What changed in this filing

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Item 1A. Risk Factors

2022-03-14 compared with 2021-03-16 · 43 added, 31 removed, 211 unchanged (26% of the section changed)

We cannot assure investors that our assumptions and expectations will prove to have been correct.

Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements.

Such factors that could cause or contribute to such differences include those factors discussed below.

We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

If any of the following risks actually occur, our business, financial condition, or results of operations would likely suffer.

You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Annual Report on Form 10-K and our other public filings with the SEC.

The risks described below are not the only risks facing our Company.

The occurrence of any of the following risks, or of additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could cause our business, prospects, operating results, and financial condition to suffer materially.

The risks below also include forward-looking statements, and important factors could cause our actual results to differ materially from those indicated or implied by these forward-looking statements.

See “Cautionary Note Concerning Forward-Looking Statements.”

Risks Related to our Business, Operations and Industry

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● changes in overall demand and timing of product shipments related to economic markets and to government spending;

● supply constraints;

● changes in vendor distribution of products;

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● adverse weather conditions that affect response, distribution, or shipping.

● supply constraints.

Our results also may vary based on our ability to manage personnel levels in response to fluctuations in revenue.

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We may not be able to continue to compete effectively against our current or future competitors.

If we encounter new competition or fail to compete effectively against our competitors, our business may be harmed.

If we encounter new competition or fail to compete effectively against our competitors, our business market share, results of operations or cash flows may be adversely impacted.

We face and will continue to face significant price competition, which could result in a reduction of our profit margins.

Generally, pricing is very aggressive in our industry, and we expect pricing pressures to escalate should economic conditions deteriorate.

Generally, pricing is very aggressive in our industry, and we expect pricing pressures to escalate should economic conditions deteriorate or inflationary pressures increase in excess of the amounts our customers are willing to pay.

An increase in price competition could result in a reduction of our profit margins.

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The spread of COVID-19 and the imposition of related public health measures and restrictions have, and may in the future, further materially adversely impact our business, financial condition, results of operations and cash flows.

In December 2019, the 2019 novel coronavirus surfaced in Wuhan, China.

The World Health Organization declared a global emergency on January 30, 2020, with respect to the outbreak and several countries, including the United States, Japan and Australia have initiated travel restrictions to and from China.

The impacts of the outbreak are unknown and rapidly evolving.

The COVID-19 pandemic has caused material disruptions to our business and operations and could cause material disruptions to our business and operations in the future as a result of, among other things, quarantines, worker illness, worker absenteeism as a result of illness or other factors, social distancing measures and other travel, health-related, business or other restrictions.

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The extent of the impact will depend on future developments, including actions taken to contain COVID-19.

The interruption of the flow of products from suppliers could disrupt our supply chain.

Our business depends on the timely supply of products in order to meet the demands of our customers.

Manufacturing interruptions or delays, including as a result of the financial instability or bankruptcy of manufacturers, significant labor disputes such as strikes, natural disasters, political or social unrest, pandemics (such as the COVID-19 pandemic) or other public health crises, or other adverse occurrences affecting any of our suppliers’ facilities, could disrupt our supply chain.

We could experience product constraints due to the failure of suppliers to accurately forecast customer demand, or to manufacture sufficient quantities of product to meet customer demand (including as a result of shortages of product components), among other reasons.

Additionally, the relocation of key distributors utilized in our purchasing model could increase our need for, and the cost of, working capital and have an adverse effect on our business, results of operations or cash flows

Our supply chain is also exposed to risks related to international operations.

While we purchase our products primarily in the markets we serve (for example, products for US customers are sourced in the US), our vendor partners manufacture or purchase a significant portion of the products we sell outside of the US, primarily in Asia.

Political, social or economic instability in Asia, or in other regions in which our vendor partners purchase or manufacture the products we sell, could cause disruptions in trade, including exports to the US.

Other events related to international activities that could cause disruptions to our supply chain include:

● the imposition of additional trade law provisions or regulations, the adoption or expansion of trade restrictions, including new or expanded economic sanctions in response to the ongoing conflict between Russia and Ukraine;

● the imposition of additional duties, tariffs and other charges on imports and exports, including any resulting retaliatory tariffs or charges and any reductions in the production of products subject to such tariffs and charges;

● foreign currency fluctuations;

● restrictions on the transfer of funds.

We cannot predict whether the countries in which the products we sell, or any components of those products, are purchased or manufactured will be subject to new or additional trade restrictions or sanctions imposed by the United States or foreign governments, including the likelihood, type or effect of any such restrictions.

