Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 05, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Entity Registrant Name | Wayside Technology Group, Inc. | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Central Index Key | 0000945983 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 4,351,473 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 11,587 | $ 14,984 |
Accounts receivable, net of allowances of $785 and $765, respectively | 108,791 | 100,987 |
Inventory, net | 2,248 | 2,760 |
Vendor prepayments | 560 | 100 |
Prepaid expenses and other current assets | 2,600 | 2,718 |
Total current assets | 125,786 | 121,549 |
Equipment and leasehold improvements, net | 1,122 | 1,215 |
Right-of-use assets, net | 1,708 | 1,792 |
Accounts receivable-long-term, net | 1,015 | 1,358 |
Other assets | 91 | 111 |
Deferred income taxes | 124 | 256 |
Total assets | 129,846 | 126,281 |
Current liabilities: | ||
Accounts payable and accrued expenses | 82,343 | 78,364 |
Lease liability, current portion | 370 | 383 |
Total current liabilities | 82,713 | 78,747 |
Lease liability, net of current portion | 2,094 | 2,189 |
Non-current liabilities | 89 | 89 |
Total liabilities | 84,896 | 81,025 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common stock, $.01 par value; 10,000,000 shares authorized; 5,284,500 shares issued: 4,567,444 and 4,505,693 shares outstanding, respectively | 53 | 53 |
Additional paid-in capital | 31,961 | 32,874 |
Treasury stock, at cost, 717,056 and 778,807 shares, respectively | (12,209) | (13,256) |
Retained earnings | 26,776 | 26,715 |
Accumulated other comprehensive loss | (1,631) | (1,130) |
Total stockholders' equity | 44,950 | 45,256 |
Total liabilities and stockholders' equity | $ 129,846 | $ 126,281 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Condensed Consolidated Balance Sheets | ||
Accounts receivable, allowances (in dollars) | $ 785 | $ 765 |
Common Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares authorized | 10,000,000 | 10,000,000 |
Common Stock, shares issued | 5,284,500 | 5,284,500 |
Common Stock, shares outstanding | 4,567,444 | 4,505,693 |
Treasury stock, shares | 717,056 | 778,807 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Earnings - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Condensed Consolidated Statements of Earnings | ||
Net sales | $ 62,618 | $ 44,858 |
Cost of sales | 54,454 | 37,624 |
Gross profit | 8,164 | 7,234 |
Selling, general, and administrative expenses | 5,500 | 5,515 |
Legal and financial advisory expenses - unsolicited bid and related matters | 1,323 | |
Acquisition related costs | 403 | |
Income from operations | 938 | 1,719 |
Other income: | ||
Interest, net | 62 | 169 |
Foreign currency transaction gain | 115 | 62 |
Income before provision for income taxes | 1,115 | 1,950 |
Provision for income taxes | 279 | 487 |
Net income | $ 836 | $ 1,463 |
Income per common share-Basic | $ 0.18 | $ 0.32 |
Income per common share-Diluted | $ 0.18 | $ 0.32 |
Weighted average common shares outstanding — Basic (in shares) | 4,447 | 4,404 |
Weighted average common shares outstanding — Diluted (in shares) | 4,447 | 4,404 |
Dividends paid per common share (in dollars per share) | $ 0.17 | $ 0.17 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Condensed Consolidated Statements of Comprehensive Income | ||
Net income | $ 836 | $ 1,463 |
Other comprehensive income (loss): | ||
Foreign currency translation adjustments | (501) | 127 |
Other comprehensive income (loss) | (501) | 127 |
Comprehensive income | $ 335 | $ 1,590 |
Condensed Consolidated Statem_3
Condensed Consolidated Statement of Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Treasury | Retained Earnings | Accumulated Other Comprehensive Loss | Total |
Balance at Dec. 31, 2018 | $ 53 | $ 32,392 | $ (13,447) | $ 22,994 | $ (1,419) | $ 40,573 |
Balance (in shares) at Dec. 31, 2018 | 5,284,500 | |||||
Balance (in shares) at Dec. 31, 2018 | 788,006 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 1,463 | 1,463 | ||||
Translation adjustment | 127 | 127 | ||||
Dividends paid | (767) | (767) | ||||
Share-based compensation expense | 165 | 165 | ||||
Restricted stock grants (net of forfeitures) | (318) | $ 318 | ||||
Restricted stock grants (net of forfeitures) (in shares) | (18,780) | |||||
Treasury shares repurchased | $ (20) | (20) | ||||
Treasury shares repurchased (in shares) | 1,905 | |||||
Balance at Mar. 31, 2019 | $ 53 | 32,239 | $ (13,149) | 23,690 | (1,292) | 41,541 |
Balance (in shares) at Mar. 31, 2019 | 5,284,500 | |||||
Balance (in shares) at Mar. 31, 2019 | 771,131 | |||||
Balance at Dec. 31, 2019 | $ 53 | 32,874 | $ (13,256) | 26,715 | (1,130) | $ 45,256 |
Balance (in shares) at Dec. 31, 2019 | 5,284,500 | 5,284,500 | ||||
Balance (in shares) at Dec. 31, 2019 | 778,807 | 778,807 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 836 | $ 836 | ||||
Translation adjustment | (501) | (501) | ||||
Dividends paid | (775) | (775) | ||||
Share-based compensation expense | 167 | 167 | ||||
Restricted stock grants (net of forfeitures) | (1,080) | $ 1,079 | (1) | |||
Restricted stock grants (net of forfeitures) (in shares) | (63,810) | |||||
Treasury shares repurchased | $ (32) | (32) | ||||
Treasury shares repurchased (in shares) | 2,059 | |||||
Balance at Mar. 31, 2020 | $ 53 | $ 31,961 | $ (12,209) | $ 26,776 | $ (1,631) | $ 44,950 |
Balance (in shares) at Mar. 31, 2020 | 5,284,500 | 5,284,500 | ||||
Balance (in shares) at Mar. 31, 2020 | 717,056 | 717,056 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities | ||
Net income | $ 836 | $ 1,463 |
Adjustments to reconcile net income to net cash and cash equivalents (used in) provided by operating activities: | ||
Depreciation and amortization expense | 96 | 135 |
Deferred income tax benefit | 132 | 66 |
Share-based compensation expense | 167 | 165 |
Amortization of discount on accounts receivable | (62) | (153) |
Amortization of right-of-use assets | 112 | 94 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (7,821) | (2,539) |
Inventory | 507 | (163) |
Prepaid expenses and other current assets | 100 | (728) |
Vendor prepayments | (460) | 1,597 |
Accounts payable and accrued expenses | 4,150 | 94 |
Lease liability, net | (134) | (33) |
Other assets and liabilities | 15 | 30 |
Net cash and cash equivalents (used in) provided by operating activities | (2,362) | 28 |
Cash flows from investing activities | ||
Purchase of equipment and leasehold improvements | 1 | (82) |
Net cash and cash equivalents used in investing activities | 1 | (82) |
Cash flows from financing activities | ||
Purchase of treasury stock | (32) | (20) |
Borrowings under revolving credit facility | 1,300 | |
Repayments of borrowings under revolving credit facility | (1,300) | |
Dividends paid | (775) | (767) |
Net cash and cash equivalents used in financing activities | (807) | (787) |
Effect of foreign exchange rate on cash and cash equivalents | (229) | 20 |
Net decrease in cash and cash equivalents | (3,397) | (821) |
Cash and cash equivalents at beginning of period | 14,984 | 14,883 |
Cash and cash equivalents at end of period | 11,587 | 14,062 |
Supplementary disclosure of cash flow information: | ||
Income taxes paid | $ 108 | $ 161 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2020 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation: The accompanying unaudited condensed consolidated financial statements of Wayside Technology Group, Inc. and its subsidiaries (collectively, the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete audited financial statements. The preparation of these condensed consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, intangible assets, income taxes, stock-based compensation, evaluation of performance obligations and allocation of revenue to distinct items, contingencies and litigation. The Company bases its estimates on its historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In the opinion of the Company’s management, all adjustments that are of a normal recurring nature, considered necessary for fair presentation, have been included in the accompanying condensed consolidated financial statements. The Company’s actual results may differ from these estimates under different assumptions or conditions. The unaudited condensed consolidated statements of earnings for the interim periods are not necessarily indicative of results for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K filed with the Securities Exchange Commission for the year ended December 31, 2019. |
