10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2014

OR

oTRANSITION 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)

1157 Shrewsbury Avenue, Shrewsbury, New Jersey 07702

(Address of principal executive offices)

(732) 389-8950

Registrant’s Telephone Number

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 x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes x  No o

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

Check One:

Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer o	Smaller Reporting Company x

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

There were 4,873,507 outstanding shares of common stock, par value $.01 per share, (“Common Stock”) as of August 1, 2014, not including 410,993 shares classified as treasury stock.

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,
	2014			2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	14,716		$	19,609
Accounts receivable, net of allowances of $1,461 and $1,429, respectively	57,585			60,796
Inventory, net	1,221			1,315
Prepaid expenses and other current assets	974			2,117
Deferred income taxes	236			218
Total current assets	74,732			84,055
Equipment and leasehold improvements, net	328			324
Accounts receivable-long-term	10,411			10,006
Other assets	162			159
Deferred income taxes	216			216
	$	85,849		$	94,760
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	47,493		$	60,039
Total current liabilities	47,493			60,039
Commitments and contingencies
Stockholders’ equity
Common Stock, $.01 par value; 10,000,000 shares authorized, 5,284,500 shares issued; 4,873,507 and 4,653,293 shares outstanding, respectively	53			53
Additional paid-in capital	30,488			28,791
Treasury stock, at cost, 410,993 and 631,207 shares, respectively	(5,965		)	(7,017		)
Retained earnings	13,645			12,695
Accumulated other comprehensive income	135			199
Total stockholders’ equity	38,356			34,721
	$	85,849		$	94,760

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

2

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,
	2014			2013		2014		2013
Net sales	$	156,129		$	140,075	$	84,399	$	74,095
Cost of sales	144,452			128,797		78,260		68,130
Gross profit	11,677			11,278		6,139		5,965
Selling, general and administrative expenses	8,002			7,731		3,957		3,814
Income from operations	3,675			3,547		2,182		2,151
Other income:
Interest, net	255			276		132		146
Foreign currency transaction (loss) gain	(4		)	21		8		16
Income before provision for income taxes	3,926			3,844		2,322		2,313
Provision for income taxes	1,384			1,284		839		773
Net income	$	2,542		$	2,560	$	1,483	$	1,540
Income per common share — Basic	$	0.55		$	0.57	$	0.32	$	0.35
Income per common share —Diluted	$	0.54		$	0.56	$	0.31	$	0.34
Weighted average common shares outstanding — Basic	4,601			4,464		4,664		4,451
Weighted average common shares outstanding — Diluted	4,665			4,578		4,719		4,557
Dividends paid per common share	$	0.34		$	0.32	$	0.17	$	0.16

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

3

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,
	2014			2013			2014		2013
Net income	$	2,542		$	2,560		$	1,483	$	1,540
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment	(64		)	(322		)	218		(136		)
Reclassification adjustment for loss realized in net income on available-for-sale marketable securities	—			11			—		—
Other comprehensive (loss) income	(64		)	(311		)	218		(136		)
Comprehensive income	$	2,478		$	2,249		$	1,701	$	1,404

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

4

Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statement 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			Total
Balance at January 1, 2014	5,284,500	$	53	$	28,791		631,207		$	(7,017	)	$	12,695		$	199		$	34,721
Net income												2,542						2,542
Translation adjustment															(64		)	(64		)
Dividends paid												(1,592		)				(1,592		)
Share-based compensation expense				609														609
Restricted stock grants (net of forfeitures)				(128		)	(20,414	)	128									—
Stock options exercised				552			(220,000	)	1,239									1,791
Tax benefit from share-based compensation				664														664
Treasury stock repurchased							20,200		(315		)							(315		)
Balance at June 30, 2014	5,284,500	$	53	30,488			410,993		(5,965		)	13,645			135			38,356

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

5

Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

	Six months ended
	June 30,
	2014			2013
Cash flows from operating activities
Net income	$	2,542		$	2,560
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization expense	114			150
Deferred income (benefit) tax expense	(18		)	14
Provision for doubtful accounts receivable	—			112
Share-based compensation expense	575			551
Changes in operating assets and liabilities:
Accounts receivable	2,834			10,603
Inventory	94			(30		)
Prepaid expenses and other current assets	1,142			(240		)
Accounts payable and accrued expenses	(12,493		)	(12,910		)
Other assets	(5		)	(82		)
Net cash (used in) provided by operating activities	(5,215		)	728
Cash flows provided by (used in) investing activities
Purchases of available-for-sale securities	—			(920		)
Redemptions of available-for-sale securities	—			5,342
Purchase of equipment and leasehold improvements	(116		)	(146		)
Net cash (used in) provided by investing activities	(116		)	4,276
Cash flows from financing activities
Dividends paid	(1,592		)	(1,493		)
Purchase of treasury stock	(315		)	(1,211		)
Tax benefit from share-based compensation	664			57
Repayment of capital lease obligations	—			(41		)
Proceeds from stock option exercises	1,791			—
Net cash provided by (used in) financing activities	548			(2,688		)
Effect of foreign exchange rate on cash	(110		)	(130		)
Net (decrease) increase in cash and cash equivalents	(4,893		)	2,186
Cash and cash equivalents at beginning of period	19,609			9,835
Cash and cash equivalents at end of period	$	14,716		$	12,021
Supplementary disclosure of cash flow information:
Income taxes paid	$	1,414		$	1,593
Interest paid	$	—		$	10

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

6

Wayside Technology Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

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

1.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, 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, investments, intangible assets, income taxes, stock-based compensation, and 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 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, 2013.

2.In May 2014, the FASB issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts with customers. The standard is effective for our reporting year beginning January 1, 2017 and early adoption is not permitted. We are currently evaluating the impact of this new accounting pronouncement, if any, the pronouncement will have on our financial statements.

3.Assets and liabilities of the Company’s foreign subsidiaries have been translated at current exchange rates, and related sales and expenses have been translated at average rates of exchange in effect during the period. The sales from our Canadian operations in the first six months of 2014 were $11.5 million as compared to $10.6 million for the first six months of 2013. The sales from our Canadian operations for the second quarter of 2014 were $5.9 million as compared to $5.7 million for the second quarter of 2013.

4.Cumulative translation adjustments and unrealized gains (losses) on available-for-sale securities have been classified within accumulated other comprehensive income, which is a separate component of stockholders’ equity in accordance with FASB ASC Topic 220, “Comprehensive Income.”

5.Revenue on product (software and hardware) and maintenance agreement sales are recognized once four criteria are met: (1) persuasive evidence of an arrangement exists, (2) the price is fixed and determinable, (3) delivery (software and hardware) or fulfillment (maintenance) has occurred, and (4) there is reasonable assurance of collection of the sales proceeds.  Revenues from the sales of hardware products, software products and licenses and maintenance agreements are recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recorded as cost of sales.

7

Wayside Technology Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

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

Product delivery to customers occur in a variety of ways, including (i) as physical product shipped from the Company’s warehouse, (ii) via drop-shipment by the vendor, or (iii) via electronic delivery for software licenses.  The Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse, thereby increasing efficiency and reducing costs.  The Company recognizes revenue for drop-ship arrangements on a gross basis.  Furthermore, in such drop-ship arrangements, the Company negotiates price with the customer, pays the supplier directly for the product shipped and bears credit risk of collecting payment from its customers.  The Company serves as the principal with the customer and, therefore, recognizes the sale and cost of sale of the product upon receiving notification from the supplier that the product has shipped.  Maintenance agreements allow customers to obtain technical support directly from the software publisher and to upgrade, at no additional cost, to the latest technology if new applications are introduced by the software publisher during the period that the maintenance agreement is in effect.

Sales are recorded net of discounts, rebates, and returns.  Vendor rebates and price protection are recorded when earned as a reduction to cost of sales or merchandise inventory, as applicable.

Cooperative reimbursements from vendors, which are earned and available, are recorded in the period the related advertising expenditure is incurred. Cooperative reimbursements are recorded as a reduction of cost of sales in accordance with FASB ASC Topic 605-50 “Accounting by a Customer (including reseller) for Certain Consideration Received from a Vendor.”  Provisions for returns are estimated based on historical sales returns and credit memo analysis which are adjusted to actual on a periodic basis.

Accounts receivable-long-term result from product sales with extended payment terms that are discounted to their present values at the prevailing market rates. In subsequent periods, the accounts receivable are 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.

6.The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximated fair value at June 30, 2014 and December 31, 2013 because of the relative short maturity of these instruments. The Company’s accounts receivable long-term is discounted to their present value at prevailing market rates so the balances approximate fair value.