Trade restrictions, including new or increased tariffs or quotas, embargoes, sanctions, safeguards and customs restrictions against the products we sell, could increase the cost or reduce the supply of product available to us and adversely affect our business, results of operations or cash flows.

In addition, our supply chain and our cost of goods also may be negatively impacted by unanticipated price increases due to factors such as inflation, including wage inflation, or to supply restrictions beyond our control or the control of our suppliers.

Instability in economic conditions and government spending may adversely affect our business and reduce our operating results.

Our business has been affected by changes in economic conditions that are outside of our control, including reductions in business investment, loss of consumer confidence, and fiscal uncertainty at both federal and state government levels.

Reductions in federal government spending may result in significant reductions in program funding.

An adverse change in government spending policies (such as budget cuts or limitations or temporary shutdowns of government operations), shifts in budget priorities or reductions in revenue levels, could cause our Public Sector Solutions customers to reduce or delay their purchases or to terminate or not renew their contracts with us, which could adversely affect our business, results of operations or cash flows.

Uncertainty also exists regarding expected economic conditions both globally and in the United States, and future delays or reductions in IT spending could have a material adverse effect on demand for our products and consequently on our financial results.

Despite the recent increase in general economic optimism, there is always a risk that heightened economic expectations may not be realized.

Economic instability may arise, and it is difficult to predict to what extent our business may be adversely affected.

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We acquire products for resale both directly from manufacturers and increasingly indirectly through distributors and other sources.

Although we purchase from a diverse vendor base, product purchases from Ingram Micro, Inc., Synnex and HP Inc.

Although we purchase from a diverse vendor base, product purchases from Ingram Micro, Inc., TD Synnex Corporation and Dell Inc.

accounted for approximately 23%, 23% and 12% respectively, of our total product purchases in 2021.

No other singular vendor supplied more than 10% of our total product purchases in the year 2021.

In addition to these vendors, product purchases, whether purchased directly or from a wholesale distributor, from Dell and Tech Data comprised a total of 66% of our product purchases in 2020.

If we are unable to acquire products, or if we experienced a change in business relationship with any of these vendors, we could experience a short-term disruption in the availability of products, and such disruption could have a material adverse effect on our results of operations and cash flows.

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An element of our business strategy is to continue increasing our participation in first-to-market purchase opportunities.

The availability of certain desired products, especially in the direct marketing channel, has been constrained in the past.

The availability of certain desired products, especially in the direct marketing channel, has been constrained in the past due to these limits imposed by product manufacturers.

We could experience a material adverse effect to our business if we are unable to source first-to-market purchases or similar opportunities, or if significant availability constraints reoccur.

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Growing demand for the development of cloud-based solutions may reduce demand for some of our existing hardware products.

If the transition to an environment characterized by cloud-based computing and software being delivered as a service progresses, we will likely increase investments in this area before knowing whether our sales forecasts will accurately reflect customer demand for these products, services,

and solutions.

If the transition to an environment characterized by cloud-based computing and software being delivered as a service progress, we will likely increase investments in this area before knowing whether our sales forecasts will accurately reflect customer demand for these products, services, and solutions.

We may not be able to effectively compete using these virtual distribution models.

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Many of our customers elect to have their purchases shipped by an interstate common carrier, such as United Parcel Service, Inc., or UPS, or FedEx Corporation.

A strike or other interruption in service by these shippers could adversely affect our ability to market or deliver products to customers on a timely basis.

A strike or other interruption in service, including, among other things, widespread illness due to the COVID-19 pandemic and inclement weather experienced could adversely affect our ability to market or deliver products to customers on a timely basis.

We may experience increases in shipping and postage costs, which may adversely affect our business if we are not able to pass such increases on to our customers.

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In the past, we have experienced a decrease in the level of vendor consideration available to us from certain manufacturers.

The level of such

consideration we receive from some manufacturers may decline in the future.

The level of such consideration we receive from some manufacturers may decline in the future.

Such a decline could decrease our gross profit and have a material adverse effect on our earnings and cash flows.

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In order to satisfy customer demand and to obtain favorable purchasing discounts, we have and may continue to carry increased inventory levels of certain products.

By so doing, we are subject to the increased risk of inventory obsolescence.

By doing so, we are subject to the increased risk of inventory obsolescence.

Also, in order to implement our business strategy, we intend to continue, among other things, placing larger than typical inventory stocking orders of selected products and increasing our participation in first-to-market purchase opportunities.

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We extend credit to our customers for a significant portion of our net sales, typically on 30-day payment terms.

We are subject to the risk that our customers may not pay for the products they have purchased, or may pay at a slower rate than we have historically experienced.