Recently Issued Accounting Stan
Recently Issued Accounting Standards | 3 Months Ended |
Mar. 31, 2020 | |
Recently Issued Accounting Standards | |
Recently Issued Accounting Standards | 2. Recently Issued Accounting Standards: In June 2016, the FASB issued Accounting Standards Update No. 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. 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. 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. 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. In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” as part of its initiative to reduce complexity in the accounting standards. The standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies and simplifies other aspects of the accounting for income taxes. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have upon its financial position and results of operations, if any. |
Foreign Currency Translation
Foreign Currency Translation | 3 Months Ended |
Mar. 31, 2020 | |
Foreign Currency Translation | |
Foreign Currency Translation | 3. 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. Foreign currency transaction gains and losses are recorded as income or expenses as amounts are settled. The net sales from our foreign operations for the three months ended March 31, 2020 and 2019 were $4.7 million and $5.2 million, respectively. |
Comprehensive Income
Comprehensive Income | 3 Months Ended |
Mar. 31, 2020 | |
Comprehensive Income | |
Comprehensive Income | 4. Comprehensive Income: Cumulative translation adjustments have been classified within accumulated other comprehensive loss, which is a separate component of stockholders’ equity in accordance with FASB ASC Topic 220, “Comprehensive Income.” |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 31, 2020 | |
Revenue Recognition | |
Revenue Recognition | 5. Revenue Recognition: The core principle of the revenue recognition criteria is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled in exchange for those goods or services. This principle is achieved through applying the following five-step approach: Identification of the contract, or contracts, with a customer — A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. The Company considers customer purchase orders, which in some cases are governed by master agreements or general terms and conditions of sale, to be contracts with customers. All revenue is generated from contracts with customers. Identification of the performance obligations in the contract — Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are capable of being distinct in the context of the contract. If these criteria are not met the promised goods or services are accounted for as a single performance obligation. Determination of the transaction price —The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer, net of sales taxes collected from customers, which are subsequently remitted to governmental entities. Net sales are recorded net of estimated discounts, rebates, and returns. Vendor rebates are recorded when earned as a reduction to cost of sales or inventory, as applicable. Allocation of the transaction price to the performance obligations in the contract — If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price, or SSP, basis. We determine SSP based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through established standard prices, we use judgement and estimate the standalone selling price considering available information such as market pricing and pricing related to similar products. Contracts with a significant financing component are discounted to their present value at contract inception and accreted up to the expected payment amounts. These contracts generally offer customers extended payment terms of up to three years. Recognition of revenue when, or as, we satisfy a performance obligation — The Company recognizes revenue when its performance obligations are complete, and control of the specified goods or services pass to the customer. The Company considers the following indicators in determining when control passes to the customer: (i) the Company has a right to payment for the product or service (ii) the customer has legal title to the product, (iii) the Company has transferred physical possession of the product (iv) the Customer has the significant risk and rewards of ownership of the product and (v) the customer has accepted the product. Substantially all our performance obligations are satisfied at a point in time, as our obligation is to deliver a product or fulfill an order for a third party to deliver ongoing services, maintenance or support. Disaggregation of Revenue We generate revenue from the re-sale of third-party software licenses, subscriptions, hardware, and related service contracts. Finance fees related to sales are classified as interest income. The following table depicts the disaggregation of revenue according to revenue type and is consistent with how we evaluate our financial performance: (Unaudited) Three months ended Net sales: March 31, March 31, 2020 2019 Hardware, software and other products $ $ Software - security & highly interdependent with support Maintenance, support & other services Net sales $ $ Hardware, software and other products - Hardware product consists of sales of hardware manufactured by third parties. Hardware product is delivered from our warehouse or drop shipped directly from the vendor. Revenue from our hardware products is recognized on a gross basis, with the selling price to the customer as net sales, and the cost of the related product as cost of sales, upon transfer of control to the customer, as the Company is acting as a principal in the transaction. Control is generally deemed to have passed to the customer upon transfer of title and risk of ownership. Software product consists of sales of perpetual and term software licenses for products developed by third party vendors, which are distinct from related maintenance and support. Software licenses are delivered via electronic license keys provided by the vendor to the end user. Revenue from the sale of software products is recognized on a gross basis, with the selling price to the customer as net sales, and the cost of the related product as cost of sales, upon transfer of control to our customers as the Company is a principal in the transaction. Control is deemed to have passed to the customer when they acquire the right to use or copy the software under license as substantially all product functionality is available to the customer at the time of sale. Other products include marketing revenues that are recorded on a gross basis as the Company is a principal in the arrangement. Software maintenance and support, commonly known as software assurance or post contract support, consists of software updates and technical support provided by the software vendor to the licensor over a period. In cases where the software maintenance is distinct from the related software license, software maintenance is accounted for as a separate performance obligation. In cases where the software maintenance is not distinct from the related software license, it is accounted for as a single performance obligation with the related license. We utilize judgement in determining whether the maintenance is distinct from the software itself. This involves considering if the software provides its original intended functionality without the updates, or is dependent on frequent, or continuous updates to maintain its functionality. See Allocation of the transaction price to the performance obligations in the contract for a discussion of the allocation of maintenance and support costs when they are distinct from the related software licenses and Software - security and highly interdependent with support below for a discussion of maintenance and support costs when they are not distinct from the related software license. Software - security and highly interdependent with support - Software - security software and software highly interdependent with support consists of sales of security subscriptions and other licensed software products whose functionality is highly interdependent with, and therefore not distinct from, related