7.Balance Sheet Detail:

Equipment and leasehold improvements consist of the following as of June 30, 2014 and December 31, 2013:

	June 30, 2014			December 31, 2013
Equipment	$	2,870		$	2,771
Leasehold improvements	570			555
	3,440			3,326
Less accumulated depreciation and amortization	(3,112		)	(3,002		)
	$	328		$	324

8

Wayside Technology Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

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

Accounts payable and accrued expenses consist of the following as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Trade accounts payable	$	45,121	$	56,973
Accrued expenses	2,372		3,066
	$	47,493	$	60,039

Accumulated other comprehensive income consists of the following as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Foreign currency translation adjustment	$	135	$	199
	$	135	$	199

8.On January 4, 2013, the Company entered into a $10,000,000 revolving credit facility (the “Credit Facility”) with Citibank, N.A. (“Citibank”) pursuant to a Business Loan Agreement (the “Loan Agreement”), Promissory Note (the “Note”), Commercial Security Agreements (the “Security Agreements”) and Commercial Pledge Agreement (the “Pledge Agreement”).  The Credit Facility, which will be used for business and working capital purposes, including financing of larger extended payment terms sales transactions. The Credit Facility matures on January 4, 2016, at which time the Company must pay this loan in one payment of any outstanding principal plus all accrued unpaid interest. In addition, the Company will pay regular monthly payments of all accrued 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 an independent index which is the LIBOR Rate (the “Index”).  If the Index becomes unavailable during the term of this loan, Citibank may designate a substitute index after notifying the Company.  Interest on the unpaid principal balance of the Note will be calculated using a rate of 1.500 percentage points over the Index.  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 ratio of Total Liabilities to Tangible Net Worth (each as defined in the Loan Agreement) of not greater than 2.50 to 1.00, to be tested quarterly and (ii) a minimum Debt Service Coverage Ratio (as defined in the Loan Agreement) of 2.00 to 1.00.  Additionally, the Loan Agreement contains negative covenants related to, among other items, prohibitions against the creation of certain liens, engaging in any business activities substantially different than those currently engaged in by the Company, and paying dividends the Company’s stock other than (i) dividends payable in its stock and (ii) cash dividends in amounts and frequency consistent with past practice, without first securing the written consent of Citibank. The Company is in compliance with all covenants at June 30, 2014.

At June 30, 2014, the Company had no borrowings outstanding under the Credit Facility.

9.Basic Earnings Per Share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted average number of shares of Common Stock outstanding during the period.

9

Wayside Technology Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

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

Diluted EPS is calculated by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding, adjusted for potentially dilutive securities including unexercised stock option grants and nonvested shares of restricted stock.

A reconciliation of the numerators and denominators of the basic and diluted per share computations follows:

	Six months ended				Three months ended
	June 30,				June 30,
	2014		2013		2014		2013
Numerator:
Net income	$	2,542	$	2,560	$	1,483	$	1,540
Denominator:
Weighted average shares (Basic)	4,601		4,464		4,664		4,451
Dilutive effect of outstanding options and non-vested shares of restricted stock	64		114		55		106
Weighted average shares including assumed conversions (Diluted)	4,665		4,578		4,719		4,557
Basic income per share	$	0.55	$	0.57	$	0.32	$	0.35
Diluted income per share	$	0.54	$	0.56	$	0.31	$	0.34

10.The Company had one major vendor that accounted for 11.5% and 13.2% of total purchases during the six months and three months, respectively, that ended June 30, 2014. The Company had two major vendors that accounted for 10.9% and 9.7% of total purchases during the six months ended June 30, 2013, and 13.5% and 10.9% of total purchases for the three months that ended June 30, 2013. The Company had three major customers that accounted for 16.7%, 15.1% and 11.1% of its total net sales during the six months ended June 30, 2014, and 17.5%, 14.5% and 11.5% of total net sales for the three months ended June 30, 2014. These same customers accounted for 12.5%, 14.5% and 9.0% of total net accounts receivable as June 30, 2014. The Company had three major customers that accounted for 15.0%, 13.9% and 12.0% of its total net sales during the six months ended June 30, 2013, and 15.6%, 13.3% and 12.6% of total net sales for the three months ended June 30, 2013.

11.The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. The Company has identified its federal consolidated tax return and its state tax return in New Jersey and its Canadian tax return as major tax jurisdictions. As of June 30, 2014 the Company’s Federal and Canadian tax returns remain open for examination for the years 2010 through 2013. The Company’s New Jersey tax returns are open for examination for the years 2009 through 2013. 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.

10

Wayside Technology Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

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

The effective tax rate for each of the six and three months ended June 30, 2014 was 35.3% and 36.1% respectively, compared with 33.4% for both periods last year. The current year tax rate increase is primarily due to an increase in permanent differences between book and taxable income.

12.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.  As of June 30, 2014, the number of shares of Common stock available for future award grants to employees and directors under the 2012 Plan is 557,636.

The 2006 Stock-Based Compensation Plan (the “2006 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 2006 Plan was 800,000. As of June 30, 2014, there are no shares of Common Stock available for future award grants to employees and directors under the 2006 Plan.

During 2006, the Company granted a total of 315,000 shares of Restricted Stock to officers, directors and employees. Included in this grant were 200,000 Restricted Shares granted to the Company’s CEO in accordance with his employment agreement. These 200,000 Restricted Shares vest over 40 equal quarterly installments. The remaining grants of Restricted Stock vest over 20 equal quarterly installments.

During 2007, the Company granted a total of 30,000 shares of Restricted Stock to officers, directors and employees. These shares of Restricted Stock vest over 20 equal quarterly installments. In 2007, a total of 12,500 shares of Restricted Stock were forfeited as a result of employees and officers terminating employment with the Company.

During 2008, the Company granted a total of 57,500 shares of Restricted Stock to officers and directors. These shares of Restricted Stock vest over 20 equal quarterly installments.  In 2008, a total of 3,500 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company.

During 2009, the Company granted a total of 140,000 shares of Restricted Stock to officers and employees. These shares of Restricted Stock vest over 20 equal quarterly installments.

During 2010, the Company granted a total of 150,500 shares of Restricted Stock to officers and employees. These shares of Restricted Stock vest over 20 equal quarterly installments. In 2010, a total of 5,875 shares of Restricted Stock were forfeited as a result of employees and officers terminating employment with the Company.

During 2011, the Company granted a total of 15,000 shares of Restricted Stock to employees. These shares of Restricted Stock vest over 20 equal quarterly installments. In 2011, a total of 8,375 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company.

During 2012, the Company granted a total of 92,000 shares of Restricted Stock to officers, directors, and employees. These shares of Restricted Stock vest over 20 equal quarterly installments. A total of 3,525 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company.

11

Wayside Technology Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

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

During 2013, the Company granted a total of 56,500 shares of Restricted Stock to officers and employees. Included in these grants were 40,000 Restricted Shares granted to the Company’s CEO in accordance with the satisfaction of certain performance criteria included in his compensation plan. These 40,000 Restricted Shares vest over 16 equal quarterly installments. The remaining grants of Restricted Stock vest over 20 equal quarterly installments. A total of 775 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company.

During 2014, the Company granted a total of 45,689 shares of Restricted Stock to officers and employees. These shares of Restricted Stock vest between eight and twenty equal quarterly installments. A total of 25,275 shares of Restricted Stock were forfeited as a result of officers and employees terminating employment with the Company.

Changes during 2014 in options outstanding under the Company’s combined plans (i.e., the 2012 Plan, the 2006 Plan, the 1995 Non-Employee Director Plan and the 1995 Stock Option Plan) were as follows:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value ($M)(1)
Outstanding at January 1, 2014	285,640		$	8.71
Granted in 2014	—		—
Canceled in 2014	(15,000	)	3.04
Exercised in 2014	(220,000	)	8.14
Outstanding at June 30, 2014	50,640		$	12.85	0.8	$	0.1
Exercisable at June 30, 2014	50,640		$	12.85	0.8	$	0.1

(1) The intrinsic value of an option is calculated as the difference between the market value on the last trading day of the quarter (June 30, 2014) and the exercise price of the outstanding options. The market value as of June 30, 2014 was $15.35 per share represented by the closing price as reported by The NASDAQ Global Market on that day.

A summary of nonvested shares of Restricted Stock awards outstanding under the Company’s the 2012 Plan and 2006 Plan as of June 30, 2014, and changes during the six months then ended is as follows:

	Shares		Weighted Average Grant Date Fair Value
Nonvested shares at January 1, 2014	199,550		$	12.02
Granted in 2014	45,689		15.12
Vested in 2014	(51,942	)	11.23
Forfeited in 2014	(25,275	)	11.28
Nonvested shares at June 30, 2014	168,022		$	12.99

As of June 30, 2014, there is approximately $2.2 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 2.7 years.

12

Wayside Technology Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

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

For the six months ended June 30, 2014 and 2013, the Company recognized share-based compensation cost of $575,000 and $551,000 respectively, which is included in the Company’s general and administrative expense.

13.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 Chief Executive Officer.

