What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-05 compared with 2023-03-16 · 81 added, 77 removed, 183 unchanged (46% of the section changed)

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Our Company is a value added IT distribution and solutions company, primarily selling software and other third-party IT products and services through two reportable operating segments.

Through our “Distribution” segment we sell products and services to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide,

who in turn sell these products to end users.

Through our “Distribution” segment we sell products and services to corporate resellers, VAR, consultants and systems integrators worldwide, who in turn sell these products to end users.

Through our “Solutions” segment we act as a cloud solutions provider and value-added reseller, selling computer software and hardware developed by others and provide technical services directly to end user customers worldwide.

We offer 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.

technically sophisticated domains as well as computer hardware.

We market these products through creative marketing communications, including our web sites, local and on-line seminars, webinars, social media, direct e-mail, and printed materials.

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

Name Change of Wayside Technology Group, Inc.

to Climb Global Solutions, Inc.

On October 31, 2022, the Company, formerly known as “Wayside Technology Group, Inc.”, amended its organizational documents to change its name to “Climb Global Solutions, Inc.”

Factors Influencing Our Financial Results

We derive most 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 competitive, and demand characteristics of the products which we are authorized to distribute.

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.

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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Total dividends paid and the dollar value of shares repurchased were $3.0 million and $1.7 million for the year ended December 31, 2023, respectively, and $3.0 million and $0.7 million for the year ended December 31, 2022, respectively.

The payment of future dividends and any share repurchases are 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.

The payment of future dividends and any share repurchases are 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.

Stock Volatility.

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Numerous conditions which impact these sectors or the stock market in general or the Company in particular, whether or not such events relate to or reflect upon the Company’s operating performance, could adversely affect the market price of the Company’s Common Stock.

Furthermore, fluctuations in the Company’s operating results, announcements regarding litigation, the loss of a significant vendor partner or customer, increased competition, reduced vendor incentives and trade credit, higher operating expenses, and other developments, could have a significant impact on the market price of our Common Stock.

Furthermore, fluctuations in the Company’s operating results, announcements regarding litigation, the loss of a significant vendor partner or customer, increased competition, reduced

vendor incentives and trade credit, higher operating expenses, and other developments, could have a significant impact on the market price of our Common Stock.

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.

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Selling, general and administrative (“SG&A”) expenses increased 30%, or $10.2 million, to $44.3 million for the year ended December 31, 2023, compared to $34.1 million for the same period in 2022.

Acquisition related costs for the year ended December 31, 2022 were $0.6 million compared to no expense for the same period in 2021.

Acquisition related costs for the years ended December 31, 2023 and 2022 were $0.6 million, respectively.

Amortization and depreciation expense increased $0.7 million to $2.8 million for the year ended December 31, 2023 compared to $2.1 million for the same period in the prior year.

Net income increased 36%, or $3.3 million, to $12.5 million for the year ended December 31, 2022 compared to $9.2 million for the same period in 2021.

Income per diluted share increased 34%, or $0.72, to $2.81 for the year ended December 31, 2022 compared to $2.09 for the same period in 2021.

Net income decreased 2%, or $0.2 million, to $12.3 million for the year ended December 31, 2023 compared to $12.5 million for the same period in 2022.

Income per diluted share decreased 3%, or $0.09, to $2.72 for the year ended December 31, 2023 compared to $2.81 for the same period in 2022.

Critical Accounting Policies and Estimates

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The Company believes the following critical accounting policies and estimates 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.

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.

These estimates require 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.

We also use judgment in the allocation of sales proceeds among performance obligations, utilizing observable data such as stand-alone selling prices, or market pricing for similar products and services.

Allowances for Accounts Receivable

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.

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.

Allowances for Expected Credit Losses

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

Management determines the estimate of the allowance for expected credit losses by considering a number of factors, including historical experience, aging of the accounts receivable, as well as current market conditions and future forecasts of our customers’ ability to make payments for goods and services.

At the time of sale, we 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.

