UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 000-26408

Wayside Technology Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-3136104
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

4 Industrial Way West, Suite 300, Eatontown, New Jersey 07724

(Address of principal executive offices)

(732) 389-8950

Registrant’s Telephone Number

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common stock, $.01 par value	WSTG	The NASDAQ Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐		Accelerated Filer ☒
		Smaller Reporting Company ☒
Non-Accelerated Filer ☐		Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 4,402,767 outstanding shares of common stock, par value $.01 per share (“Common Stock”) as of August 2, 2021.

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Wayside Technology Group, Inc. and Subsidiaries

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		Page

	PART I FINANCIAL INFORMATION

Item 1	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	3

	Condensed Consolidated Statements of Earnings for the three and six months ended June 30, 2021 and 2020 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32

Item 4.	Controls and Procedures	32

	PART II OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 6.	Exhibits, Financial Statement Schedules	34

SIGNATURES		35

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PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)


	June 30,		December 31,
	2021		2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	23,781	$	29,348
Accounts receivable, net of allowances of $922 and $892, respectively		101,878		93,821
Inventory, net		4,108		4,936
Vendor prepayments and advances		3,440		1,235
Prepaid expenses and other current assets		3,934		3,837
Total current assets		137,141		133,177

Equipment and leasehold improvements, net		2,163		2,308
Goodwill		17,566		16,816
Other intangibles, net		10,600		10,625
Right-of-use assets, net		1,738		1,933
Accounts receivable-long-term, net		116		304
Other assets		490		257
Deferred income tax assets		77		113
Total assets	$	169,891	$	165,533
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	117,430	$	116,692
Lease liability, current portion		476		490
Total current liabilities		117,906		117,182

Lease liability, net of current portion		1,937		2,167
Deferred income tax liabilities		1,462		1,467
Total liabilities		121,305		120,816

Commitments and contingencies

Stockholders’ equity:
Common stock, $.01 par value; 10,000,000 shares authorized; 5,284,500 shares issued: 4,385,785 and 4,361,997 shares outstanding, respectively		53		53
Additional paid-in capital		32,037		31,962
Treasury stock, at cost, 898,715 and 922,503 shares, respectively		(14,393)		(14,747)
Retained earnings		30,356		28,191
Accumulated other comprehensive income (loss)		533		(742)
Total stockholders’ equity		48,586		44,717
Total liabilities and stockholders' equity	$	169,891	$	165,533

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(Unaudited)

(Amounts in thousands, except per share data)


	Six months ended				Three months ended
	June 30,				June 30,
	2021		2020		2021		2020

Net sales	$	138,163	$	119,206	$	75,350	$	56,586

Cost of sales		116,341		103,927		64,371		49,472

Gross profit		21,822		15,279		10,979		7,114

Selling, general, and administrative expenses		16,551		10,873		8,138		5,469

Legal and financial advisory expenses, net - unsolicited bid and related matters		—		1,833		—		509

Acquisition related costs		—		638		—		235

Amortization and depreciation expense		796		239		398		143

Income from operations		4,475		1,696		2,443		758

Other income:

Interest, net		301		86		291		24

Foreign currency transaction (loss) gain		(66)		276		25		161

Income before provision for income taxes		4,710		2,058		2,759		943

Provision for income taxes		1,046		641		615		362

Net income	$	3,664	$	1,417	$	2,144	$	581

Income per common share-Basic	$	0.84	$	0.31	$	0.49	$	0.13

Income per common share-Diluted	$	0.84	$	0.31	$	0.49	$	0.13

Weighted average common shares outstanding — Basic		4,254		4,351		4,260		4,255

Weighted average common shares outstanding — Diluted		4,254		4,351		4,260		4,255

Dividends paid per common share	$	0.34	$	0.34	$	0.17	$	0.17

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands)


	Six months ended				Three months ended
	June 30,				June 30,
	2021		2020		2021		2020