The Company is organized into two reportable operating segments.  The “Lifeboat Distribution” segment distributes technical software 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 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:

	Six months ended					Three months ended
	June 30,					June 30,
	2014			2013		2014		2013
Revenue:
Lifeboat Distribution	$	129,237		$	115,078	$	69,979	$	61,209
TechXtend	26,892			24,997		14,420		12,886
	156,129			140,075		84,399		74,095
Gross Profit:
Lifeboat Distribution	$	8,728		$	8,284	$	4,612	$	4,511
TechXtend	2,949			2,994		1,527		1,454
	11,677			11,278		6,139		5,965
Direct Costs:
Lifeboat Distribution	$	2,479		$	2,350	$	1,248	$	1,245
TechXtend	1,595			1,654		801		765
	4,074			4,004		2,049		2,010
Segment Income:
Lifeboat Distribution	$	6,249		$	5,934	$	3,364	$	3,266
TechXtend	1,354			1,340		726		689
Segment Income	7,603			7,274		4,090		3,955
General and administrative	$	3,928		$	3,727	$	1,908	$	1,804
Interest, net	255			276		132		146
Foreign currency translation (loss) gain	(4		)	21		8		16
Income before taxes	$	3,926		$	3,844	$	2,322	$	2,313
	As of June 30, 2014
Selected Assets By Segment:
Lifeboat Distribution	$	32,284
TechXtend	36,933
Segment Select Assets	69,217
Corporate Assets	16,632
Total Assets	$	85,849

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of risk and uncertainties, including those set forth under the heading “Certain Factors Affecting Results of Operations and Stock Price” and elsewhere in this report and those set forth in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission. The following discussion should be read in conjunction with the accompanying unaudited  condensed consolidated financial statements and related notes included in this report and the consolidated financial statements and related notes included in our 2013 Annual Report on Form 10-K.

Overview

The Company is organized into two reportable operating segments.  The “Lifeboat Distribution” segment distributes technical software 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 USA and Canada.

We offer an extensive line of products from leading publishers of software and tools for virtualization/cloud computing, security, networking, storage and infrastructure management, application lifecycle management and other technically sophisticated domains as well as computer hardware. We market these products through direct sales, the Internet, our catalogs, direct mail programs, advertisements in trade magazines and e-mail promotions.

The Company’s sales, gross profit and results of operations have fluctuated and are expected to continue to fluctuate on a quarterly basis as a result of a number of factors, including but not limited to: the condition of the software industry in general, shifts in demand for software products, pricing, level of extended payment terms sales transactions, industry shipments of new software products or upgrades, the timing of new merchandise and catalog offerings, fluctuations in response rates, fluctuations in merchandise returns, adverse weather conditions that affect response, distribution or shipping, shifts in the timing of holidays and changes in the Company’s product offerings. The Company’s operating expenditures are based on sales forecasts. If sales do not meet expectations in any given quarter, operating results may be materially adversely affected.

Results of Operations

The following table sets forth for the periods indicated certain financial information derived from the Company’s unaudited condensed consolidated statements of earnings expressed as a percentage of net sales. This comparison of financial results is not necessarily indicative of future results:

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	Six months ended June  30,				Three months ended June  30,
	2014		2013		2014		2013
Net sales	100	%	100	%	100	%	100	%
Cost of sales	92.5		92.0		92.7		91.9
Gross profit	7.5		8.0		7.3		8.1
Selling, general and administrative expenses	5.1		5.5		4.7		5.1
Income from operations	2.4		2.5		2.6		3.0
Interest income, net	.1		.2		0.2		0.1
Realized foreign currency exchange gain	—		—		—		—
Income before income taxes	2.5		2.7		2.8		3.1
Provision for income taxes	0.9		0.9		1.0		1.0
Net income	1.6	%	1.8	%	1.8	%	2.1	%

Net Sales

Net sales for the second quarter ended June 30, 2014 increased 14% or $10.3 million to $84.4 million compared to $74.1 million for the same period in 2013. Total sales for the second quarter of 2014 for our Lifeboat Distribution segment were $70.0 million compared to $61.2 million in the second quarter of 2014, representing an increase of $8.8 million or 14%. Total sales for the second quarter of 2014 for our TechXtend segment were $14.4 million compared to $12.9 million in the second quarter of 2013, representing a increase of $1.5 million or 12%.

The 14% increase in net sales for the Lifeboat Distribution segment was mainly a result of the strengthening of our account penetration, our continued focus on the expanding virtual infrastructure-centric business and the addition of several key product lines. The 12% increase in net sales in the TechXtend segment was primarily due an increase in extended payment terms sales transactions as compared to the second quarter ended June 30, 2013.

For the six months ended June 30, 2014, net sales increased 11% or $16.1 million to $156.1 million compared to $140.1 million for the same period in 2013. Net sales for the six months ended June 30, 2014 for our Lifeboat segment increased 12% or $14.2 million to $129.2 million compared to $115.1 million for the same period in 2013.   Net sales for the six months ended June 30, 2014 for our TechXtend segment increased 8% or $1.9 million to $26.9 million compared to $25.0 million for the same period in 2013.

The 12% increase in net sales from our Lifeboat segment in the first six months of 2014 compared to the same period in 2013 was mainly a result of our continued focus on the expanding virtual infrastructure-centric business, the addition of several key product lines, and the strengthening of our account penetration. The 8% increase in net sales in the TechXtend segment was primarily due to an increase in extended payment terms sales transactions as compared to the same period in 2013.

Gross Profit

Gross Profit for the second quarter ended June 30, 2014 was $6.1 million, a 3% increase as compared to $6.0 million for the second quarter of 2013. Gross profit for our Lifeboat segment in the second quarter of 2014 was $4.6 million compared to $4.5 million for the second quarter of 2013, representing a 2% increase. Gross profit for our TechXtend segment of $1.5 million in the second quarter of 2014 was $1.5 million was essentially flat as compared to the second quarter of 2013.

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For the six months ended June 30, 2014 gross profit increased 4% or $0.4 million to $11.7 million compared to $11.3 million for the same period in 2013. Lifeboat’s gross profit for the six months ended June 30, 2014 increased 5% to $8.7 million as compared to $8.3 million for the first six months of 2013. The increase in gross profit for the Lifeboat segment was primarily due to higher sales volume. TechXtend gross profit for the six months ended June 30, 2014 decreased by 2% to $2.9 million as compared to $3.0 million for the first six months of 2013. The decrease in gross profit margin for the TechXtend segment was primarily caused by the increase in larger extended payment term sales transactions which typically carry lower margins.

Gross profit margin (gross profit as a percentage of net sales) for the second quarter ended June 30, 2014 was 7.3% compared to 8.1% for the second quarter of 2013. Gross profit margin for the six months ended June 30, 2014 was 7.5% compared to 8.1% in the same period in 2013. Gross profit margin for our Lifeboat segment for the second quarter of 2014 was 6.6% compared to 7.4% for the second quarter of 2013. The decrease in gross profit margin for the Lifeboat Distribution segment was primarily caused by competitive pricing pressure. Gross profit margin for our TechXtend segment for the second quarter of 2014 was 10.6% compared to 11.3% for the second quarter of 2013.  The decrease in gross profit margin for the TechXtend segment was primarily caused by the increase in larger extended payment term sales transactions which typically carry lower margins.

Vendor rebates and discounts for the six month period ended June 30, 2014 amounted to $0.8 million compared to $0.7 million for the six month period ended June 30, 2013. Vendor rebates are dependent on reaching certain targets set by our vendors. Vendors have been periodically substantially increasing their target revenues for rebate eligibility.  The Company monitors gross profits and gross profit margins carefully. Price competition in our market continued to intensify in 2014, with competitors lowering their prices significantly and the Company responded immediately.  We anticipate that margins, as well as discounts and rebates, for the remainder of the year will continue to be affected by this current trend.  To the extent that the Company finances larger transactions with extended payment terms, as anticipated, gross margins also will be negatively impacted.

Selling, General and Administrative Expenses

Total selling, general, and administrative (“SG&A”) expenses for the second quarter of 2014 were $4.0 million compared to $3.8 million for the second quarter of 2013, representing a increase of $0.1 million or 3.7%.  This increase is primarily the result of an increase in employee and employee related expenses (salaries, commissions, bonus accruals and benefits) and occupancy expenses in 2014 compared to 2013. As a percentage of net sales, SG&A expenses for the second quarter of 2014 were 4.7% compared to 5.1% for the second quarter of 2013.The decline in SG&A as a percentage of net sales is the result of the increase in net sales.

For the six months ended June 30, 2014, SG&A expenses were $8.0 million compared to $7.7 million in the same period in 2013, representing an increase of $0.3 million or 4%. This increase is primarily the result of an increase in employee and employee related expenses (salaries, commissions, bonus accruals and benefits) in 2014 compared to 2013.  As a percentage of net sales, SG&A expenses for the six months ended June 30, 2014 were 5.1% compared to 5.5% for the six months ended June 2013. The decline in SG&A as a percentage of net sales is the result of the increase in net sales.

Direct selling costs (a component of SG&A) for the second quarter of 2014 were $2.1 million compared to $2.0 million for the second quarter of 2013. Total direct selling costs for our Lifeboat Distribution segment for the second quarter of 2014 were $1.3 million compared to $1.2 million for the same period in 2013.  Total direct selling costs for our TechXtend segment for the second quarter of 2014 were $0.8 million compared to $0.8 million for the same period in 2013.