Accounts Receivable – Long Term

The Company’s accounts receivable long-term are discounted to their present value at prevailing market rates at the time of sale.

In doing so, the Company considers competitive market rates and other relevant factors.

Inventory Allowances

The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

If actual market conditions are less favorable than those projected by management, additional inventory write-offs may be required.

Business Combinations

The Company accounts for business combinations using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.

The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions.

The Company may utilize third-party valuation specialists to assist the Company in the allocation.

Initial purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition.

Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred.

We apply the provisions of ASC 805, Business Combinations (“ASC 805”), in accounting for our acquisitions.

ASC 805 requires that we evaluate whether a transaction pertains to an acquisition of assets, or to an acquisition of a business.

A business is defined as an integrated set of assets and activities that is capable of being conducted and managed for the purpose of providing a return to investors.

Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets and liabilities assumed on a relative fair value basis;

whereas the acquisition of a business requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at the acquisition date fair values.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.

Our valuation of acquired assets and assumed liabilities requires estimates, especially with respect to intangible assets that was derived using valuation techniques and models such as the income approach.

Such models require use of estimates including discount rates, and future expected revenue.

The approach to estimating an initial contingent consideration associated with the purchase price also uses similar unobservable factors such as projected cash flows over the term of the contingent earn-out period, discounted for the period over which the initial contingent consideration is measured and expected volatility.

Based upon these assumptions, the initial contingent consideration is then valued using a Monte Carlo simulation.

We have used third-party qualified specialists to assist management in determining the fair value of assets acquired and liabilities assumed.

This includes assistance with the determination of economic useful lives and valuation of identifiable intangibles.

We estimate the fair value based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from our estimates.

Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.

As a result, during the measurement period, which may be up to one year from the business acquisition date, we record certain adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

All acquisition-related costs are accounted for as expenses in the period in which they are incurred.

Contingent consideration is remeasured each reporting period using Level 3 inputs, and the change in fair value, including accretion for the passage of time, is recognized in acquisition related costs in the consolidated statement of earnings.

We test goodwill for impairment on an annual basis and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

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Goodwill is not amortized but is subject to periodic testing for impairment at the reporting unit level.

In a qualitative assessment, we assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill.

If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary.

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In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2016-13, “Financial Instruments - Credit Losses (Topic 326)” ("ASU 2016-13").

2016-13, “Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-13”).

ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.

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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.

Effective January 1, 2023, the Company adopted the new credit loss standard and it did not have an impact on the Company’s financial statements.

In July 2023, the FASB issued Accounting Standards Update 2023-03, “ Presentation of Financial Statements (Topic 205), Income Statement — Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), Compensation — Stock Compensation (Topic 718) .” This ASU amends various paragraphs in the accounting codification pursuant to the issuance of Commission Staff Accounting Bulletin (“SAB”) number 120.

The ASU provides clarifying guidance related to employee and non-employee share-based payment accounting, including guidance related to spring-loaded awards.

ASU 2023-03 was effective upon issuance.

The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued Accounting Standards Update 2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The Company will adopt the update in the first quarter of 2024 but does not expect there to be a material effect on our consolidated financial statements.

Results of Operations

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Acquisition related costs

Amortization and depreciation expense

Depreciation and amortization expense

Income from operations

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We believe that the most important of these measures and ratios include net sales, adjusted gross billings, gross profit, net income, net income excluding separation expenses, net of taxes, adjusted EBITDA, gross profit as a percentage of adjusted gross billings and adjusted EBITDA as a percentage of gross profit.

We use a variety of operating and other information to evaluate the operating performance of our business, develop financial

forecasts, make strategic decisions, and prepare and approve annual budgets.

We use a variety of operating and other information to evaluate the operating performance of our business, develop financial forecasts, make strategic decisions, and prepare and approve annual budgets.

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.

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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.