software maintenance. Delivery of the software license and related support over time is considered a single performance obligation of the third-party vendor for these products. The Company is an agent in these transactions, with revenue being recorded on a net basis when its performance obligation of processing a valid order between the supplier and customer contracting for the services is complete. Maintenance, support and other services revenue - Maintenance, support and other services revenue consists of third-party post-contract support that is not critical or essential to the core functionality of the related licensed software, and, to a lesser extent, from third-party professional services, software as a service, and cloud subscriptions. Revenue from maintenance, support and other service revenues is recognized on a net basis, upon fulfillment of an order to the customer, as the Company is an agent in the transaction, and its performance obligations are complete at the time a valid order between the parties is processed. Costs to obtain and fulfill a contract - We pay commissions and related payroll taxes to sales personnel when customers are invoiced. These costs are recorded as selling general and administrative expenses in the period earned as all our performance obligations are complete within a short window of processing the order. Contract balances - Accounts receivable is recorded at the invoiced amount, net of an allowance for doubtful accounts. A receivable is recognized in the period we deliver goods or provide services or when our right to consideration is unconditional. Payment terms on invoiced amounts are typically 30-75 days. The balance of accounts receivable, net of allowance for doubtful accounts as of March 31, 2020 and December 31, 2019 is presented in the accompanying Consolidated Balance Sheets. Accounts receivable-long-term result from product sales with extended payment terms that are discounted to their present values at the Company’s estimates of prevailing market rates at the time of the sale. The Company has determined that these amounts do not represent variable consideration as the amount earned is fixed. In subsequent periods, the accounts receivable is increased to the amounts due and payable by the customers through the accretion of interest income on the unpaid accounts receivable due in future years. The amounts due under these long-term accounts receivable due within one year are reclassified to the current portion of accounts receivable and are shown net of reserves. As our revenues are generally recognized at a point in time in the same period as they are billed, we have no deferred revenue balances. Provisions for doubtful accounts including long-term accounts receivable and returns are estimated based on historical write offs, sales returns and credit memo analysis which are adjusted to actual on a periodic basis. Refund liability – The Company records a refund liability for expected product returns with a corresponding asset for an amount representing any expected recovery from vendors regarding the return. Principal versus agent considerations – The Company determines whether it is acting as a principal or agent in a transaction by assessing whether it controls a good or service prior to it being transferred to a customer, with control being defined as having the ability to direct the use of and obtain the benefits from the asset. The Company considers the following indicators, among others, in making the determination: 1) the Company is primarily responsible for fulfilling the promise to provide the promised good or service, 2) the Company has inventory risk, before or after the specified good or service has been transferred to the customer, and 3) the Company has discretion in establishing price for the specified good or service. Generally, we conclude that we are a principal in transactions where software or hardware products containing their core functionality are delivered to the customer at the time of sale and are agents in transactions where we are arranging for the provision of future performance obligations by a third party. As we enter into distribution agreements with third-party service providers, we evaluate whether we are acting as a principal or agent for each product sold under the agreement based on the nature of the product or service, and our performance obligations. Products for which there are significant ongoing third-party performance obligations include software maintenance, which includes periodic software updates and support, security software that is highly interdependent with maintenance, software as a service, cloud and third-party professional services. Sales of hardware, software and other products where we are a principal are recorded on a gross basis with the selling price to the customer recorded as sales and the cost of the product or software recorded as cost of sales. Sales where we are acting as an agent are recognized on a net basis at the date our performance obligations are complete. Under net revenue recognition, the cost paid to the vendor or third-party service provider is recorded as a reduction to sales, resulting in revenue being equal to the gross profit on the transaction. |
Right-of-use Asset and Lease Li
Right-of-use Asset and Lease Liability | 3 Months Ended |
Mar. 31, 2020 | |
Right-of-use Asset and Lease Liability | |
Right-of-use Asset and Lease Liability | 6. Right-of-use Asset and Lease Liability: The Company has entered into operating leases for office and warehouse facilities, which have terms at lease commencement that range from 3 years to 11 years. The Company determines if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets and lease expense for these leases is recognized on a straight-line basis over the lease term. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date of the lease based on the present value of the lease payments over the lease term. As our leases do not provide a readily determinable implicit rate, we use an incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. The operating lease asset also includes any lease payments made and excludes lease incentives. Operating lease expense is recognized on a straight-line basis over the lease term and included in selling, general and administrative expenses. Information related to the Company’s right-of-use assets and related lease liabilities were as follows: (Unaudited) Three months ended March 31, 2020 2019 Cash paid for operating lease liabilities $ 120 $ 124 Right-of-use assets obtained in exchange for new operating lease obligations (1) $ — $ 2,163 Weighted-average remaining lease term 6.9 years 7.8 years Weighted-average discount rate (1) Represents operating leases existing on January 1, 2019 and recognized as part of the Company’s adoption of ASU 2016-02. No new operating leases commenced during the three months ended March 31, 2020 and 2019. Maturities of lease liabilities as of March 31, 2020 were as follows: 2020 (excluding the three months ended March 31, 2020) $ 318 2021 405 2022 414 2023 463 2024 473 Thereafter 1,100 3,173 Less: imputed interest (709) Total lease liabilities $ 2,464 Lease liabilities, current portion 370 Lease liabilities, net of current portion 2,094 Total lease liabilities $ 2,464 |
Fair Value
Fair Value | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value | |
Fair Value | 7. Fair Value: The carrying amounts of financial instruments, including cash and cash equivalents, short-term accounts receivable and accounts payable approximated fair value at March 31, 2020 and December 31, 2019 because of the relative short maturity of these instruments. The Company’s accounts receivable long-term are discounted to their present value at prevailing market rates at the time of sale. |
Balance Sheet Detail
Balance Sheet Detail | 3 Months Ended |
Mar. 31, 2020 | |
Balance Sheet Detail | |