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The Company expects that its SG&A expenses, as a percentage of net sales, may vary by quarter depending on changes in sales volume, and levels of continuing investments in employee headcount and marketing. We continue to monitor our SG&A expenses closely.

Income Taxes

For the three months ended June 30, 2014, the Company recorded a provision for income taxes of $.8 million or 36.1% of income, compared to $.8 million or 33.4% of income for the same period in 2013. The current year tax rate increase is primarily due to an increase in permanent differences between book and taxable income.

For the six months ended June 30, 2014, the Company recorded a provision for income taxes of $1.4 million or 35.3% of income, compared to $1.3 million or 33.4% of income for the same period in 2013. The current year tax rate increase is primarily due to an increase in permanent differences between book and taxable income.

Liquidity and Capital Resources

During the first three months of 2014 our cash and cash equivalents decreased by $4.9 million to $14.7 million at June 30, 2014, from $19.6 million at December 31, 2013. During the first six months of 2014, net cash used in operating activities amounted to $5.2 million, net cash used in investing activities amounted to $0.1 million and net cash provided by financing activities amounted to $0.5 million.

Net cash used in operating activities in the first six months of 2014 was $5.2 million and primarily resulted from a $12.5 million decrease in accounts payable partially offset by $3.2 million in net income excluding non-cash charges, and  $2.8 million decrease in accounts receivable and a decrease of $1.1 million in prepaid and other current assets. The decreases in accounts receivable and account payable and accrued expenses were mainly due to lower sales volume, including sales on extended payment terms, in the second quarter of 2014 compared to the fourth quarter of 2013.

Net cash used in investing activities in the first six months of 2014 amounted to $0.1 million. This was the result of capital expenditures of $0.1 million.

Net cash provided by financing activities in the first three months of 2014 amounted to $0.5 million. This consisted primarily of proceeds from stock option exercises of $1.8 million and the tax benefit from share based compensation of $0.7 million offset by dividends paid of $1.6 million and treasury stock repurchased of $0.3 million.

The Company’s current and anticipated use of its cash and cash equivalents is, and will continue to be, to fund working capital, operational expenditures, the Common Stock repurchase program and dividends if declared by the board of directors.

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

Contractual Obligations as of June 30, 2014 are summarized as follows:

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Payment due by Period	Total		Less than 1 year		1-3 years		4-5 years	After 5 years
Long-term debt obligations	—		—		—		—	—
Capital Lease obligations	—		—		—		—	—
Operating Lease obligations (1)	$	441	$	266	$	175	—	—
Purchase Obligations	—		—		—		—	—
Other Long term Obligations reflected on the Company’s
Balance Sheet under GAAP	—		—		—		—	—
Total Contractual Obligations	$	441	$	266	$	175	—	—

(1)  Operating leases relate primarily to the leases of the space used for our operations in Shrewsbury, New Jersey, Mississauga, Canada and Almere, Netherlands. The commitments for operating leases include the minimum rent payments.

As of June 30, 2014, the Company is not committed by lines of credit or standby letters of credit, and has no standby repurchase obligations or other commercial commitments (see Note 7 in the Notes to our Consolidated Financial Statements).

Foreign Exchange

The Company’s Canadian business is subject to changes in demand or pricing resulting from fluctuations in currency exchange rates or other factors. We are subject to fluctuations primarily in the Canadian Dollar-to-U.S. Dollar exchange rate.

Off-Balance Sheet Arrangements

As of June 30, 2014, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company recognizes revenue from the sale of software and hardware for microcomputers, servers and networks upon shipment or upon electronic delivery of the product. The Company expenses the advertising costs associated with producing its catalogs. The costs of these catalogs are expensed in the same month the catalogs are mailed.

On an on-going basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, investments, intangible assets, income taxes, stock-based compensation, contingencies and litigation.

The Company bases its estimates on 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. Actual results may differ from these estimates.

The Company believes the following critical accounting policies, used in the preparation of its unaudited condensed consolidated financial statements, affect its more significant judgments and estimates.

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to

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deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-offs may be required.

The Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance related to deferred tax assets. In the event the Company was to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.

Under the fair value recognition provision stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense as it is amortized on a straight-line basis over the requisite service period, which is the vesting period. We make certain assumptions in order to value and expense our various share-based compensation awards. In connection with valuing stock options, we use the Black-Scholes model, which requires us to consider certain facts and to estimate certain subjective assumptions. The key facts and assumptions we consider are: (i) the expected volatility of our Common Stock; (ii) the expected term of the award; and (iii) the expected forfeiture rate. In connection with our restricted stock program we make assumptions principally related to the forfeiture rate. We review our valuation assumptions periodically and, as a result, we may change our valuation assumptions used to value stock based awards granted in future periods. Such changes may lead to a significant change in the expense we recognize in connection with share-based payments.

Certain Factors Affecting Results of Operations and Stock Price

This report includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements in this report regarding future events or conditions, including but not limited to statements regarding industry prospects and the Company’s expected financial position, results of operations, business and financing plans, are forward-looking statements. These statements can be identified by forward-looking words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” and “continue” or similar words.

Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Substantial risks and uncertainties unknown at this time could cause actual results to differ materially from those indicated by such forward-looking statements, including, but not limited to, the continued acceptance of the Company’s distribution channel by vendors and customers, the timely availability and acceptance of new products, product mix, market conditions, competitive pricing pressures, contribution of key vendor relationships and support programs, including vendor rebates and discounts, as well as factors that affect the software industry in general and other factors generally. We strongly urge current and prospective investors to carefully consider the cautionary statements and risk factors contained in this report and our annual report on Form 10-K for the year ended December 31, 2013.

The Company operates in a rapidly changing business, and new risk factors emerge from time to time. Management cannot predict every risk factor, nor can it assess the impact, if any, of all such risk factors on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements.

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Accordingly, forward-looking statements should not be relied upon as a prediction of actual results and readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The statements concerning future sales, future gross profit margin and future selling and administrative expenses are forward looking statements involving certain risks and uncertainties such as availability of products, product mix, pricing pressures, market conditions and other factors, which could result in a fluctuation of sales below recent experience.

Stock Volatility. The technology sector of the United States stock markets has experienced substantial volatility in recent periods. Numerous conditions which impact the technology sector or the stock market in general or the Company in particular, whether or not such events relate to or reflect upon the Company’s operating performance, could adversely affect the market price of the Company’s Common Stock. Furthermore, fluctuations in the Company’s operating results, announcements regarding litigation, the loss of a significant vendor, increased competition, reduced vendor incentives and trade credit, higher postage and operating expenses, and other developments, could have a significant impact on the market price of the Company’s Common Stock.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

In addition to its activities in the United States, 7.4% of the Company sales during the six months ended June 30, 2014 was generated in Canada. We are subject to general risks attendant to the conduct of business in Canada, including economic uncertainties and foreign government regulations. In addition, the Company’s Canadian business is subject to changes in demand or pricing resulting from fluctuations in currency exchange rates or other factors. See “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Foreign Currency Transactions Gain (Loss).”

The Company’s cash balance is invested in short-term savings accounts with our primary banks, Citibank, and JPMorgan Chase Bank. As such, we believe that the risk of significant changes in the value of our cash invested is minimal.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures”, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.  This evaluation was carried out under the supervision and with the participation of various members of our management, including our Company’s President, Chairman of the Board and Chief Executive Officer (principal executive officer) and Vice President of Accounting and Reporting and Interim Chief Financial Officer (principal financial officer). Based upon that evaluation, the Company’s Chief Executive Officer and Interim Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective, as of the end of the period covered by this report, to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and  Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting. There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act, that occurred during the quarter ended June 30, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

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

The table below sets forth the repurchase of Common Stock by the Company and its affiliated purchasers during the second quarter of 2014.

ISSUER PURCHASE OF EQUITY SECURITIES

	Total Number of Shares		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or	Average Price Paid Per Share		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
Period	Purchased		(2)		Programs	(3)		(4)(5)
April 1, 2014- April 30, 2014	—		$	—	—	$	—	214,947
May 1, 2014- May 31, 2014	8,267	(1)	15.92		—	—		214,947
June 1, 2014- June 30, 2014	—		—		—	—		214,947
Total	8,267		$	15.92	—	$	—	214,947

(1) Includes 8,267 shares surrendered to the Company by employees to satisfy individual tax withholding obligations upon vesting of previously issued shares of Restricted Stock. These shares are not included in the Common Stock repurchase program referred to in footnote (4) below.

(2) Average price paid per share reflects the closing price the Company’s Common Stock on the business date the shares were surrendered by the employee stockholder to satisfy individual tax withholding obligations upon vesting of Restricted Stock or the price of the Common Stock paid on the open market purchase, as applicable.

(3) Average price paid per share reflects the price of the Company’s Common Stock purchased on the open market.