Net income reconciled to adjusted EBITDA:

Net income reconciled to adjusted EBITDA (Non-GAAP):

Provision for income taxes

Amortization and depreciation

Depreciation and amortization

Interest expense

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

During the year ended December 31, 2022, gross profit increased 18%, or $8.4 million, to $54.1 million compared to $45.7 million for the same period in 2021 while effective margin increased 520 basis points to 39.1% compared to 33.9% for the same period in 2021.

During the year ended December 31, 2023, gross profit increased 19%, or $10.1 million, to $64.2 million compared to $54.1 million for the same period in 2022 while effective margin decreased 80 basis points to 38.3% compared to 39.1% for the same period in 2022.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

On August 18, 2022, we completed the acquisition of 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.

On October 6, 2023, we completed the acquisition of Data Solutions for an aggregate purchase of approximately €15.0 million (equivalent to $15.9 million USD), subject to certain working capital and other adjustments, paid at closing plus a potential post-closing earn-out.

The operating results of Data Solutions are included in our operating results from the date of acquisition.

The Company recorded net revenue for Data Solutions of approximately $14.3 million and net income of approximately $0.8 million during the year ended December 31, 2023.

On August 18, 2022, we completed the acquisition 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 operating results of Spinnakar are included in our operating results 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.

Operating results of Data Solutions and Spinnakar are included in our Distribution segment.

Net sales for the year ended December 31, 2023 increased 16%, or $47.7 million, to $352.0 million compared to $304.3 million for the same period in 2022.

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Adjusted gross billings for the Distribution segment for the year ended December 31, 2023 increased 18%, or $178.1 million, to $1,176.9 million compared to $998.8 million for the same period in 2022.

Net sales and adjusted gross billings increased due to organic growth at our existing vendor lines as well as the impact of the Spinnakar acquisition in the current year.

Adjusted gross billings increased at a greater rate than net sales due to differences in the product mix between the two periods and an unfavorable impact of foreign exchange rates.

Net sales in our Solutions segment for the year ended December 31, 2022 decreased 6%, or $1.4 million, to $21.8 million compared to $23.2 million for the prior year.

Adjusted gross billings for the Solutions segment for the year ended

December 31, 2022 increased 5%, or $3.2 million, to $65.9 million compared to $62.7 million for the same period in 2021.

Adjusted gross billings increased while net sales decreased due to differences in the product mix between the two periods.

Net sales and adjusted gross billings increased due to organic growth at our existing vendor lines as well as the impact of the Data Solutions acquisition in the current year.

Adjusted gross billings increased at a greater rate than net sales due to differences in the product mix between the two periods.

Net sales in our Solutions segment for the year ended December 31, 2023 increased 22%, or $4.9 million, to $26.8 million compared to $21.8 million for the prior year.

Adjusted gross billings for the Solutions segment for the year ended December 31, 2023 increased 27%, or $17.6 million, to $83.5 million compared to $65.9 million for the same period in 2022.

Adjusted gross billings increased at a greater rate than net sales due to differences in the product mix between the two periods.

During the year ended December 31, 2023, we relied on two key customers for a total of 35% of our total net sales.

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Distribution segment gross profit for the year ended December 31, 2023 increased 19%, or $8.4 million, to $53.4 million compared to $45.0 million for the same period in 2022.

The increase in Distribution segment gross profit resulted primarily from the organic growth at our existing vendor lines, impact of Spinnakar since the date of acquisition, lower early pay discounts and other rebates and discounts offered to our customers as a percentage of adjusted gross billings and increased rebates and discounts from our vendor partners.

Solutions segment gross profit for the year ended December 31, 2022, decreased 1%, or $0.1 million, to $9.1 million compared to $9.2 million for the same period in 2021.

The increase in Distribution segment gross profit resulted primarily from the organic growth at our existing vendor lines, impact of Data Solutions since the date of acquisition, and increased rebates and discounts from our vendor partners partially offset by higher 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 year ended December 31, 2023, increased 19%, or $1.8 million, to $10.9 million compared to $9.1 million for the same period in 2022.

This increase was the result of the aforementioned increase in adjusted gross billings.