Net income	$	3,664	$	1,417	$	2,144	$	581

Other comprehensive income:
Foreign currency translation adjustments		1,275		(279)		236		222
Other comprehensive income (loss)		1,275		(279)		236		222

Comprehensive income	$	4,939	$	1,138	$	2,380	$	803

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(Amounts in thousands, except share amounts)


											Accumulated
				Additional							Other
	Common Stock			Paid-In		Treasury			Retained		Comprehensive
	Shares	Amount		Capital		Shares	Amount		Earnings		Income (Loss)		Total
Balance at January 1, 2021	5,284,500	$	53	$	31,962	922,503	$	(14,747)	$	28,191	$	(742)	$	44,717
Net income	—		—		—	—		—		1,520		—		1,520
Translation adjustment	—		—		—	—		—		—		1,039		1,039
Dividends paid	—		—		—	—		—		(750)		—		(750)
Share-based compensation expense	—		—		279	—		—		—		—		279
Restricted stock grants (net of forfeitures)	—		—		(883)	(52,190)		883		—		—		—
Treasury shares repurchased	—		—		—	2,990		(57)		—		—		(57)
Balance at March 31, 2021	5,284,500	$	53	$	31,358	873,303	$	(13,921)	$	28,961	$	297	$	46,748
Net income	—		—		—	—		—		2,144		—		2,144
Translation adjustment	—		—		—	—		—		—		236		236
Dividends paid	—		—		—	—		—		(749)		—		(749)
Share-based compensation expense	—		—		337	—		—		—		—		337
Restricted stock grants (net of forfeitures)	—		—		342	20,184		(342)		—		—		—
Treasury shares repurchased	—		—		—	5,228		(130)		—		—		(130)
Balance at June 30, 2021	5,284,500		53		32,037	898,715		(14,393)		30,356		533		48,586

											Accumulated
				Additional							Other
	Common Stock			Paid-In		Treasury			Retained		Comprehensive
	Shares	Amount		Capital		Shares	Amount		Earnings		Income (Loss)		Total
Balance at January 1, 2020	5,284,500		53		32,874	778,807		(13,256)		26,715		(1,130)	$	45,256
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)	(63,810)		1,079		—		—		(1)
Treasury shares repurchased	—		—		—	2,059		(32)		—		—		(32)
Balance at March 31, 2020	5,284,500	$	53	$	31,961	717,056	$	(12,209)	$	26,776	$	(1,631)	$	44,950
Net income	—		—		—	—		—		581		—		581
Translation adjustment	—		—		—	—		—		—		222		222
Dividends paid	—		—		—	—		—		(740)		—		(740)
Share-based compensation expense	—		—		234	—		—		—		—		234
Restricted stock grants (net of forfeitures)	—		—		(813)	(48,068)		813		—		—		—
Treasury shares repurchased	—		—		—	264,039		(3,489)		—		—		(3,489)
Balance at June 30, 2020	5,284,500		53		31,382	933,027		(14,885)		26,617		(1,409)		41,758

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)


	Six months ended
	June 30,
	2021		2020
Cash flows from operating activities
Net income	$	3,664	$	1,417
Adjustments to reconcile net income to net cash and cash equivalents (used in) provided by operating activities:
Depreciation and amortization expense		796		239
Provision for doubtful accounts		—		130
Deferred income tax expense		(20)		9
Share-based compensation expense		616		400
Amortization of discount on accounts receivable		(42)		(108)
Amortization of right-of-use assets		240		197
Change in fair value of contingent earn-out consideration		18		—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(7,395)		36,479
Inventory		830		813
Prepaid expenses and other current assets		(48)		268
Vendor prepayments		790		152
Accounts payable and accrued expenses		175		(3,338)
Lease liability, net		(288)		(243)
Other assets and liabilities		(242)		(20)
Net cash and cash equivalents (used in) provided by operating activities		(906)		36,395

Cash flows from investing activities
Purchase of equipment and leasehold improvements		(169)		(19)
Vendor advances		(2,994)		—
Payment for acquisitions, net of cash acquired		—		(1,141)
Net cash and cash equivalents used in investing activities		(3,163)		(1,160)