(4) On July 31, 2008, the Company approved the increase of its Common Stock repurchase program by an additional 500,000 shares. The Company expects to purchase shares of its Common Stock from time to time in the market or otherwise subject to market conditions. The Common Stock repurchase program does not have an expiration date.

(5) On October 23, 2012, the Board of Directors of the Company approved, and on October 29, 2012, the Company entered into a written purchase plan intended to comply with the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Plan”).  Purchases involving shares of the Company’s Common Stock under the Plan may take place commencing October 29, 2012, and the Plan is intended to be in effect until October 29, 2014.  Pursuant to the Plan, the Company’s broker shall effect purchases of up to an aggregate of 350,000 shares of Common Stock.

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Item 6. Exhibits

(a)Exhibits

31.1	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Simon F. Nynens, the Chief Executive Officer (principal executive officer) of the Company.
31.2	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Kevin T. Scull, the Interim Chief Financial Officer (principal financial officer) of the Company.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Simon F. Nynens, the Chief Executive Officer (principal executive officer) of the Company.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Kevin T. Scull, the Interim Chief Financial Officer (principal financial officer) of the Company.
101	The following financial information from Wayside Technology Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed with the SEC on August 4, 2014, formatted in XBRL (Extensible Business Reporting Language) includes: (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Earnings, (3) Condensed Consolidated Statements of Stockholders’ Equity, (4) Condensed Consolidated Statements of Comprehensive Income, (5) Condensed Consolidated Statements of Cash Flows, and (6) the Notes to the Unaudited Condensed Consolidated Financial Statements,.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		WAYSIDE TECHNOLOGY GROUP, INC
August 4, 2014	By:	/ s/ Simon F. Nynens
Date		Simon F. Nynens, Chairman of the Board, President and Chief Executive Officer
August 4 , 2014	By:	/s/Kevin T. Scull
Date		Kevin T. Scull, Vice President Accounting and Reporting Interim Chief Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Simon F. Nynens, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Wayside Technology Group, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))  and  internal control over financial reporting ( as defined in Exchange Act Rules 13a-15(f) and 15(d) -15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed  such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2014

/s/ Simon F. Nynens

Simon F. Nynens

Chairman of the Board

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Kevin T. Scull, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Wayside Technology Group, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))  and  internal control over financial reporting ( as defined in Exchange Act Rules 13a-15(f) and 15(d) -15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed  such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 04, 2014

/s/ Kevin T. Scull

Kevin T. Scull

Vice President Accounting and Reporting

Interim Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Wayside Technology Group, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Simon F. Nynens,  certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Simon F. Nynens

Simon F. Nynens

Chairman of the Board

President and Chief Executive Officer (Principal Executive Officer)

August 4, 2014

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Wayside Technology Group, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin  T. Scull, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Kevin T. Scull

Kevin T. Scull

Vice President Accounting and Reporting

Interim Chief Financial Officer

(Principal Financial Officer)

August 4, 2014

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Stockholders' Equity and Stock Based Compensation (Details)		12 Months Ended										6 Months Ended			12 Months Ended
	Jun. 30, 2014 2006 Plan	Dec. 31, 2013 2006 Plan Restricted stock installment	Dec. 31, 2012 2006 Plan Restricted stock installment	Dec. 31, 2011 2006 Plan Restricted stock installment	Dec. 31, 2010 2006 Plan Restricted stock installment	Dec. 31, 2009 2006 Plan Restricted stock installment	Dec. 31, 2008 2006 Plan Restricted stock installment	Dec. 31, 2007 2006 Plan Restricted stock installment	Dec. 31, 2006 2006 Plan Restricted stock installment	Dec. 31, 2006 2006 Plan Restricted stock CEO installment	Jun. 30, 2014 2012 Plan	Jun. 30, 2014 2006 Plan and 2012 Plan Restricted stock	Jun. 30, 2014 2006 Plan and 2012 Plan Restricted stock Minimum installment	Jun. 30, 2014 2006 Plan and 2012 Plan Restricted stock Maximum installment	Dec. 31, 2013 2006 Plan and 2012 Plan Restricted stock CEO installment
Stock-based compensation
Number of shares of common stock initially available for award	800,000										600,000
Options reserved for future issuance (in shares)	0										557,636
Granted (in shares)		56,500	92,000	15,000	150,500	140,000	57,500	30,000	315,000	200,000		45,689			40,000
Number of equal quarterly installments for vesting of awards		20	20	20	20	20	20	20	20	40			8	20	16
Forfeited (in shares)		775	3,525	8,375	5,875		3,500	12,500				25,275

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Industry, Segment and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2014

Industry, Segment and Geographic Information

Schedule of segment reporting information

	Six months ended					Three months ended
	June 30,					June 30,
	2014			2013		2014		2013
Revenue:
Lifeboat Distribution	$	129,237		$	115,078	$	69,979	$	61,209
TechXtend	26,892			24,997		14,420		12,886
	156,129			140,075		84,399		74,095
Gross Profit:
Lifeboat Distribution	$	8,728		$	8,284	$	4,612	$	4,511
TechXtend	2,949			2,994		1,527		1,454
	11,677			11,278		6,139		5,965
Direct Costs:
Lifeboat Distribution	$	2,479		$	2,350	$	1,248	$	1,245
TechXtend	1,595			1,654		801		765
	4,074			4,004		2,049		2,010
Segment Income:
Lifeboat Distribution	$	6,249		$	5,934	$	3,364	$	3,266
TechXtend	1,354			1,340		726		689
Segment Income	7,603			7,274		4,090		3,955
General and administrative	$	3,928		$	3,727	$	1,908	$	1,804
Interest, net	255			276		132		146
Foreign currency translation (loss) gain	(4		)	21		8		16
Income before taxes	$	3,926		$	3,844	$	2,322	$	2,313
	As of June 30, 2014
Selected Assets By Segment:
Lifeboat Distribution	$	32,284
TechXtend	36,933
Segment Select Assets	69,217
Corporate Assets	16,632
Total Assets	$	85,849

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New Accounting pronouncements

6 Months Ended

Jun. 30, 2014

New Accounting pronouncements

New Accounting pronouncements

2. In May 2014, the FASB issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts with customers. The standard is effective for our reporting year beginning January 1, 2017 and early adoption is not permitted. We are currently evaluating the impact of this new accounting pronouncement, if any, the pronouncement will have on our financial statements.

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Credit Facility (Details) (Credit Facility, USD $)			0 Months Ended
	Jun. 30, 2014	Jan. 04, 2013 item	Jan. 04, 2013 Index
Credit Facility
Maximum borrowing capacity		$ 10,000,000
Number of payments		1
Variable interest rate base			LIBOR
Interest rate margin (as a percent)			1.50%
Total liabilities to tangible net worth ratio, maximum		2.50
Interest coverage ratio, minimum		2.00
Borrowings outstanding	$ 0

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Balance Sheet Detail: (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Equipment and leasehold improvements
Gross	$ 3,440	$ 3,326
Less accumulated depreciation and amortization	(3,112)	(3,002)
Net	328	324
Accounts payable and accrued expenses
Trade accounts payable	45,121	56,973
Accrued expenses	2,372	3,066
Accounts payable and accrued expenses	47,493	60,039
Accumulated other comprehensive income
Foreign currency translation adjustment	135	199
Accumulated other comprehensive income	135	199
Equipment
Equipment and leasehold improvements
Gross	2,870	2,771
Leasehold improvements
Equipment and leasehold improvements
Gross	$ 570	$ 555

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Numerator:
Net income	$ 1,483	$ 1,540	$ 2,542	$ 2,560
Denominator:
Weighted average shares (Basic)	4,664	4,451	4,601	4,464
Dilutive effect of outstanding options and nonvested shares of restricted stock (in shares)	55	106	64	114
Weighted average shares including assumed conversions (Diluted)	4,719	4,557	4,665	4,578
Basic income per share (in dollars per share)	$ 0.32	$ 0.35	$ 0.55	$ 0.57
Diluted income per share (in dollars per share)	$ 0.31	$ 0.34	$ 0.54	$ 0.56

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Major customers (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2014 customer	Jun. 30, 2013 customer	Jun. 30, 2014 customer	Jun. 30, 2013 customer
Purchases | Vendor concentration risk | One major vendor
Significant Customers
Number of vendors	1		1
Percentage of concentration risk	13.20%		11.50%
Purchases | Vendor concentration risk | Two major vendor
Significant Customers
Number of vendors		2		2
Purchases | Vendor concentration risk | Vendor one
Significant Customers
Percentage of concentration risk		13.50%		10.90%
Purchases | Vendor concentration risk | Vendor two
Significant Customers
Percentage of concentration risk		10.90%		9.70%
Net sales | Customer concentration risk
Significant Customers
Number of customers	3	3	3	3
Net sales | Customer one | Customer concentration risk
Significant Customers
Percentage of concentration risk	17.50%	15.60%	16.70%	15.00%
Net sales | Customer two | Customer concentration risk
Significant Customers
Percentage of concentration risk	14.50%	13.30%	15.10%	13.90%
Net sales | Customer three | Customer concentration risk
Significant Customers
Percentage of concentration risk	11.50%	12.60%	11.10%	12.00%
Net accounts receivable | Customer one | Customer concentration risk
Significant Customers
Percentage of concentration risk			12.50%
Net accounts receivable | Customer two | Customer concentration risk
Significant Customers
Percentage of concentration risk			14.50%
Net accounts receivable | Customer three | Customer concentration risk
Significant Customers
Percentage of concentration risk			9.00%

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Basis of Presentation

6 Months Ended

Jun. 30, 2014

Basis of Presentation

Basis of Presentation

1. 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, 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, investments, intangible assets, income taxes, stock-based compensation, and 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 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, 2013.