Balance Sheet Detail | 8. Balance Sheet Detail: Equipment and leasehold improvements consist of the following: (Unaudited) March 31, December 31, 2020 2019 Equipment $ 2,230 $ 2,230 Leasehold improvements 1,289 1,289 3,519 3,519 Less accumulated depreciation and amortization (2,397) (2,304) $ 1,122 $ 1,215 During the three months ended March 31, 2020 and 2019, the Company recorded depreciation and amortization expense of $0.1 million, respectively. Depreciation and amortization expense are included in selling, general and administrative expense. In limited circumstances, the Company offers extended payment terms to customers for periods of 12 to 48 months. The related customer receivables are classified as accounts receivable long-term and discounted to their present value at prevailing market rates at the time of sale. In subsequent periods, the accounts receivable is increased to the amounts due and payable by the customers through the accretion of interest income on the unpaid accounts receivable due in future years. The amounts under these long-term accounts receivable due within one year are reclassified to the current portion of accounts receivable. At times the Company sells receivables to a financial institution on a non-recourse basis for cash, less a discount. The net proceeds from such sales are included in the operating section of the statement of cash flows as changes in accounts receivable. Accounts receivable long term, net consists of the following: (Unaudited) March 31, December 31, 2020 2019 Total amount due from customer $ 5,303 $ 5,656 Less: unamortized discount (131) (194) Less: current portion included in accounts receivable (4,157) (4,104) $ 1,015 $ 1,358 The undiscounted cash flows to be received by the Company relating to these accounts receivable long-term expects to be $4.3 million and $1.0 million during the 12-month periods ending March 31, 2021 and 2022, respectively. Accounts payable and accrued expenses consist of the following: (Unaudited) March 31, December 31, 2020 2019 Trade accounts payable $ 76,988 $ 73,310 Accrued expenses 5,355 5,054 $ 82,343 $ 78,364 |
Credit Facility
Credit Facility | 3 Months Ended |
Mar. 31, 2020 | |
Credit Facility. | |
Credit Facility | 9. Credit Facility: 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 (the “Security Agreement”) and Second Amended and Restated Pledge and Security Agreement (the “Pledge Agreement”). The Credit Facility, which will be used for working capital and general corporate purposes, matures on August 31, 2020, 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. In addition, the Company will pay regular monthly payments of all accrued and unpaid interest. The interest rate for any borrowings under the Credit Facility is subject to change from time to time based on the changes in the LIBOR Rate, as defined in the Loan Agreement (the “Index”). The Index was 1.62% at March 31, 2020. Interest on the unpaid principal balance of the Note will be calculated using a rate of 1.50 percentage points over the Index. If the Index becomes unavailable during the term of the Credit Facility, interest will be based upon the Prime Rate (as defined in the Loan Agreement) after notifying the Company. The Credit Facility is secured by the assets of the Company. Among other affirmative covenants set forth in the Loan Agreement, the Company must maintain (i) a minimum Debt Service Coverage Ratio (as defined in the Loan Agreement) of not less than 2.0 to 1.0, (ii) a maximum Leverage Ratio (as defined in the Loan Agreement) of at least 2.5 to 1.0, and (iii) a minimum Collateral Coverage Ratio (as defined in the Loan Agreement) of not less than 1.5 to 1.0. Additionally, the Loan Agreement contains negative covenants prohibiting, among other things, the creation of certain liens, the alteration of the nature or character of the Company’s business, and transactions with the Company’s shareholders, directors, officers, subsidiaries and/or affiliates other than with respect to (i) the repurchase of the issued and outstanding capital stock of the Company from the stockholders of the Company or (ii) the declaration and payment of dividends to the stockholders of the Company. The Company was in compliance with all such covenants at March 31, 2020 and December 31, 2019. At March 31, 2020 and December 31, 2019, the Company had no borrowings outstanding under the Credit Facility. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share | |
Earnings Per Share | 10. Earnings Per Share: Our basic and diluted earnings per share are computed using the two-class method. The ck 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. Diluted and basic earnings per share are the same because the restricted shares are the only potentially dilutive security. A reconciliation of the numerators and denominators of the basic and diluted per share computations follows: (Unaudited) Three months ended March 31, 2020 2019 Numerator: Net income $ 836 $ Less distributed and undistributed income allocated to participating securities 20 Net income attributable to common shareholders 816 1,429 Denominator: Weighted average common shares (Basic) 4,447 4,404 Weighted average common shares including assumed conversions (Diluted) 4,447 4,404 Basic net income per share $ 0.18 $ 0.32 Diluted net income per share $ 0.18 $ 0.32 |
Major Customers and Vendors
Major Customers and Vendors | 3 Months Ended |
Mar. 31, 2020 | |
Major Customers and Vendors | |
Major Customers and Vendors | 11. Major Customers and Vendors: The Company had two major vendors that accounted for 22% and 14%, respectively, of total purchases during the three months ended March 31, 2020 and 28% and 16%, respectively, of total purchases during the three months ended March 31, 2019. The Company had two major customers that accounted for 27% and 14%, respectively, of its net sales during the three months ended March 31, 2020 and 26% and 18%, respectively, of its net sales during the three months ended March 31, 2019. These same customers accounted for 43% and 9%, respectively, of total net accounts receivable as of March 31, 2020 and 43% and 12%, respectively, of total net accounts receivable as of December 31, 2019. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Taxes | |
Income Taxes | 12. Income Taxes: The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. In prior years, the Company recorded an accrual of $0.5 million, net of federal tax benefit, for potential liabilities for state income taxes in states which have enacted economic nexus statutes and in which the Company has not filed income tax returns. The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. The Company believes that it has appropriate support for the income tax positions it takes and expects to take on its tax returns, and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. The effective tax rate for the three months ended March 31, 2020 and March 31, 2019 was 25.0%. On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. We continue to examine the impact that the CARES Act may have on our business. Currently, we are unable to determine the impact that the CARES Act will have on our financial condition, results of operations, or liquidity. |
Stockholders' Equity and Stock
Stockholders' Equity and Stock Based Compensation | 3 Months Ended |
Mar. 31, 2020 | |
Stockholders' Equity and Stock Based Compensation | |
Stockholders' Equity and Stock Based Compensation | 13. Stockholders’ Equity and Stock Based Compensation: The 2012 Stock-Based Compensation Plan (the “2012 Plan”) authorizes the grant of Stock Options, Stock Units, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Bonuses and other equity-based awards. The total number of shares of Common Stock initially available for award under the 2012 Plan was 600,000, which was increased to 1,000,000 shares by shareholder approval at the Company’s 2018 Annual Meeting in June 2018. As of March 31, 2020, the number of shares of Common Stock available for future award grants to employees, officers and directors under the 2012 Plan is 449,837. During the three months ended March 31, 2020, the Company granted a total of 66,560 shares of Restricted Stock to officers. These shares of Restricted Stock vest in sixteen equal quarterly installments. During the three months ended March 31, 2020, a total of 2,750 shares of Restricted Stock were forfeited. During the three months ended March 31, 2019, the Company granted a total of 20,405 shares of Restricted Stock to officers and employees. These shares of Restricted Stock vest over time in sixteen equal quarterly installments. During the three months ended March 31, 2019, a total of 1,625 shares of Restricted Stock were forfeited. A summary of nonvested shares of Restricted Stock awards outstanding under the 2012 Plan as of March 31, 2020, and changes during the three months then ended is as follows: Weighted Average Grant Date Shares Fair Value Nonvested shares at January 1, 2020 63,922 $ 14.94 Granted in 2020 66,560 12.58 Vested in 2020 (10,880) 14.28 Forfeited in 2020 (2,750) 17.92 Nonvested shares at March 31, 2020 116,852 $ 13.59 As of March 31, 2020, there is approximately $1.5 million of total unrecognized compensation costs related to nonvested share-based compensation arrangements. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 2.9 years. During the three months ended March 31, 2020 and March 31, 2019, the Company recognized share-based compensation expense of $0.2 million. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2020 | |