We are subject to the risk that our customers may not pay for the products they have purchased, or may pay at a slower rate

than we have historically experienced.

This risk is heightened during periods of global or industry-specific economic downturn or uncertainty, during periods of rising interest rates or, in the case of public sector customers, during periods of budget constraints.

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Natural disasters, terrorism, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a negative effect on the Company, its suppliers, logistics providers, manufacturing vendors, and customers.

Our business operations are subject to interruption by natural disasters, fire, power shortages, nuclear power plant accidents, terrorist attacks, and other hostile acts, and other events beyond our control.

Our business operations are subject to interruption by natural disasters, fire, power shortages, nuclear power plant accidents, terrorist attacks, or political instability in particular economies and markets, such as may result in Europe or other geographies as a result of the ongoing conflict between Russia and Ukraine, and other hostile acts, and other events beyond our control.

Such events could decrease demand for our products, make it difficult or impossible for us to deliver services or products to our customers, or to receive products from our suppliers, and create delays and inefficiencies in our supply chain.

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Our business is heavily dependent upon information technology networks and systems.

Internal or external attacks on those networks and systems could disrupt our normal operations centers and impede our ability to provide critical products and services to our customers and clients, subjecting us to liability under our contracts and damaging our reputation.

We have experienced attacks and attempted attacks that have generally been in the form of active intrusion attempts from the internet, passive vulnerability mapping from the internet, and internal malware and or phishing attempts delivered through user actions.

Future internal or external attacks on our networks and systems could disrupt our normal operations centers and impede our ability to provide critical products and services to our customers and clients, subjecting us to liability under our contracts and damaging our reputation

Our business also involves the use, storage and transmission of proprietary information and sensitive or confidential data, including personal information about our employees, our clients and customers of our clients.

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Furthermore, the evolving nature of threats to data security, in light of new and sophisticated methods used by criminals and cyberterrorists, including computer viruses, malware, phishing, misrepresentation, social engineering, and forgery make it increasingly challenging to anticipate and adequately mitigate these risks.

The risk of cyber incidents could also be increased by cyberwarfare in connection with the ongoing conflict between Russia and Ukraine, including potential proliferation of malware from the conflict into systems unrelated to the conflict.

Breaches in security could expose us, our supply chain, our customers or other individuals to significant disruptions, a risk of public disclosure, loss or misuse of this information.

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In our case, these attacks and attempted attacks have generally been in the form of active intrusion attempts from the internet, passive vulnerability mapping from the internet, and internal malware and or phishing attempts delivered through user actions.

Although we have in place various processes, procedures,

and controls to monitor and mitigate these threats, these measures may not be sufficient to prevent a material security threat or mitigate these risks for our customers.

Although we have in place various processes, procedures, and controls to monitor and mitigate these threats, these measures may not be sufficient to prevent a material security threat or mitigate these risks for our customers.

If any of these events were to materialize, they could lead to disruption of our operations or loss of sensitive information as well as subject us to regulatory actions, litigation, or damage to our reputation, and could have a material adverse effect on our financial position, results of operations, and cash flows.

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Noncompliance with government procurement regulations or contract provisions could result in civil, criminal, and administrative liability, including substantial monetary fines or damages, termination of government contracts, and suspension, debarment, or ineligibility from doing business with the government.

Our current arrangements with these government agencies allow them to cancel orders with little or no notice and do not require them to purchase products from us in the future.

Our current arrangements with these government agencies allow them to cancel orders with little or no

notice and do not require them to purchase products from us in the future.

The effect of any of these possible actions by any government department or agency could adversely affect our financial position, results of operations, and cash flows.

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We are controlled by one principal stockholder.

Patricia Gallup, our principal stockholder, beneficially owns or controls, in the aggregate, approximately 56% of the outstanding shares of our common stock as of December 31, 2020.

Patricia Gallup, our principal stockholder, beneficially owned or controlled, in the aggregate, approximately 56% of the outstanding shares of our common stock as of December 31, 2021.

Because of her beneficial stock ownership, the stockholder can continue to elect the members of the Board of Directors and decide all matters requiring stockholder approval at a meeting or by a written consent in lieu of a meeting.

Similarly, such stockholder can control decisions to adopt, amend, or repeal our charter and our bylaws, or take other actions requiring the vote or consent of our stockholders and prevent a takeover of us by one or more third parties, or sell or otherwise transfer their stock to a third party, which could deprive our stockholders of a control premium that might otherwise be realized by her in connection with an acquisition of our Company.

with an acquisition of our Company.

Such control may result in decisions that are not in the best interest of our unaffiliated public stockholders.

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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 1A. Risk Factors