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Income Taxes (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income Taxes
Effective tax rate (as a percent)	36.10%	33.40%	35.30%	33.40%

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets
Cash and cash equivalents	$ 14,716	$ 19,609
Accounts receivable, net of allowances of $1,461 and $1,429, respectively	57,585	60,796
Inventory, net	1,221	1,315
Prepaid expenses and other current assets	974	2,117
Deferred income taxes	236	218
Total current assets	74,732	84,055
Equipment and leasehold improvements, net	328	324
Accounts receivable-long-term	10,411	10,006
Other assets	162	159
Deferred income taxes	216	216
Total assets	85,849	94,760
Current liabilities
Accounts payable and accrued expenses	47,493	60,039
Total current liabilities	47,493	60,039
Commitments and contingencies
Stockholders' equity
Common Stock, $.01 par value; 10,000,000 shares authorized, 5,284,500 shares issued; 4,873,507 and 4,653,293 shares outstanding, respectively	53	53
Additional paid-in capital	30,488	28,791
Treasury stock, at cost, 410,993 and 631,207 shares, respectively	(5,965)	(7,017)
Retained earnings	13,645	12,695
Accumulated other comprehensive income	135	199
Total stockholders' equity	38,356	34,721
Total liabilities and stockholders' equity	$ 85,849	$ 94,760

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Condensed Consolidated Statement of Stockholders' Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock	Additional Paid-In Capital	Treasury	Retained Earnings	Accumulated Other Comprehensive Income
Balance at Dec. 31, 2013	$ 34,721	$ 53	$ 28,791	$ (7,017)	$ 12,695	$ 199
Balance (in shares) at Dec. 31, 2013	631,207			631,207
Balance (in shares) at Dec. 31, 2013	5,284,500	5,284,500
Increase (Decrease) in Stockholders' Equity
Net income	2,542				2,542
Translation adjustment	(64)					(64)
Dividends paid	(1,592)				(1,592)
Share-based compensation expense	609		609
Restricted stock grants (net of forfeitures)			(128)	128
Restricted stock grants (net of forfeitures) (in shares)				(20,414)
Stock options exercised	1,791		552	1,239
Stock options exercised (in shares)				(220,000)
Tax benefit from share-based compensation	664		664
Treasury stock repurchased	(315)			(315)
Treasury stock repurchased (in shares)				20,200
Balance at Jun. 30, 2014	$ 38,356	$ 53	$ 30,488	$ (5,965)	$ 13,645	$ 135
Balance (in shares) at Jun. 30, 2014	410,993			410,993
Balance (in shares) at Jun. 30, 2014	5,284,500	5,284,500

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Stockholders' Equity and Stock Based Compensation (Details 3) (2006 Plan and 2012 Plan, Restricted stock awards, USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
2006 Plan and 2012 Plan | Restricted stock awards
Shares
Nonvested shares at the beginning of the period	199,550
Granted (in shares)	45,689
Vested (in shares)	(51,942)
Forfeited (in shares)	(25,275)
Nonvested shares at the end of the period	168,022
Weighted Average Grant Date Fair Value
Nonvested shares at the beginning of period (in dollars per share)	$ 12.02
Granted (in dollars per share)	$ 15.12
Vested (in dollars per share)	$ 11.23
Forfeited (in dollars per share)	$ 11.28
Nonvested shares at the end of period (in dollars per share)	$ 12.99
Unrecognized compensation cost (in dollars)	$ 2,200,000
Weighted average period for recognition of unrecognized compensation cost	2 years 8 months 12 days
Share-based compensation cost (in dollars)	$ 575,000	$ 551,000

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Balance Sheet Detail: (Tables)

6 Months Ended

Jun. 30, 2014

Balance Sheet Detail:

Schedule of equipment and leasehold improvements

	June 30, 2014			December 31, 2013
Equipment	$	2,870		$	2,771
Leasehold improvements	570			555
	3,440			3,326
Less accumulated depreciation and amortization	(3,112		)	(3,002		)
	$	328		$	324

Schedule of accounts payable and accrued expenses

	June 30, 2014		December 31, 2013
Trade accounts payable	$	45,121	$	56,973
Accrued expenses	2,372		3,066
	$	47,493	$	60,039

Schedule of accumulated other comprehensive income

	June 30, 2014		December 31, 2013
Foreign currency translation adjustment	$	135	$	199
	$	135	$	199

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Industry, Segment and Geographic Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 item	Jun. 30, 2013	Dec. 31, 2013
Industry, Segment and Geographic Information
Number of reportable operating segments			2
Segment reporting information
Revenue	$ 84,399	$ 74,095	$ 156,129	$ 140,075
Gross Profit	6,139	5,965	11,677	11,278
Direct Costs	2,049	2,010	4,074	4,004
Segment Income	4,090	3,955	7,603	7,274
General and administrative	1,908	1,804	3,928	3,727
Interest, net	132	146	255	276
Foreign currency translation (loss) gain	8	16	(4)	21
Income before provision for income taxes	2,322	2,313	3,926	3,844
Total Assets	85,849		85,849		94,760
Segment Total
Segment reporting information
Total Assets	69,217		69,217
Corporate Assets
Segment reporting information
Total Assets	16,632		16,632
Lifeboat Distribution
Segment reporting information
Revenue	69,979	61,209	129,237	115,078
Gross Profit	4,612	4,511	8,728	8,284
Direct Costs	1,248	1,245	2,479	2,350
Segment Income	3,364	3,266	6,249	5,934
Total Assets	32,284		32,284
TechXtend
Segment reporting information
Revenue	14,420	12,886	26,892	24,997
Gross Profit	1,527	1,454	2,949	2,994
Direct Costs	801	765	1,595	1,654
Segment Income	726	689	1,354	1,340
Total Assets	$ 36,933		$ 36,933

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Stockholders' Equity and Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Stockholders' Equity and Stock Based Compensation

Schedule of changes in options outstanding under the combined plans

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value ($M)(1)
Outstanding at January 1, 2014	285,640		$	8.71
Granted in 2014	—		—
Canceled in 2014	(15,000	)	3.04
Exercised in 2014	(220,000	)	8.14
Outstanding at June 30, 2014	50,640		$	12.85	0.8	$	0.1
Exercisable at June 30, 2014	50,640		$	12.85	0.8	$	0.1

(1) The intrinsic value of an option is calculated as the difference between the market value on the last trading day of the quarter (June 30, 2014) and the exercise price of the outstanding options. The market value as of June 30, 2014 was $15.35 per share represented by the closing price as reported by The NASDAQ Global Market on that day.

Summary of nonvested shares of Restricted Stock awards outstanding and the changes during the period

	Shares		Weighted Average Grant Date Fair Value
Nonvested shares at January 1, 2014	199,550		$	12.02
Granted in 2014	45,689		15.12
Vested in 2014	(51,942	)	11.23
Forfeited in 2014	(25,275	)	11.28
Nonvested shares at June 30, 2014	168,022		$	12.99

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities
Net income	$ 2,542	$ 2,560
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization expense	114	150
Deferred income (benefit) tax expense	(18)	14
Provision for doubtful accounts receivable		112
Share-based compensation expense	575	551
Changes in operating assets and liabilities:
Accounts receivable	2,834	10,603
Inventory	94	(30)
Prepaid expenses and other current assets	1,142	(240)
Accounts payable and accrued expenses	(12,493)	(12,910)
Other assets	(5)	(82)
Net cash (used in) provided by operating activities	(5,215)	728
Cash flows provided by (used in) investing activities
Purchases of available-for-sale securities		(920)
Redemptions of available-for-sale securities		5,342
Purchase of equipment and leasehold improvements	(116)	(146)
Net cash (used in) provided by investing activities	(116)	4,276
Cash flows from financing activities
Dividends paid	(1,592)	(1,493)
Purchase of treasury stock	(315)	(1,211)
Tax benefit from share-based compensation	664	57
Repayment of capital lease obligations		(41)
Proceeds from stock option exercises	1,791
Net cash provided by (used in) financing activities	548	(2,688)
Effect of foreign exchange rate on cash	(110)	(130)
Net (decrease) increase in cash and cash equivalents	(4,893)	2,186
Cash and cash equivalents at beginning of period	19,609	9,835
Cash and cash equivalents at end of period	14,716	12,021
Supplementary disclosure of cash flow information:
Income taxes paid	1,414	1,593
Interest paid		$ 10