Cash flows from financing activities
Purchase of treasury stock		(187)		(3,521)
Borrowings under revolving credit facility		—		6,800
Repayments of borrowings under revolving credit facility		—		(6,800)
Dividends paid		(1,499)		(1,515)
Net cash and cash equivalents used in financing activities		(1,686)		(5,036)

Effect of foreign exchange rate on cash and cash equivalents		188		(152)

Net (decrease) increase in cash and cash equivalents		(5,567)		30,047
Cash and cash equivalents at beginning of year		29,348		14,984
Cash and cash equivalents at end of year	$	23,781	$	45,031

Supplementary disclosure of cash flow information:
Income taxes paid	$	1,026	$	269
Interest paid	$	21	$	23

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Wayside Technology Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

(Amounts in tables in thousands, except share and per share amounts)

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, as permitted by the rules and regulation of the Securities and Exchange Commission, 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 of the results for the periods presented, 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, 2020.

The consolidated financial statements include the accounts of Wayside Technology Group, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

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.

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 June 30, 2021 and 2020 were $15.2 million and $6.9 million, respectively. The net sales from our foreign operations for the six months ended June 30, 2021 and 2020 were $32.0 million and $11.6 million, respectively.

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4. Comprehensive Income:

Cumulative translation adjustments have been classified within accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity in accordance with FASB ASC Topic 220, “Comprehensive Income.”

5. Revenue Recognition:

The Company’s revenues primarily result from the sale of various technology products and services, including third-party products, third-party software and third-party maintenance, software support and services. The Company recognizes revenue as control of the third-party products and third-party software is transferred to customers, which generally happens at the point of shipment or fulfilment and at the point that our customers and vendors accept the terms and conditions of the arrangement for third-party maintenance, software support and services.

The Company has contracts with certain customers where the Company’s performance obligation is to arrange for the products or services to be provided by another party. In these arrangements, as the Company assumes an agency relationship in the transaction, revenue is recognized in the amount of the net fee associated with serving as an agent. These arrangements primarily relate to third party maintenance, cloud services and certain security software whose intended functionality is dependent on third party maintenance.

The Company allows its customers to return product for exchange or credit subject to certain limitations. A liability is recorded at the time of sale for estimated product returns based upon historical experience and an asset is recognized for the amount expected to be recorded in inventory upon product return. The Company also provides rebates and other discounts to certain customers which are considered variable consideration. A provision for customer rebates and other discounts is recorded as a reduction of revenue at the time of sale based on an evaluation of the contract terms and historical experience.

The Company considers shipping and handling activities as costs to fulfill the sales of products. Shipping revenue is included in net sales when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of products sold. Taxes imposed by governmental authorities on the Company’s revenue producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales.

The Company disaggregates its operating revenue by segment, geography and timing of revenue recognition, which the Company believes provides a meaningful depiction of the nature of its revenue. See segment Note 16.

Hardware and software products sold by the Company are generally delivered via shipment from the Company’s facilities, drop shipment directly from the vendor, or by electronic delivery of keys for software products. The majority of the Company’s business involves shipments directly from its vendors to its customers, in these transactions, the Company is generally responsible for negotiating price both with the vendor and customer, payment to the vendor, establishing payment terms with the customer, product returns, and has risk of loss if the customer does not make payment. As the principal with the customer, the Company recognizes revenue upon receiving notification from the vendor that the product was shipped. Control of software products 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.

The Company performs an analysis of the number of days of sales in-transit to customers at the end of each reporting period based on an analysis of commercial delivery terms that include drop-shipment arrangements. This analysis is the basis upon which the Company estimates the amount of net sales in-transit at the end of the period and adjusts revenue and the related costs to reflect only what has been delivered to the customer. Changes in delivery patterns may result in a different number of business days estimated to make this adjustment. The Company also performs a weighted average analysis of the estimated number of days between order fulfillment and beginning of the renewal term for term licenses recorded on a gross basis, and a deferral estimate is recorded for term license renewals fulfilled prior to commencement date.

