include intellectual property owned primarily by the Company's third-party vendor partners.

Substantial litigation and threats of litigation regarding intellectual property rights exist in the

software and some service industries.

Substantial litigation and threats of litigation regarding intellectual property rights exist in the software and some service industries.

From time to time, third parties (including certain companies in the business of acquiring patents not for the purpose of developing technology but with the intention of aggressively seeking licensing revenue from purported infringers) may assert patent, copyright and/or other intellectual property rights to technologies that are important to the Company's business.

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Additionally, if an infringement claim is successful the Company may be required to pay damages or seek royalty or license arrangements, which may not be available on commercially reasonable terms.

The payment of any such damages or royalties may significantly increase the Company's operating expenses and harm the Company's operating results and financial condition.

The payment of any such damages or royalties may significantly increase the Company's operating expenses and impact the Company's operating results and financial condition.

Also, royalty or license arrangements may not be available at all.

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Additionally, actions by activist shareholders may be exploited by our competitors, cause concern to our current or potential customers, make it more difficult to attract and retain qualified personnel and may create adverse uncertainty for our employees.

The interest rate of our current credit facility is priced using LIBOR and is subject to risks associated with the transition from LIBOR to an alternative reference rate that could adversely affect our business, operating results, and financial condition.

LIBOR is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally.

We use LIBOR as a reference rate in our current credit facility.

In July 2017, the U.

K.’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR and while the transition period for many LIBOR tenors has been extended to June 2023, the U.S.

Federal Reserve advised banks to stop new LIBOR issuances.

The Alternative Reference Rates Committee, a steering committee comprised of U.S.

financial market participants, has identified the secured overnight financing rate, or SOFR, as the recommended alternative rate for all LIBOR.

At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates as the transition away from the LIBOR benchmarks is anticipated in coming years.

Accordingly, the outcome of these reforms is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist.

The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our borrowings under the current credit facility.

Further, the consequences of these developments, or any alternative reference rate that is adopted, cannot be entirely predicted but could include an increase in the cost of our variable rate debt, which could adversely impact our interest expense, results of operations and cash flows.

Changes in accounting rules, or the misapplication of current accounting rules, may adversely affect our future financial results.

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We are required to determine if we are the principal or agent in all transactions with our customers.

The voluminous number of products and services we sell, and the manner in which they are bundled, are technologically complex.

The voluminous number of products and services we sell, and the manner in which they are bundled, are technologically

Mischaracterization of these products and services could result in misapplication of revenue recognition polices.

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Factors that are likely to cause our revenue and operating results to fluctuate include the risk factors discussed throughout this section.

The Company’s goodwill and identifiable intangible assets could become impaired, which could reduce the value of its assets and reduce its net income in the year in which the write-off occurs.

Our goodwill and identifiable intangible assets could become impaired, which could reduce the value of our assets and reduce net income in the year in which the write-off occurs.

Goodwill represents the excess of the cost of an acquisition over the fair value of the assets acquired.

The Company also ascribes value to certain identifiable intangible assets, which consist primarily of customer relationships and trade names, among others, as a result of acquisitions.

The Company also ascribes value to certain identifiable intangible assets, which consist primarily of vendor relationships, customer relationships and trade names, among others, as a result of acquisitions.

The Company may incur impairment charges on goodwill or identifiable intangible assets if it determines that the fair values of the goodwill or identifiable intangible assets are less than their current carrying values.

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A decline in general economic conditions, a substantial increase in market interest rates, and increase in income tax rates, or the company’s inability to meet long-term working capital or operating income projections could impact future valuations of the Company’s reporting units, and the company could be required to record an impairment charge in the future, which could impact the company’s consolidated balance sheets, as well as the Company’s consolidated statements of operations.

The inability to obtain financing on favorable terms will adversely impact our business, financial position and results of operations.

The inability to obtain financing on favorable terms may adversely impact our business, financial position and results of operations.

Our business requires working capital to operate and to finance accounts receivable and product inventory that are not financed by trade creditors.

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Risks related to our Common Stock .

The exercise of options or any other issuance of shares by us may dilute your ownership of our Common Stock.

The issuance of shares by us may dilute your ownership of our Common Stock.

Trading volume in our Common Stock varies significantly based on a number of factors, which may be exacerbated by our repurchases of our Common Stock.

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Without a larger float, our Common Stock will be less liquid than the stock of companies with broader public ownership, and, as a result, the trading prices for our Common Stock may be more volatile.

Among other things, trading of a relatively small volume of our Common Stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger.

Among other things, trading of a relatively small

volume of our Common Stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger.

Our Common Stock is listed on The NASDAQ Global Market tier of the Nasdaq Stock Market, and we therefore are subject to continued listing requirements, including requirements with respect to the market value and number of publicly-held shares, number of stockholders, minimum bid price, number of market makers and either (i) stockholders’ equity or (ii) total market value of stock, total assets and total revenues.

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Weak economic conditions generally, sustained uncertainty about global economic and political conditions, government spending cuts and the impact of new government policies, or a tightening of credit markets, could cause our customers and potential customers to postpone or reduce spending on technology products or services or put downward pressure on prices, which could have an adverse effect on our business, results of operations or cash flows.

For example, there continues to be substantial uncertainty regarding the economic impact of the UK's exit from the European Union ("EU"), referred to as "Brexit".

The UK formally withdrew from EU membership on January 31, 2020 and commenced a transition period during which the trading relationship between the UK and the EU will remain the same and the UK and EU will begin negotiations to determine their future relationship.

Although the full effects of Brexit are uncertain and will be dependent on the outcome of such negotiations, potential adverse consequences of Brexit include global market uncertainty, volatility in currency exchange rates, greater restrictions on imports and exports between the UK and other countries, and increased regulatory complexities, each of which could have a negative impact on our business, financial condition or results of operations.

These effects may be amplified if the UK and the EU fail to agree on a future trade relationship, which could result in significant market and economic disruption.

We have established a presence in the Netherlands to help address future developments, as needed, for Brexit, which could add complexity to our European operations as well as result in higher costs associated with serving our customers following the transition period.

For example, there continues to be substantial uncertainty regarding the economic impact of the UK's exit from the European Union ("EU"), referred to as "Brexit".

The potentially divergent laws and regulations as a result of Brexit may continue to lead to economic and legal uncertainty, causing increased economic volatility or disrupting the markets and clients we serve.

General economic weakness may reduce our revenues and profits.

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Changes in income tax and other regulatory legislation.

We operate in compliance with applicable laws and regulations and make plans for our structure and operations based upon existing laws and anticipated future changes in the law.

We operate in compliance with applicable laws and regulations and make plans for our structure and operations based upon existing laws and anticipated future changes in the

When new legislation is enacted with minimal advance notice, or when new interpretations or applications of existing laws are made, we may need to implement changes in our policies or structure.

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Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our business, financial position and results of operations for the period in which the ruling occurred or future periods.

Unresolved Staff Comments

Not applicable.

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 1A. Risk Factors