Segment Information | |
Segment Information | 14. Segment Information: FASB ASC Topic 280, “Segment Reporting,” requires that public companies report profits and losses and certain other information on their “reportable operating segments” in their annual and interim financial statements. The internal organization used by the public company’s Chief Operating Decision Maker (CODM) to assess performance and allocate resources determines the basis for reportable operating segments. The Company’s CODM is the President of our “Lifeboat Distribution” segment. The Company is organized into two reportable operating segments. The “Lifeboat Distribution” segment distributes technical software and hardware to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide. The “TechXtend” segment is a value-added reseller of software, hardware and services for corporations, government organizations and academic institutions in the United States and Canada. As permitted by FASB ASC Topic 280, the Company has utilized the aggregation criteria in combining its operations in Canada with the domestic segments as the Canadian operations provide the same products and services to similar clients and are considered together when the Company’s CODM decides how to allocate resources. Segment income is based on segment revenue less the respective segment’s cost of revenues as well as segment direct costs (including such items as payroll costs and payroll related costs, such as profit sharing, incentive awards and insurance) and excluding general and administrative expenses not attributed to an individual segment business unit. The Company only identifies accounts receivable, vendor prepayments and inventory by segment as shown below as “Selected Assets” by segment; it does not allocate its other assets, including capital expenditures by segment. The following segment reporting information of the Company is provided: (Unaudited) Three months ended March 31, 2020 2019 Revenue: Lifeboat Distribution $ 57,264 $ 40,055 TechXtend 5,354 4,803 62,618 44,858 Gross Profit: Lifeboat Distribution $ 7,162 $ 6,198 TechXtend 1,002 1,036 8,164 7,234 Direct Costs: Lifeboat Distribution $ 2,637 $ 2,484 TechXtend 462 437 3,099 2,921 Segment Income Before Taxes: (1) Lifeboat Distribution $ 4,525 $ 3,714 TechXtend 540 599 Segment Income Before Taxes 5,065 4,313 General and administrative $ 2,401 $ 2,594 Legal and financial advisory expenses - unsolicited bid and related matters 1,323 — Acquisition related costs 403 — Interest, net 62 169 Foreign currency transaction gain 115 62 Income before taxes $ 1,115 $ 1,950 (1) Excludes general corporate expenses including interest and foreign currency translation expenses. (Unaudited) As of As of March 31, December 31, Selected Assets by Segment: 2020 2019 Lifeboat Distribution $ 107,450 $ 99,602 TechXtend 5,164 5,603 Segment Select Assets 112,614 105,205 Corporate Assets 17,232 21,076 Total Assets $ 129,846 $ 126,281 (Unaudited) Three months ended Disaggregation of Revenue: March 31, March 31, 2020 2019 Lifeboat Distribution Hardware, software and other products $ $ Software - security & highly interdependent with support Maintenance, support & other services Net Sales $ $ TechXtend Hardware, software and other products $ $ 4,337 Software - security & highly interdependent with support 56 Maintenance, support & other services 410 Net Sales $ $ |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions | |
Related Party Transactions | 15. Related Party Transactions: The Company made sales to a customer where a member of our Board of Directors is an executive. During the three months ended March 31, 2020 and 2019, net sales to this customer totaled less than $0.1 million, respectively, and amounts due from this customer as of March 31, 2020 and December 31, 2019 totaled less than $0.1 million, respectively, which were settled in cash subsequent to each period end. |
Unsolicited Bid and Shareholder
Unsolicited Bid and Shareholder Demand | 3 Months Ended |
Mar. 31, 2020 | |
Unsolicited Bid and Shareholder Demand | |
Unsolicited Bid and Shareholder Demand | 16. Unsolicited Bid and Shareholder Demand: On July 15, 2019, the Company received a letter from Shepherd Kaplan Krochuk, LLC (“SKK”) and North & Webster SSG, LLC (“N&W”) announcing an unsolicited bid to acquire the Company for $14.37 per share (the “July 15 Proposal”), which reflected an approximate 32.8% premium over the Company’s adjusted closing stock price on July 12, 2019, one trading day earlier. The July 15 Proposal was subject to a number of contingencies, including the need for SKK and N&W to secure financing to complete a transaction. On August 23, 2019, the Company received another unsolicited offer from SKK and N&W, proposing to acquire the Company for $16.38 per share (the “August 23 Proposal”), which reflected an approximate 18.1% premium over the Company’s closing stock price one day earlier, and requesting members of the Board and management to enter into voting and support agreements in connection with the execution of a definitive merger agreement. The August 23 Proposal, similar to the July 15 Proposal, was subject to a number of contingencies, including the need for SKK and N&W to secure financing to complete a transaction. On November 27, 2019, SKK, N&W, and Messrs. Shepherd, Kaplan, Krochuk and Kidston (collectively, the “SKK 13D Group”) entered into a Joint Filing Agreement and filed a Schedule 13D with the SEC, disclosing an aggregate 5.8% ownership stake in the Company. Also on November 27, 2019, Mr. Nynens entered into an agreement with SKK and N&W (the “November 27 Agreement”), granting SKK an irrevocable proxy to vote his shares of Common Stock (i) in favor of any acquisition proposal by SKK, (ii) against any third-party acquisition, and (iii) as directed by SKK with respect to the election of directors nominated by persons other than the Company. The November 27 Agreement also provides that, upon the consummation of the acquisition by an SKK-controlled entity of up to 100% of the outstanding capital stock of the Company, Nynens be appointed as Executive Chairman of the Company at an annual base salary of $250,000 in addition to stock option grants or comparable equity awards representing three percent (3%) of the outstanding equity of the Company, and for a minimum term of three (3) years. On December 20, 2019, Mr. Nynens delivered a nomination notice to the Company regarding his intent to nominate Kim J. McCauley, Delynn Copley, Dennis M. Crowley, III and Nilesh Shah at the Meeting (the “Nomination Notice”). On December 23, 2019, the SKK 13D Group filed Amendment No. 2 to its Schedule 13D disclosing the Nomination Letter and stating that it sought to engage in discussions with the Company’s management and Board about its composition, the Company’s financial position and other means of enhancing stockholder value, including the potential sale of the Company. Mr. Nynens filed Amendment No. 3 to his Schedule 13D, disclosing and stating the same. On January 22, 2020, the Company received a letter from one of its stockholders demanding that the Board investigate and bring an action against Mr. Nynens for breaches of certain restrictive covenants contained in his Separation and Release Agreement, dated May 11, 2018 (the “Nynens Separation Agreement”), including his covenant not to seek future employment with the Company (the “Shareholder Derivative Demand”). On February 11, 2020, after considering the proposals with its financial advisers, the Board responded to SKK and N&W that the expired proposal received on December 10, 2019 would not have been in the best interests of the Company’s stockholders because it undervalues the Company, and did not serve as a basis for further diligence or discussion. On February 14, 2020, after conducting an investigation, and in response to the Shareholder Derivative Demand, the Company filed a lawsuit (the “Lawsuit”) against Mr. Nynens, SKK, and N&W in the Superior Court of New Jersey Monmouth County, asserting claims against Mr. Nynens for alleged breaches of the Nynens Separation Agreement, including for violating his covenant not to seek future employment with the Company, and claims for tortious interference against SKK and N&W for inducing Mr. Nynens to commit these breaches. In connection with its claims, the Company sought monetary damages, injunctive relief and a declaratory judgment. |