Generally, software products are sold with accompanying third-party delivered software assurance, which is a product that allows customers to upgrade, at no additional cost, to the latest technology if new capabilities are introduced during the period that the software assurance is in effect. The Company evaluates whether the software assurance is a separate performance obligation by assessing if the third-party delivered software assurance is critical or essential to the core functionality of the software itself. This involves considering if the software provides its original intended functionality to the customer without the updates, if the customer would ascribe a higher value to the upgrades versus the up-front deliverable, if the customer would expect frequent intelligence updates to the software (such as updates that maintain the original functionality), and if the customer chooses to not delay or always install upgrades. If the Company determines that the accompanying third-party delivered software assurance is critical or essential to the core functionality of the software license,

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the software license and the accompanying third-party delivered software assurance are recognized as a single performance obligation. The value of the product is primarily the accompanying support delivered by a third party and therefore the Company is acting as an agent in these transactions and recognizes them on a net basis at the point the associated software license is delivered to the customer. The Company sells cloud computing solutions that utilize third-party vendors to enable customers to access data center functionality in a cloud-based solution, including storage, computing and networking and access to software in the cloud that enhances office productivity, provides security or assists in collaboration. The Company recognizes revenue for cloud computing solutions for arrangements with one-time invoicing to the customer at the time of invoice on a net basis as the Company is acting as an agent in the transaction. For monthly subscription-based arrangements, the Company is acting as an agent in the transaction and recognizes revenue as it invoices the customer for its monthly usage on a net basis. For software licenses where the accompanying third-party delivered software assurance is not critical or essential to the core functionality, the software assurance is recognized as a separate performance obligation, with the associated revenue recognized on a net basis at the point the related software license is delivered to the customer.

The Company also sells some of its products and services as part of bundled contract arrangements containing multiple deliverables, which may include a combination of products and services. For each deliverable that represents a distinct performance obligation, total arrangement consideration is allocated based upon the standalone selling prices (“SSP”) of each performance obligation. SSP is determined 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.

The Company records freight billed to its customers as net sales and the related freight costs as cost of sales when the underlying product revenue is recognized. For freight not billed to its customers, the Company records the freight costs as cost of sales. The Company’s typical shipping terms result in shipping being performed before the customer obtains control of the product. The Company considers shipping to be a fulfillment activity and not a separate performance obligation.

The Company pays 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.

6. Acquisition:

Acquisition of Interwork Technologies

On April 30, 2020, the Company completed the purchase of Interwork Technologies Inc., a Delaware corporation and Interwork Technologies Inc., a corporation incorporated under the laws of the Province of Ontario, Canada (collectively, “Interwork”) for an aggregate purchase price of $5 million Canadian dollar (equivalent to $3.6 million USD), subject to certain working capital adjustments, paid at closing plus a potential post-closing $1.1 million Canadian dollars (equivalent to $0.8 million USD) earn-out. The purchase price allocation is final.

The purchase consideration included approximately $0.8 million of potential earn-out consideration if certain targets are achieved, payable in cash. As of June 30, 2021, the Company reassessed the earn-out liability and increased the fair value of the earn-out liability to approximately $0.9 million, with less than $0.1 million adjustment recognized within selling, general and administrative expenses during the six months ended June 30, 2021. The earn-out liability is included in accounts payable and accrued expenses as of June 30, 2021 as payment would be due in the third quarter of 2021.

There were no acquisition related costs incurred during the three and six months ended June 30, 2021. The Company incurred acquisition related costs of approximately $0.2 million and $0.6 million during the three and six months ended June, 2020, respectively, in conjunction with the acquisition of Interwork, which are reflected in the accompanying consolidated statements of earnings.