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Condensed Consolidated Balance Sheets
Accounts receivable, allowances (in dollars)	$ 1,461	$ 1,429
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	4,873,507	4,653,293
Treasury stock, shares	410,993	631,207

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Major customers

6 Months Ended

Jun. 30, 2014

Major customers

Major customers

10. The Company had one major vendor that accounted for 11.5% and 13.2% of total purchases during the six months and three months, respectively, that ended June 30, 2014. The Company had two major vendors that accounted for 10.9% and 9.7% of total purchases during the six months ended June 30, 2013, and 13.5% and 10.9% of total purchases for the three months that ended June 30, 2013. The Company had three major customers that accounted for 16.7%, 15.1% and 11.1% of its total net sales during the six months ended June 30, 2014, and 17.5%, 14.5% and 11.5% of total net sales for the three months ended June 30, 2014. These same customers accounted for 12.5%, 14.5% and 9.0% of total net accounts receivable as June 30, 2014. The Company had three major customers that accounted for 15.0%, 13.9% and 12.0% of its total net sales during the six months ended June 30, 2013, and 15.6%, 13.3% and 12.6% of total net sales for the three months ended June 30, 2013.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 01, 2014
Document and Entity Information
Entity Registrant Name	Wayside Technology Group, Inc.
Entity Central Index Key	0000945983
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		4,873,507
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Taxes

Income Taxes

11. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. The Company has identified its federal consolidated tax return and its state tax return in New Jersey and its Canadian tax return as major tax jurisdictions. As of June 30, 2014 the Company’s Federal and Canadian tax returns remain open for examination for the years 2010 through 2013. The Company’s New Jersey tax returns are open for examination for the years 2009 through 2013. 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 each of the six and three months ended June 30, 2014 was 35.3% and 36.1% respectively, compared with 33.4% for both periods last year. The current year tax rate increase is primarily due to an increase in permanent differences between book and taxable income.

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Condensed Consolidated Statements of Earnings (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Condensed Consolidated Statements of Earnings
Net sales	$ 84,399	$ 74,095	$ 156,129	$ 140,075
Cost of sales	78,260	68,130	144,452	128,797
Gross profit	6,139	5,965	11,677	11,278
Selling, general and administrative expenses	3,957	3,814	8,002	7,731
Income from operations	2,182	2,151	3,675	3,547
Other income:
Interest, net	132	146	255	276
Foreign currency transaction (loss) gain	8	16	(4)	21
Income before provision for income taxes	2,322	2,313	3,926	3,844
Provision for income taxes	839	773	1,384	1,284
Net income	$ 1,483	$ 1,540	$ 2,542	$ 2,560
Income per common share - Basic (in dollars per share)	$ 0.32	$ 0.35	$ 0.55	$ 0.57
Income per common share - Diluted (in dollars per share)	$ 0.31	$ 0.34	$ 0.54	$ 0.56
Weighted average common shares outstanding - Basic (in shares)	4,664	4,451	4,601	4,464
Weighted average common shares outstanding - Diluted (in shares)	4,719	4,557	4,665	4,578
Dividends paid per common share (in dollars per share)	$ 0.17	$ 0.16	$ 0.34	$ 0.32

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Revenue Recognition

6 Months Ended

Jun. 30, 2014

Revenue Recognition

Revenue Recognition

5. Revenue on product (software and hardware) and maintenance agreement sales are recognized once four criteria are met: (1) persuasive evidence of an arrangement exists, (2) the price is fixed and determinable, (3) delivery (software and hardware) or fulfillment (maintenance) has occurred, and (4) there is reasonable assurance of collection of the sales proceeds.  Revenues from the sales of hardware products, software products and licenses and maintenance agreements are recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recorded as cost of sales.

Product delivery to customers occur in a variety of ways, including (i) as physical product shipped from the Company’s warehouse, (ii) via drop-shipment by the vendor, or (iii) via electronic delivery for software licenses.  The Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse, thereby increasing efficiency and reducing costs.  The Company recognizes revenue for drop-ship arrangements on a gross basis.  Furthermore, in such drop-ship arrangements, the Company negotiates price with the customer, pays the supplier directly for the product shipped and bears credit risk of collecting payment from its customers.  The Company serves as the principal with the customer and, therefore, recognizes the sale and cost of sale of the product upon receiving notification from the supplier that the product has shipped.  Maintenance agreements allow customers to obtain technical support directly from the software publisher and to upgrade, at no additional cost, to the latest technology if new applications are introduced by the software publisher during the period that the maintenance agreement is in effect.

Sales are recorded net of discounts, rebates, and returns.  Vendor rebates and price protection are recorded when earned as a reduction to cost of sales or merchandise inventory, as applicable.

Cooperative reimbursements from vendors, which are earned and available, are recorded in the period the related advertising expenditure is incurred. Cooperative reimbursements are recorded as a reduction of cost of sales in accordance with FASB ASC Topic 605-50 “Accounting by a Customer (including reseller) for Certain Consideration Received from a Vendor.”  Provisions for returns are estimated based on historical sales returns and credit memo analysis which are adjusted to actual on a periodic basis.

Accounts receivable-long-term result from product sales with extended payment terms that are discounted to their present values at the prevailing market rates. In subsequent periods, the accounts receivable are 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.

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Comprehensive Income

6 Months Ended

Jun. 30, 2014

Comprehensive Income

Comprehensive Income

4. Cumulative translation adjustments and unrealized gains (losses) on available-for-sale securities have been classified within accumulated other comprehensive income, which is a separate component of stockholders’ equity in accordance with FASB ASC Topic 220, “Comprehensive Income.”

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share

Schedule of reconciliation of the numerators and denominators for computations of the basic and diluted per share

	Six months ended				Three months ended
	June 30,				June 30,
	2014		2013		2014		2013
Numerator:
Net income	$	2,542	$	2,560	$	1,483	$	1,540
Denominator:
Weighted average shares (Basic)	4,601		4,464		4,664		4,451
Dilutive effect of outstanding options and non-vested shares of restricted stock	64		114		55		106
Weighted average shares including assumed conversions (Diluted)	4,665		4,578		4,719		4,557
Basic income per share	$	0.55	$	0.57	$	0.32	$	0.35
Diluted income per share	$	0.54	$	0.56	$	0.31	$	0.34

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Stockholders' Equity and Stock Based Compensation

6 Months Ended

Jun. 30, 2014

Stockholders' Equity and Stock Based Compensation

Stockholders' Equity and Stock Based Compensation

12. 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.  As of June 30, 2014, the number of shares of Common stock available for future award grants to employees and directors under the 2012 Plan is 557,636.

The 2006 Stock-Based Compensation Plan (the “2006 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 2006 Plan was 800,000. As of June 30, 2014, there are no shares of Common Stock available for future award grants to employees and directors under the 2006 Plan.

During 2006, the Company granted a total of 315,000 shares of Restricted Stock to officers, directors and employees. Included in this grant were 200,000 Restricted Shares granted to the Company’s CEO in accordance with his employment agreement. These 200,000 Restricted Shares vest over 40 equal quarterly installments. The remaining grants of Restricted Stock vest over 20 equal quarterly installments.

During 2007, the Company granted a total of 30,000 shares of Restricted Stock to officers, directors and employees. These shares of Restricted Stock vest over 20 equal quarterly installments. In 2007, a total of 12,500 shares of Restricted Stock were forfeited as a result of employees and officers terminating employment with the Company.

During 2008, the Company granted a total of 57,500 shares of Restricted Stock to officers and directors. These shares of Restricted Stock vest over 20 equal quarterly installments.  In 2008, a total of 3,500 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company.

During 2009, the Company granted a total of 140,000 shares of Restricted Stock to officers and employees. These shares of Restricted Stock vest over 20 equal quarterly installments.

During 2010, the Company granted a total of 150,500 shares of Restricted Stock to officers and employees. These shares of Restricted Stock vest over 20 equal quarterly installments. In 2010, a total of 5,875 shares of Restricted Stock were forfeited as a result of employees and officers terminating employment with the Company.

During 2011, the Company granted a total of 15,000 shares of Restricted Stock to employees. These shares of Restricted Stock vest over 20 equal quarterly installments. In 2011, a total of 8,375 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company.

During 2012, the Company granted a total of 92,000 shares of Restricted Stock to officers, directors, and employees. These shares of Restricted Stock vest over 20 equal quarterly installments. A total of 3,525 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company.

During 2013, the Company granted a total of 56,500 shares of Restricted Stock to officers and employees. Included in these grants were 40,000 Restricted Shares granted to the Company’s CEO in accordance with the satisfaction of certain performance criteria included in his compensation plan. These 40,000 Restricted Shares vest over 16 equal quarterly installments. The remaining grants of Restricted Stock vest over 20 equal quarterly installments. A total of 775 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company.