Contingencies
Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Contingencies | |
Contingencies | 17. Contingencies: In January 2020, the Company entered into an agreement with a financial advisory firm (“Advisor”) to provide services related to an unsolicited offer to buy the Company. As part of the agreement, among other things, the Company granted a right of first refusal to the Advisor to act as the Company’s financial advisor in a potential sale or merger of the Company, and agreed to pay a contingent fee of $0.5 million if there is no such change in control of the Company as of the expiration of the agreement, on December 31, 2020. Achievement of the criteria in the agreement and payment of the contingent fees are dependent on a number of factors that are outside of the Company’s control, including actions requiring potential approval by the Company’s shareholders. Therefore, no accrual for the contingent fee has been recorded as of March 31, 2020. As part of the evaluation of an unsolicited offer to purchase the Company, nomination of directors by a shareholder, and shareholder demand to investigate a potential breach in a separation agreement, the Company incurred approximately $1.3 million in legal and advisory expenses during the three months ended March 31, 2020. In connection with this the Company made certain claims for reimbursement under its insurance policies. As of March 31, 2020, reimbursement for insurance proceeds under these policies have not been recorded as they have not been realized. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events | |
Subsequent Events | 18. Subsequent Events: Unsolicited Bid and Shareholder Demand On April 16, 2020 (the “Effective Date”), the Company entered into a Settlement Agreement (the “Agreement”) with Mr. Nynens, SKK, N&W, and each of Dennis Crowley, David Shepherd, David Kaplan, Timothy Krochuk and Samuel Kidston (collectively with SKK and N&W, the “SKK Parties”). Pursuant to the Agreement, the Company agreed to voluntarily dismiss the Lawsuit with prejudice, and it did so on April 21, 2020. The Company also agreed to purchase all of Mr. Nynens’ 261,631 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) owned, of record or beneficially, as of the Effective Date, at a price set by calculating the volume-weighted average price of such shares trading on the NASDAQ Global Market for the ten trading days ending on the close of the trading day immediately preceding the Effective Date, and with each party paying for its own fees and expenses. As of the Effective Date, Mr. Nynens and the SKK Parties agreed to terminate November 27 Agreement and did so on April 16, 2020. Further, the SKK Parties agreed to terminate the Joint Filing Agreement, dated November 27, 2019, by and between Mr. Nynens and the SKK Parties, and did so on April 16, 2020. Additionally, as of the Effective Date, Mr. Nynens agreed to withdraw the notice of intent to nominate director candidates for election at the 2020 annual meeting of stockholders of the Company, submitted by Mr. Nynens on December 20, 2019, and to cease all solicitation of proxies and other activities in connection with such annual meeting, and Mr. Nynens did so on April 16, 2020. On April 23, 2020, the Company completed the purchase of 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 a purchase price of $3.5 million. Acquisition of Interwork Technologies On April 20, 2020, CLIMB Channel Solutions (Canada) Inc. (“Buyer”), a newly-formed indirect subsidiary of the Company, entered into a Stock Purchase Agreement (the “SPA”) with Interwork Group, Inc. (“Seller”), Interwork Technologies Inc., a Delaware corporation (“Interwork US”), Interwork Technologies Inc., a corporation incorporated under the laws of the Province of Ontario, Canada (“Interwork Canada”), and Firepower Equity Inc. On April 30, 2020, Buyer completed the acquisition of Interwork US and Interwork Canada. Pursuant to the SPA, Buyer acquired Interwork US and Interwork Canada for an aggregate purchase price of $5 million Canadian dollar paid at closing plus a potential post-closing $1.1 million Canadian dollar earn-out. The SPA contains customary representations, warranties and covenants. The SPA also contains indemnification obligations of both Buyer and Seller, subject to certain limitations, and covenants regarding the conduct of each party prior to closing. COVID-19 In March 2020, the World Health Organization declared the novel coronavirus, COVID-19, a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. While the Company offers a full suite of solutions and services that address customer priorities across the technology landscape, it is not possible for the Company to predict the duration or magnitude of adverse results of the outbreak and its effects on the Company’s business, liquidity or results of operations at this time. |
Recently Issued Accounting St_2
Recently Issued Accounting Standards (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Recently Issued Accounting Standards | |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Standards: In June 2016, the FASB issued Accounting Standards Update No. 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. 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. 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. 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. In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” as part of its initiative to reduce complexity in the accounting standards. The standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies and simplifies other aspects of the accounting for income taxes. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have upon its financial position and results of operations, if any. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Revenue Recognition | |
Summary of disaggregation of revenue according to revenue type | (Unaudited) Three months ended Net sales: March 31, March 31, 2020 2019 Hardware, software and other products $ $ Software - security & highly interdependent with support Maintenance, support & other services Net sales $ $ |
Right-of-use Asset and Lease _2
Right-of-use Asset and Lease Liability (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Right-of-use Asset and Lease Liability | |
Schedule of information relating to right-of-use assets and related lease liabilities | (Unaudited) Three months ended March 31, 2020 2019 Cash paid for operating lease liabilities $ 120 $ 124 Right-of-use assets obtained in exchange for new operating lease obligations (1) $ — $ 2,163 Weighted-average remaining lease term 6.9 years 7.8 years Weighted-average discount rate Represents operating leases existing on January 1, 2019 and recognized as part of the Company’s adoption of ASU 2016-02. No new operating leases commenced during the three months ended March 31, 2020 and 2019. |
Schedule of maturities of lease liabilities | 2020 (excluding the three months ended March 31, 2020) $ 318 2021 405 2022 414 2023 463 2024 473 Thereafter 1,100 3,173 Less: imputed interest (709) Total lease liabilities $ 2,464 Lease liabilities, current portion 370 Lease liabilities, net of current portion 2,094 Total lease liabilities $ 2,464 |
Balance Sheet Detail (Tables)
Balance Sheet Detail (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Balance Sheet Detail | |
Schedule of equipment and leasehold improvements | (Unaudited) March 31, December 31, 2020 2019 Equipment $ 2,230 $ 2,230 Leasehold improvements 1,289 1,289 3,519 3,519 Less accumulated depreciation and amortization (2,397) (2,304) $ 1,122 $ 1,215 |
