What changed in this filing

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Item 1A. Risk Factors

2026-02-26 compared with 2025-03-10 · 33 added, 8 removed, 283 unchanged (13% of the section changed)

10 unchanged sentences

Business and Operations

• Demand for our products could decrease if manufacturers decide to sell them direct.

• Demand for our products could decrease if manufacturers decide to sell them directly to end users.

• Changes in our customer or product mix, could cause our gross margins to fluctuate.

• Material changes in the costs of our products from manufacturers without the ability to pass price increases onto our customers could cause our gross margins to decline.

• Material changes in the costs of our products from manufacturers without the ability to pass price increases onto our customers could cause our gross and operating margins to decline.

• A variety of issues could affect the timing or profitability of our projects, and could result in, among other things, project termination or payment of liquidated damages.

14 unchanged sentences

• Our actual results could differ from the assumptions and estimates used to prepare our financial statements.

• Our uncertain tax position and effective tax rate may vary from period to period.

Market and Economy

26 unchanged sentences

In addition, we may also be subject to price increases from vendors that we may not be able to pass along to our customers.

Our manufacturers may cancel our oral or written distribution authorizations upon little or no notice, which could adversely impact our revenues and profits from distributing certain manufacturer’s products .

Material changes in the costs of our products from manufacturers without the ability to pass price increases onto our customers could cause our gross and operating margins to decline.

Product manufacturers may adjust the prices of products we distribute for many reasons, including changes in their costs for raw materials, components, energy, labor, tariffs and taxes on imports.

In addition, a portion of our own distribution costs is composed of fuel for our sales and delivery vehicles, freight, and utility expenses for our facilities.

After the cost of the products we sell, labor costs are our largest expense.

Our ability to pass along increases in our costs in a timely manner to our customers depends on execution, market conditions, and contractual limitations.

Failing to pass along price increases timely in an inflationary environment, or not maintaining sales volume while increasing prices, could significantly reduce our profitability.

Additionally, market variables, such as inflation of product costs, labor rates, fuel, freight and energy costs, as well as geopolitical events, could negatively impact our ability to effectively manage our operating and administrative expenses.

For example, geopolitical conflicts and related international responses have and may continue to exacerbate inflationary pressures, including increases in fuel and other energy costs.

Additionally, climate-related policies, carbon pricing mechanisms, and regulations aimed at reducing emissions may increase energy and raw material costs, which could put additional pressure on our margins.

Inflation may also reduce demand for products, resulting in lower sales volumes.

In addition, our inability to pass on increases in costs to customers in a timely manner, or at all, could cause operating and administrative expenses to grow more rapidly than sales, which could result in lower gross margins and net earnings.

We are authorized to distribute certain manufacturers’ products in specific geographic areas and all of our oral or written distribution authorizations are subject to cancellation by the manufacturer, some upon little or no notice.

86 unchanged sentences

Systems implementation disruption and any other IT disruption could have an adverse effect on the Company.

If disruptions damage, breach or cause our systems or those of third parties on which we depend to cease to function properly or are otherwise disrupted, we may require a significant investment to repair or replace them and may suffer interim interruptions in its business operations.

If critical information systems fail or otherwise become unavailable, our ability to operate our digital platforms, process orders, maintain proper levels of inventories, collect accounts receivable, disburse funds, manage our supply chain, monitor results of operations, and process and store team member or customer data, among other functions, could be adversely affected.

6 unchanged sentences

Computer hackers may attempt to penetrate our information systems or our vendors' information systems and, if successful, misappropriate confidential customer, supplier, employee or other business information.

In addition, one of our employees, contractors or other third party may attempt to circumvent security measures in order to obtain such information or inadvertently cause a breach involving such information.

In addition, our employees, contractors or other third party may attempt to circumvent security measures in order to obtain such information or inadvertently cause a breach involving such information.

Loss of information could expose us to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and other persons, any of which could have an adverse effect on our financial condition and results of operations.

32 unchanged sentences

Such adjustments could be material and could result in reduced profitability.

Our uncertain tax position and effective tax rate may vary from period to period.

The Company's uncertain tax position and effective tax rate may vary from period to period.

Currently, these uncertainties primarily relate to an ongoing Internal Revenue Service (“IRS”) examination regarding the realization of federal research and development tax credits.

As of December 31, 2025, the Company recognized a total of $29.8 million in federal income tax credits for research activities from 2015 through 2025, of which $3.8 million is from an ongoing IRS audit of the 2018 tax year.

In addition, the Company has also recorded a $5.1 million reserve for uncertain tax positions related to these credits, of which $993,000 is related to the ongoing IRS audit noted above.

In addition to the position noted above, we regularly evaluate the likelihood of adverse outcomes from these examinations to assess whether our income tax reserves are sufficient.

We continue to track the progress of ongoing discussions with tax authorities and the potential impact of the expected expiration of the statute of limitations in various taxing jurisdictions.

We believe we have established an adequate reserve for any adjustments resulting from tax examinations.

However, the outcome of these examinations cannot be predicted with certainty.

If issues addressed in our tax examinations are resolved differently than management expects, given current facts and circumstances, we may need to adjust our income tax reserves and effective tax rate accordingly.

Although the timing of resolution, settlement, and closure of examinations remains uncertain, we do not believe it is reasonably possible that our unrecognized tax benefits from certain U.S.

federal, state, and non-U.S.

tax positions will materially change in the next 12 months.

Risks Related to the Market and Economy

26 unchanged sentences

The Company from time to time has been unable to comply with some of the financial covenants contained in previous credit facilities (relating to, among other things, the maintenance of prescribed financial ratios) and has, when necessary, obtained waivers or amendments to the covenants from its lenders.

In the future the Company may not be able to comply with the covenants or, if is not able to do so, that its lenders will be willing to waive such non-compliance or amend such covenants.

In the future the Company may not be able to comply with the covenants and, if it is not able to do so, its lenders may not be willing to waive such non-compliance or amend such covenants.

We may not be able to access acquisition financing, including debt capital.

15 unchanged sentences

Risks Related to Legal and Regulatory Matters

Risks associated with substantial or material claim or lawsuits that are not covered by insurance.

Risks associated with substantial or material claims or lawsuits that are not covered by insurance.

In the ordinary course of business we at times may become the subject of various claims, lawsuits or administrative proceedings seeking damages or other remedies concerning our commercial operations, the products we distribute, employees and other matters, including potential claims by individuals alleging exposure to hazardous materials as a result of the products we distribute or our operations.

32 unchanged sentences

We have meaningful operations in Canada in which the functional currency is denominated in Canadian dollars.

We also have operations in the U.A.E., where the functional currency is dirham.

We also have operations in the U.A.E., India, and Saudi Arabia, where the functional currency is dirham, rupee, and riyal, respectively.

As the value of currencies in foreign countries in which we have operations increases or decreases related to the U.S.

17 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 1A. Risk Factors