Acquisition of CDF Group Limited

On November 6, 2020, the Company entered into a Share Purchase Agreement and purchased the entire share capital of CDF Group Limited (“CDF”) for an aggregate purchase price of approximately £13.3 million (equivalent to approximately $17.4 million USD), subject to certain working capital and other adjustments. The allocation of the purchase price was based

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upon the estimated fair value of CDF’s net tangible and identifiable intangible assets as of the date of the acquisition. The transaction was accounted for under the purchase method of accounting.

The financial position and operating results of CDF are included in the Company’s consolidated financial statements for the three and six months ended June 30, 2021. The Company recorded net revenue for CDF of approximately $6.9 million and net income of approximately $0.3 million during the three months ended June 30, 2021. The Company recorded net revenue for CDF of approximately $15.3 million and net income of approximately $0.7 million during the six months ended June 30, 2021.

The impact of the CDF acquisition’s preliminary purchase price allocations on the Company’s consolidated balance sheet and the acquisition date fair value of the total consideration transferred is depicted in the table below. The Company has not yet completed its evaluation and determination of certain assets acquired and liabilities assumed, primarily (i) the final valuation of goodwill and intangible assets, (ii) capitalized software, and (iii) the final evaluation and assessment of income tax accounts; therefore the final fair value of the assets acquired and liabilities assumed may vary from the Company’s preliminary estimates:


(in thousands)
Cash	$	8,463
Trade accounts receivable		8,093
Other current assets		260
Equipment and leasehold improvements, net		1,367
Intangible assets
Customer relationships (13-year useful life)		6,357
Trademarks (15-year useful life)		504
Non-compete (1-year useful life)		42
Goodwill		12,774
Other assets		375
Accounts payable and other current liabilities		(12,364)
Deferred income tax liabilities		(1,461)
Other liabilities		(306)
Net assets	$	24,104


(in thousands)
Supplementary information:
Cash paid to sellers	$	24,104
Cash acquired in acquisition		(8,463)
Net cash paid for acquisition	$	15,641

Estimated intangible assets are comprised of approximately $6.4 million of customer relationships with an amortization period of 13 years and $0.5 million of tradenames with an amortization period of 15 years, representing the expected periods of benefits. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill recognized as a result of the acquisition is not deductible for income tax purposes.

The preliminary allocation of the purchase price for the acquisition of CDF was allocated based on information that is currently available. The Company’s estimates and assumptions underlying the initial allocations is subject to the collection of information necessary to complete its allocations within the measurement period, which is up to one year from the acquisition date.

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7. Goodwill and Other Intangible Assets:

The following table summarizes the changes in the carrying amount of goodwill for the six months ended June 30, 2021:


Balance at January 1, 2021	$	16,816
Translation adjustments		750
Balance June 30, 2021	$	17,566

Goodwill acquired through our acquisition of CDF is provisional for a period of up to one year from the acquisition date.

Information related to the Company’s other intangibles, net is as follows:


	As of June 30, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer and vendor relationships	$	10,768	$	691	$	10,077
Trade name		531		23		508
Non-compete		53		38		15
Total	$	11,352	$	752	$	10,600

	As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer and vendor relationships	$	10,361	$	272	$	10,089
Trade name		504		5		499
Non-compete		50		13		37
Total	$	10,915	$	290	$	10,625

Customer relationships are amortized over thirteen years. Vendor relationships are amortized between eleven and fifteen years. Trade name is amortized over fifteen years. Non-compete is amortized over one year. Intangible assets acquired through our acquisition of CDF are provisional for a period of up to one year from the acquisition date.

During the three months ended June 30, 2021 and 2020, the Company recognized total amortization expense for other intangibles, net of $0.2 million and $0.1 million, respectively. During the six months ended June 30, 2021 and 2020, the Company recognized total amortization expense for other intangibles, net of $0.5 million and $0.1 million, respectively.

Estimated future amortization expense of the Company’s other intangibles, net as of June 30, 2021 is as follows:


2021 (excluding the six months ended June 30, 2021)	$	436
2022		842
2023		842
2024		842
2025		842
Thereafter		6,796
Total	$	10,600

Table of Contents

8. 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 2 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.

Right-of-use (“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.