Schedule of accounts receivable - long term, net | (Unaudited) March 31, December 31, 2020 2019 Total amount due from customer $ 5,303 $ 5,656 Less: unamortized discount (131) (194) Less: current portion included in accounts receivable (4,157) (4,104) $ 1,015 $ 1,358 |
Schedule of accounts payable and accrued expenses | (Unaudited) March 31, December 31, 2020 2019 Trade accounts payable $ 76,988 $ 73,310 Accrued expenses 5,355 5,054 $ 82,343 $ 78,364 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share | |
Schedule of reconciliation of the numerators and denominators for computations of the basic and diluted per share | (Unaudited) Three months ended March 31, 2020 2019 Numerator: Net income $ 836 $ Less distributed and undistributed income allocated to participating securities 20 Net income attributable to common shareholders 816 1,429 Denominator: Weighted average common shares (Basic) 4,447 4,404 Weighted average common shares including assumed conversions (Diluted) 4,447 4,404 Basic net income per share $ 0.18 $ 0.32 Diluted net income per share $ 0.18 $ 0.32 |
Stockholders' Equity and Stoc_2
Stockholders' Equity and Stock Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Stockholders' Equity and Stock Based Compensation | |
Summary of nonvested shares of Restricted Stock awards outstanding and the changes during the period | Weighted Average Grant Date Shares Fair Value Nonvested shares at January 1, 2020 63,922 $ 14.94 Granted in 2020 66,560 12.58 Vested in 2020 (10,880) 14.28 Forfeited in 2020 (2,750) 17.92 Nonvested shares at March 31, 2020 116,852 $ 13.59 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Information | |
Schedule of segment reporting information | (Unaudited) Three months ended March 31, 2020 2019 Revenue: Lifeboat Distribution $ 57,264 $ 40,055 TechXtend 5,354 4,803 62,618 44,858 Gross Profit: Lifeboat Distribution $ 7,162 $ 6,198 TechXtend 1,002 1,036 8,164 7,234 Direct Costs: Lifeboat Distribution $ 2,637 $ 2,484 TechXtend 462 437 3,099 2,921 Segment Income Before Taxes: (1) Lifeboat Distribution $ 4,525 $ 3,714 TechXtend 540 599 Segment Income Before Taxes 5,065 4,313 General and administrative $ 2,401 $ 2,594 Legal and financial advisory expenses - unsolicited bid and related matters 1,323 — Acquisition related costs 403 — Interest, net 62 169 Foreign currency transaction gain 115 62 Income before taxes $ 1,115 $ 1,950 (1) Excludes general corporate expenses including interest and foreign currency translation expenses. (Unaudited) As of As of March 31, December 31, Selected Assets by Segment: 2020 2019 Lifeboat Distribution $ 107,450 $ 99,602 TechXtend 5,164 5,603 Segment Select Assets 112,614 105,205 Corporate Assets 17,232 21,076 Total Assets $ 129,846 $ 126,281 |
Summary of disaggregation of segment revenue | (Unaudited) Three months ended Disaggregation of Revenue: March 31, March 31, 2020 2019 Lifeboat Distribution Hardware, software and other products $ $ Software - security & highly interdependent with support Maintenance, support & other services Net Sales $ $ TechXtend Hardware, software and other products $ $ 4,337 Software - security & highly interdependent with support 56 Maintenance, support & other services 410 Net Sales $ $ |
Foreign Currency Translation (D
Foreign Currency Translation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenue from external customers | ||
Net sales | $ 62,618 | $ 44,858 |
Foreign operations | ||
Revenue from external customers | ||
Net sales | $ 4,700 | $ 5,200 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 62,618 | $ 44,858 |
Minimum | ||
Disaggregation of Revenue [Line Items] | ||
Payment terms on invoiced amount | 30 days | |
Maximum | ||
Disaggregation of Revenue [Line Items] | ||
Payment terms on invoiced amount | 75 days | |
Payment period | 3 years | |
Hardware, software and other products | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 57,583 | 40,189 |
Software - security and highly interdependent with support | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 1,953 | 1,892 |
Maintenance, support and other services revenue | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 3,082 | $ 2,777 |
Right-of-use Asset and Lease _3
Right-of-use Asset and Lease Liability (Details) | Mar. 31, 2020 |
Minimum | |
Right-of-use Asset and Lease Liability | |
Lease term | 3 years |
Maximum | |
Right-of-use Asset and Lease Liability | |
Lease term | 11 years |
Right-of-use Asset and Lease _4
Right-of-use Asset and Lease Liability - Operating lease information (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)item | Mar. 31, 2019USD ($)item | |
Right-of-use Asset and Lease Liability | ||
Cash paid for operating lease liabilities | $ 120 | $ 124 |
Right-of-use assets obtained in exchange for new operating lease obligations | $ 2,163 | |
Weighted-average remaining lease term | 6 years 10 months 24 days | 7 years 9 months 18 days |
Weighted-average discount rate | 3.40% | 3.40% |
New operating leases which commenced | item | 0 | 0 |
Right-of-use Asset and Lease _5
Right-of-use Asset and Lease Liability - Maturities of lease liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Maturities of lease liabilities | ||
2020 (excluding the three months ended March 31, 2020) | $ 318 | |
2021 | 405 | |
2022 | 414 | |
2023 | 463 | |
2024 | 473 | |
Thereafter | 1,100 | |
Total | 3,173 | |
Less: imputed interest | (709) | |
Total lease liabilities | 2,464 | |
Lease liability, current portion | 370 | $ 383 |
Lease liability, net of current portion | $ 2,094 | $ 2,189 |
Balance Sheet Detail (Details)
Balance Sheet Detail (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Equipment and leasehold improvements | |||
Equipment and leasehold improvements, gross | $ 3,519 | $ 3,519 | |
Less accumulated depreciation and amortization | (2,397) | (2,304) | |
Equipment and leasehold improvements, net | 1,122 | 1,215 | |
Depreciation and amortization expense | $ 96 | $ 135 | |
Minimum | |||
Equipment and leasehold improvements | |||
Payment extension term to customers | 12 months | ||
Maximum | |||
Equipment and leasehold improvements | |||
Payment extension term to customers | 48 months | ||
Equipment | |||
Equipment and leasehold improvements | |||
Equipment and leasehold improvements, gross | $ 2,230 | 2,230 | |
Leasehold improvements | |||
Equipment and leasehold improvements | |||
Equipment and leasehold improvements, gross | 1,289 | $ 1,289 | |
General and Administrative Expense | |||
Equipment and leasehold improvements | |||
Depreciation and amortization expense | $ 100 | $ 100 |
Balance Sheet Detail - Accounts
Balance Sheet Detail - Accounts receivable - long term, net (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Balance Sheet Detail | ||
Undiscounted cash flows March 31, 2021 | $ 4,300 | |
Undiscounted cash flows March 31, 2022 | 1,000 | |
Accounts receivable - long term | ||
Total amount due from customer | 5,303 | $ 5,656 |
Less unamortized discount | (131) | (194) |
Less current portion included in accounts receivable | (4,157) | (4,104) |
Total of accounts receivable, long term, net | $ 1,015 | $ 1,358 |
Balance Sheet Detail - Accoun_2
Balance Sheet Detail - Accounts payable and accrued expenses (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Accounts payable and accrued expenses | ||
Trade accounts payable | $ 76,988 | $ 73,310 |
Accrued expenses | 5,355 | 5,054 |
Accounts payable and accrued expenses | $ 82,343 | $ 78,364 |
Credit Facility (Details)
Credit Facility (Details) - Credit Facility | Nov. 15, 2017USD ($) | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) |
Credit Facility | |||
Maximum borrowing capacity | $ 20,000,000 | ||
Debt Service Coverage Ratio | 2 | ||
Leverage Ratio | 2.5 | ||
Collateral Coverage Ratio | 1.5 | ||
Borrowings outstanding | $ 0 | $ 0 | |
Index | |||
Credit Facility | |||
Interest rate | 1.62% | ||
Interest rate margin (as a percent) | 1.50% |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Numerator: | ||
Net income | $ 836 | $ 1,463 |
Less distributed and undistributed income allocated to participating securities | 20 | 34 |
Net income attributable to common shareholders | $ 816 | $ 1,429 |
Denominator: | ||
Weighted average common shares (Basic) | 4,447 | 4,404 |
Weighted average common shares including assumed conversions (Diluted) | 4,447 | 4,404 |
Basic net income per share | $ 0.18 | $ 0.32 |
Diluted net income per share | $ 0.18 | $ 0.32 |