Customer rebates and discounts for the year ended December 31, 2023 were $12.8 million compared to $8.8 million for the same period in the prior year.

As a percentage of adjusted gross billings, customer rebates and discounts decreased during the year ended December 31, 2022, compared to 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 year ended December 31, 2023, were $7.9 million compared to $6.1 million for the same period in the prior year.

As a percentage of adjusted gross billings, vendor rebates and discounts also increased during the year ended December 31, 2022 compared to 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 or meeting certain early payment programs offered by our vendors.

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SG&A expenses for the year ended December 31, 2023, increased 30%, or $10.2 million, to $44.3 million, compared to $34.1 million for the same period in the prior year.

The increase was primarily driven by higher payroll and related costs consistent with higher gross profit, including the impact of the Spinnakar acquisition.

The increase was primarily driven by higher payroll and related costs consistent with higher gross profit, as well as the impact of the Data Solutions acquisition.

SG&A expenses were 3.7% of adjusted gross billings, a non-GAAP financial measure, for the year ended December 31, 2023, compared to 3.5% for the same period in the prior year.

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Acquisition Related Costs

Acquisition related costs for the year ended December 31, 2022 were $0.6 million compared to no expense for the same period in the prior year.

These expenses relate to costs incurred in conjunction with the acquisition of Spinnakar.

Acquisition related costs for the years ended December 31, 2023 and 2022 were $0.6 million, respectively.

These expenses in the current year relate to costs incurred in conjunction with the acquisition of Data Solutions, while these expenses in the same period the prior year related to the acquisition of Spinnakar.

Foreign Currency Transaction Loss

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For the year ended December 31, 2023, the Company recorded a provision for income taxes of $4.5 million, or 26.6% of income before taxes, compared to $4.0 million, or 24.4% of income before taxes for the same period in the prior year.

The provision for income taxes in the prior 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.

The change in the effective tax rate for the year ended December 31, 2023 compared to the same period in the prior year is a result of limitations on the deductibility of certain executive compensation amounts during the current period, as well as the Company’s effective tax rate for both periods were impacted by limitations on the deductibility of certain facilitative acquisition related costs.

Liquidity and Capital Resources

Our cash and cash equivalents decreased by $9.1 million to $20.2 million at December 31, 2022 compared to $29.3 million at December 31, 2021.

Cash and cash equivalents decreasing was primarily the result of $4.5 million of cash and cash equivalents provided by operating activities, offset by $8.5 million payment for the Spinnakar acquisition, $2.5 million of cash used in other investing activities, $1.8 million of cash used in financing activities and $0.7 million negative impact of foreign exchange rates on cash and cash equivalents.

Our cash and cash equivalents increased by $16.1 million to $36.3 million at December 31, 2023 compared to $20.2 million at December 31, 2022.

The increase in cash and cash equivalents was primarily the result of $42.1 million of cash and cash equivalents provided by operating activities, offset by $12.7 million payment for the Data Solutions acquisition, $5.0 million of cash used in other investing activities, $8.9 million of cash used in financing activities and $0.5 million positive impact of foreign exchange rates on cash and cash equivalents.

Net cash provided by operating activities for the year ended December 31, 2023 was $42.1 million, comprised of net income adjusted for non-cash items of $19.2 million offset by changes in operating assets and liabilities of $22.9 million.

Net cash and cash equivalents used in investing activities during the year ended December 31, 2022 was $11.0 million, comprised of $2.5 million of purchases of fixed assets and $8.5 million payment for the Spinnakar acquisition, net of cash acquired.

The Company financed the acquisition from existing cash on the balance sheet.

Net cash and cash equivalents used in financing activities during the year ended December 31, 2022 was $1.8 million, comprised of borrowings under term loan, net of $1.8 million, offset by dividend payments on our Common Stock of $3.0 million and purchases of treasury stock of $0.6 million.