Major Customers and Vendors (De
Major Customers and Vendors (Details) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020customeritem | Mar. 31, 2019customeritem | Dec. 31, 2019 | |
Purchases | Vendor concentration risk | |||
Significant Customers and Vendors | |||
Number of vendors | item | 2 | 2 | |
Purchases | Vendor concentration risk | Major vendor one | |||
Significant Customers and Vendors | |||
Percentage of concentration risk | 22.00% | 28.00% | |
Purchases | Vendor concentration risk | Major vendor two | |||
Significant Customers and Vendors | |||
Percentage of concentration risk | 14.00% | 16.00% | |
Net sales | Customer concentration risk | |||
Significant Customers and Vendors | |||
Number of customers | customer | 2 | 2 | |
Net sales | Customer one | Customer concentration risk | |||
Significant Customers and Vendors | |||
Percentage of concentration risk | 27.00% | 26.00% | |
Net sales | Customer two | Customer concentration risk | |||
Significant Customers and Vendors | |||
Percentage of concentration risk | 14.00% | 18.00% | |
Net accounts receivable | Customer one | Customer concentration risk | |||
Significant Customers and Vendors | |||
Percentage of concentration risk | 43.00% | 43.00% | |
Net accounts receivable | Customer two | Customer concentration risk | |||
Significant Customers and Vendors | |||
Percentage of concentration risk | 9.00% | 12.00% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Taxes | ||
Accrual of state income taxes, net of federal tax benefit | $ 0.5 | |
Effective tax rate (as a percent) | 25.00% | 25.00% |
Stockholders' Equity and Stoc_3
Stockholders' Equity and Stock Based Compensation - Plans and options (Details) - 2012 Plan - shares | Mar. 31, 2020 | Jun. 30, 2018 | May 31, 2018 |
Stock-based compensation | |||
Number of shares of common stock initially available for award | 1,000,000 | 600,000 | |
Options reserved for future issuance (in shares) | 449,837 |
Stockholders' Equity and Stoc_4
Stockholders' Equity and Stock Based Compensation - Nonvested (Details) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 31, 2020USD ($)item$ / sharesshares | Mar. 31, 2019USD ($)itemshares | |
Weighted Average Grant Date Fair Value | ||
Share-based compensation expense | $ | $ 0.2 | $ 0.2 |
Restricted stock | ||
Shares | ||
Nonvested shares at the beginning of the period | shares | 63,922 | |
Granted (in shares) | shares | 66,560 | 20,405 |
Vested (in shares) | shares | (10,880) | |
Forfeited (in shares) | shares | (2,750) | (1,625) |
Nonvested shares at the end of the period | shares | 116,852 | |
Weighted Average Grant Date Fair Value | ||
Nonvested shares at the beginning of period (in dollars per share) | $ / shares | $ 14.94 | |
Granted (in dollars per share) | $ / shares | 12.58 | |
Vested (in dollars per share) | $ / shares | 14.28 | |
Forfeited (in dollars per share) | $ / shares | 17.92 | |
Nonvested shares at the end of period (in dollars per share) | $ / shares | $ 13.59 | |
Unrecognized compensation cost (in dollars) | $ | $ 1.5 | |
Weighted average period for recognition of unrecognized compensation cost | 2 years 10 months 24 days | |
Restricted stock | Maximum | ||
Shares | ||
Number of equal quarterly installments for vesting of awards | item | 16 | 16 |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)item | Mar. 31, 2019USD ($) | |
Segment reporting information | ||
Number of reportable operating segments | item | 2 | |
Revenue | $ 62,618 | $ 44,858 |
Gross profit | 8,164 | 7,234 |
Direct Costs | 3,099 | 2,921 |
Segment Income Before Taxes | 5,065 | 4,313 |
General and administrative | 2,401 | 2,594 |
Legal and financial advisory expenses - unsolicited bid and related matters | 1,323 | |
Acquisition related costs | 403 | |
Interest, net | 62 | 169 |
Foreign currency transaction gain | 115 | 62 |
Income before provision for income taxes | 1,115 | 1,950 |
Lifeboat Distribution | ||
Segment reporting information | ||
Revenue | 57,264 | 40,055 |
Gross profit | 7,162 | 6,198 |
Direct Costs | 2,637 | 2,484 |
Segment Income Before Taxes | 4,525 | 3,714 |
TechXtend | ||
Segment reporting information | ||
Revenue | 5,354 | 4,803 |
Gross profit | 1,002 | 1,036 |
Direct Costs | 462 | 437 |
Segment Income Before Taxes | $ 540 | $ 599 |
Segment Information - Selected
Segment Information - Selected Assets by Segment (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Segment Reporting Information [Line Items] | ||
Total Assets | $ 129,846 | $ 126,281 |
Segment Select Assets | ||
Segment Reporting Information [Line Items] | ||
Total Assets | 112,614 | 105,205 |
Corporate Assets | ||
Segment Reporting Information [Line Items] | ||
Total Assets | 17,232 | 21,076 |
Lifeboat Distribution | Segment Select Assets | ||
Segment Reporting Information [Line Items] | ||
Total Assets | 107,450 | 99,602 |
TechXtend | Segment Select Assets | ||
Segment Reporting Information [Line Items] | ||
Total Assets | $ 5,164 | $ 5,603 |
Segment Information - Disaggreg
Segment Information - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 62,618 | $ 44,858 |
Lifeboat Distribution | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 57,264 | 40,055 |
TechXtend | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 5,354 | 4,803 |
Hardware, software and other products | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 57,583 | 40,189 |
Hardware, software and other products | Lifeboat Distribution | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 52,494 | 35,852 |
Hardware, software and other products | TechXtend | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 5,089 | 4,337 |
Software - security and highly interdependent with support | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 1,953 | 1,892 |
Software - security and highly interdependent with support | Lifeboat Distribution | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 1,925 | 1,836 |
Software - security and highly interdependent with support | TechXtend | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 28 | 56 |
Maintenance, support and other services revenue | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 3,082 | 2,777 |
Maintenance, support and other services revenue | Lifeboat Distribution | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 2,845 | 2,367 |
Maintenance, support and other services revenue | TechXtend | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 237 | $ 410 |
Related Party Transactions (Det
Related Party Transactions (Detail) - Maximum - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Sales to related party | $ 0.1 | $ 0.1 | |
Due from related party | $ 0.1 | $ 0.1 |
Unsolicited Bid and Sharehold_2
Unsolicited Bid and Shareholder Demand (Details) - USD ($) | Nov. 27, 2019 | Aug. 23, 2019 | Jul. 15, 2019 |
Shepherd Kaplan Krochuk, LLC and And North & Webster SSG, LLC | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Offer price | $ 16.38 | $ 14.37 | |
Percentage of premium over closing stock price | 18.10% | 32.80% | |
SKK 13D Group | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Shares held (Percentage) | 5.80% | ||
Percentage of stock agreed to be acquired | 100.00% | ||
SKK 13D Group | Chairman | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Annual base salary | $ 250,000 | ||
Awards granted (Percentage) | 3.00% | ||
Awards term | 3 years |
Contingencies (Details)
Contingencies (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Jan. 31, 2020 | |
Contingencies | ||
Contingent fee | $ 500,000 | |
Contingent fee accrual | $ 0 | |
Legal and financial advisory expenses - unsolicited bid and related matters | $ 1,323,000 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event $ / shares in Units, $ in Millions, $ in Millions | Apr. 23, 2020USD ($)$ / sharesshares | Apr. 20, 2020CAD ($) | Apr. 16, 2020$ / sharesshares |
Settlement Agreement with Mr. Nynens and the N&W Group | |||
Subsequent Event [Line Items] | |||
Shares agreed to be purchased | shares | 261,631 | ||
Par value | $ / shares | $ 0.01 | ||
Trading days | 10 days | ||
Shares repurchased | shares | 261,631 | ||
Market value (in dollars per share) | $ / shares | $ 13.19 | ||
Shares repurchased (Percentage) | 5.80% | ||
Shares repurchased amount | $ 3.5 | ||
Interwork Group, Inc. | |||
Acquisition of Interwork Technologies | |||
Aggregate purchase price | $ 5 | ||
Potential earn-out | $ 1.1 |