Net cash and cash equivalents used in investing activities during the year ended December 31, 2023 was $17.7 million, comprised of $5.0 million of purchases of fixed assets supporting our ongoing ERP project and $12.7 million payment for the Data Solutions acquisition, net of cash acquired.

On October 6, 2023, we completed the acquisition of Data Solutions for an aggregate purchase price of approximately €15.0 million (equivalent to $15.9 million USD), subject to certain working capital and other adjustments, paid at closing plus a potential post-closing earn-out.

The operating results of Data Solutions are included in our operating results from the date of acquisition.

Net cash and cash equivalents used in financing activities during the year ended December 31, 2023 was $8.9 million, comprised of net repayments of borrowings under credit facilities of $3.1 million, dividend payments on our Common Stock of $3.0 million, purchases of treasury stock of $1.7 million, payments of deferred financing costs of $0.6 million and repayments of borrowing under term loan of $0.5 million.

On December 3, 2014, the Board of Directors of the Company approved an increase of 500,000 shares of Common Stock to the number of shares of Common Stock available for repurchase under its repurchase plans.

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We intend to hold the repurchased shares in treasury for general corporate purposes, including issuances under various stock plans.

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

(“Citibank”) pursuant to a Second Amended and Restated Revolving Credit Loan Agreement (the “Loan Agreement”), Second Amended and Restated Revolving Credit Loan Note (the “Note”), Second Amended and Restated Security Agreement and Second Amended and Restated Pledge and Security Agreement.

On August 31, 2020, the Company entered into an amendment to the Credit Facility (the “Amended Credit Facility”) pursuant to a First

Amendment to Second Amended and Restated Revolving Credit Loan Agreement and Other Loan Documents (the “Amended Loan Agreement”) and First Allonge to Second Amended and Restated Revolving Credit Loan Note (the “Amended Note”).

The Amended Credit Facility, which will continue to be used for working capital and general corporate purposes, matures on June 30, 2023, at which time the Company must pay all outstanding principal of all outstanding loans plus all accrued and unpaid interest, and any, fees, costs and expenses.

The interest rate for any borrowings under the Amended Credit Facility is subject to change from time to time based on the changes in the LIBOR Rate, as defined in the Amended Loan Agreement (the “Index”).

As of December 31, 2022 and 2021, the Company had no borrowings 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 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 December 31, 2022 and 2021, no borrowings were outstanding under the Uncommitted Credit Facility.

On May 18, 2023, the Company entered into a revolving credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A.

(“JPM”), providing for a revolving credit facility of up to $50.0 million subject to a borrowing base, including the issuance of letters of credit and swingline loans not to exceed $2.5 million and $5.0 million, respectively, at any time outstanding.

In addition, subject to certain conditions enumerated in the Credit Agreement, the Company has the right to increase the revolving credit facility by a total amount not to exceed $20.0 million.

The proceeds of the revolving loans, letters of credit and swingline loans under the Credit Agreement may be used for working capital needs, general corporate purposes and for acquisitions permitted by the terms of the Credit Agreement.

All outstanding loans issued pursuant to the Credit Agreement become due and payable, on May 18, 2028.

There were no amounts outstanding under the Credit Agreement as of December 31, 2023.

In connection with entering into the Credit Agreement, the Company voluntarily terminated that certain existing revolving credit agreement, dated November 15, 2017, by and among the Company, certain subsidiaries of the Company and Citibank, N.A.

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

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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.

The Company had $1.3 million and $1.8 million outstanding under the Term Loan as of December 31, 2023 and 2022, respectively.

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

We believe that the funds held in cash and cash equivalents and our unused borrowings under our Credit Facility will be sufficient to fund our working capital and cash requirements for the next 12 months.

We believe that the funds held in cash and cash equivalents and our unused borrowings under our Credit Agreement will be sufficient to fund our working capital and cash requirements for at least the next 12 months.

We continuously evaluate our liquidity and capital resources, including access to external capital, to ensure we can finance our future capital requirements.

Foreign Exchange

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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 7. Management’s Discussion and Analysis