During 2014, the Company granted a total of 45,689 shares of Restricted Stock to officers and employees. These shares of Restricted Stock vest between eight and twenty equal quarterly installments. A total of 25,275 shares of Restricted Stock were forfeited as a result of officers and employees terminating employment with the Company.

Changes during 2014 in options outstanding under the Company’s combined plans (i.e., the 2012 Plan, the 2006 Plan, the 1995 Non-Employee Director Plan and the 1995 Stock Option Plan) were as follows:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value ($M)(1)
Outstanding at January 1, 2014	285,640		$	8.71
Granted in 2014	—		—
Canceled in 2014	(15,000	)	3.04
Exercised in 2014	(220,000	)	8.14
Outstanding at June 30, 2014	50,640		$	12.85	0.8	$	0.1
Exercisable at June 30, 2014	50,640		$	12.85	0.8	$	0.1

(1) The intrinsic value of an option is calculated as the difference between the market value on the last trading day of the quarter (June 30, 2014) and the exercise price of the outstanding options. The market value as of June 30, 2014 was $15.35 per share represented by the closing price as reported by The NASDAQ Global Market on that day.

A summary of nonvested shares of Restricted Stock awards outstanding under the Company’s the 2012 Plan and 2006 Plan as of June 30, 2014, and changes during the six months then ended is as follows:

	Shares		Weighted Average Grant Date Fair Value
Nonvested shares at January 1, 2014	199,550		$	12.02
Granted in 2014	45,689		15.12
Vested in 2014	(51,942	)	11.23
Forfeited in 2014	(25,275	)	11.28
Nonvested shares at June 30, 2014	168,022		$	12.99

As of June 30, 2014, there is approximately $2.2 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 2.7 years.

For the six months ended June 30, 2014 and 2013, the Company recognized share-based compensation cost of $575,000 and $551,000 respectively, which is included in the Company’s general and administrative expense.

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Credit Facility

6 Months Ended

Jun. 30, 2014

Credit Facility

Credit Facility

8. On January 4, 2013, the Company entered into a $10,000,000 revolving credit facility (the “Credit Facility”) with Citibank, N.A. (“Citibank”) pursuant to a Business Loan Agreement (the “Loan Agreement”), Promissory Note (the “Note”), Commercial Security Agreements (the “Security Agreements”) and Commercial Pledge Agreement (the “Pledge Agreement”).  The Credit Facility, which will be used for business and working capital purposes, including financing of larger extended payment terms sales transactions. The Credit Facility matures on January 4, 2016, at which time the Company must pay this loan in one payment of any outstanding principal plus all accrued unpaid interest. In addition, the Company will pay regular monthly payments of all accrued 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 an independent index which is the LIBOR Rate (the “Index”).  If the Index becomes unavailable during the term of this loan, Citibank may designate a substitute index after notifying the Company.  Interest on the unpaid principal balance of the Note will be calculated using a rate of 1.500 percentage points over the Index.  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 ratio of Total Liabilities to Tangible Net Worth (each as defined in the Loan Agreement) of not greater than 2.50 to 1.00, to be tested quarterly and (ii) a minimum Debt Service Coverage Ratio (as defined in the Loan Agreement) of 2.00 to 1.00.  Additionally, the Loan Agreement contains negative covenants related to, among other items, prohibitions against the creation of certain liens, engaging in any business activities substantially different than those currently engaged in by the Company, and paying dividends the Company’s stock other than (i) dividends payable in its stock and (ii) cash dividends in amounts and frequency consistent with past practice, without first securing the written consent of Citibank. The Company is in compliance with all covenants at June 30, 2014.

At June 30, 2014, the Company had no borrowings outstanding under the Credit Facility.

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Marketable securities

6 Months Ended

Jun. 30, 2014

Marketable securities

Marketable securities

6. The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximated fair value at June 30, 2014 and December 31, 2013 because of the relative short maturity of these instruments. The Company’s accounts receivable long-term is discounted to their present value at prevailing market rates so the balances approximate fair value.

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Balance Sheet Detail:

6 Months Ended

Jun. 30, 2014

Balance Sheet Detail:

Balance Sheet Detail:

7. Balance Sheet Detail:

Equipment and leasehold improvements consist of the following as of June 30, 2014 and December 31, 2013:

	June 30, 2014			December 31, 2013
Equipment	$	2,870		$	2,771
Leasehold improvements	570			555
	3,440			3,326
Less accumulated depreciation and amortization	(3,112		)	(3,002		)
	$	328		$	324

Accounts payable and accrued expenses consist of the following as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Trade accounts payable	$	45,121	$	56,973
Accrued expenses	2,372		3,066
	$	47,493	$	60,039

Accumulated other comprehensive income consists of the following as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Foreign currency translation adjustment	$	135	$	199
	$	135	$	199

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Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share

Earnings Per Share

9. Basic Earnings Per Share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted average number of shares of Common Stock outstanding during the period.

Diluted EPS is calculated by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding, adjusted for potentially dilutive securities including unexercised stock option grants and nonvested shares of restricted stock.

A reconciliation of the numerators and denominators of the basic and diluted per share computations follows:

	Six months ended				Three months ended
	June 30,				June 30,
	2014		2013		2014		2013
Numerator:
Net income	$	2,542	$	2,560	$	1,483	$	1,540
Denominator:
Weighted average shares (Basic)	4,601		4,464		4,664		4,451
Dilutive effect of outstanding options and non-vested shares of restricted stock	64		114		55		106
Weighted average shares including assumed conversions (Diluted)	4,665		4,578		4,719		4,557
Basic income per share	$	0.55	$	0.57	$	0.32	$	0.35
Diluted income per share	$	0.54	$	0.56	$	0.31	$	0.34

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Stockholders' Equity and Stock Based Compensation (Details 2) (Options, USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Options
Number of Options
Outstanding at the beginning of the period (in shares)	285,640
Canceled (in shares)	(15,000)
Exercised (in shares)	(220,000)
Outstanding at the end of the period (in shares)	50,640
Exercisable at the end of the period (in shares)	50,640
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 8.71
Canceled (in dollars per share)	$ 3.04
Exercised (in dollars per share)	$ 8.14
Outstanding at the end of the period (in dollars per share)	$ 12.85
Exercisable at the end of the period (in dollars per share)	$ 12.85
Weighted Average Remaining Contractual Term
Outstanding at the end of the period	9 months 18 days
Exercisable at the end of the period	9 months 18 days
Aggregate Intrinsic Value
Aggregate intrinsic value of options outstanding	$ 0.1
Aggregate intrinsic value of options exercisable	$ 0.1
Market value (in dollars per share)	$ 15.35

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New Accounting pronouncements (Policies)

6 Months Ended

Jun. 30, 2014

New Accounting pronouncements

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts with customers. The standard is effective for our reporting year beginning January 1, 2017 and early adoption is not permitted. We are currently evaluating the impact of this new accounting pronouncement, if any, the pronouncement will have on our financial statements.

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Foreign Currency Translation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Canadian operations
Sales	$ 84,399	$ 74,095	$ 156,129	$ 140,075
Canadian operations
Canadian operations
Sales	$ 5,900	$ 5,700	$ 11,500	$ 10,600

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Condensed Consolidated Statements of Comprehensive Income
Net income	$ 1,483	$ 1,540	$ 2,542	$ 2,560
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment	218	(136)	(64)	(322)
Reclassification adjustment for loss realized in net income on available-for-sale marketable securities				11
Other comprehensive (loss) income	218	(136)	(64)	(311)
Comprehensive income	$ 1,701	$ 1,404	$ 2,478	$ 2,249

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Foreign Currency Translation

6 Months Ended

Jun. 30, 2014

Foreign Currency Translation

Foreign Currency Translation

3. Assets and liabilities of the Company’s foreign subsidiaries have been translated at current exchange rates, and related sales and expenses have been translated at average rates of exchange in effect during the period. The sales from our Canadian operations in the first six months of 2014 were $11.5 million as compared to $10.6 million for the first six months of 2013. The sales from our Canadian operations for the second quarter of 2014 were $5.9 million as compared to $5.7 million for the second quarter of 2013.

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Revenue Recognition (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014 item
Revenue Recognition
Number of criteria	4
Additional cost to obtain technical support directly from the software publisher and upgrade to latest technology	$ 0

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Industry, Segment and Geographic Information

6 Months Ended

Jun. 30, 2014

Industry, Segment and Geographic Information

Industry, Segment and Geographic Information

13. 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 Chief Executive Officer.

The Company is organized into two reportable operating segments.  The “Lifeboat Distribution” segment distributes technical software 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 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:

	Six months ended					Three months ended
	June 30,					June 30,
	2014			2013		2014		2013
Revenue:
Lifeboat Distribution	$	129,237		$	115,078	$	69,979	$	61,209
TechXtend	26,892			24,997		14,420		12,886
	156,129			140,075		84,399		74,095
Gross Profit:
Lifeboat Distribution	$	8,728		$	8,284	$	4,612	$	4,511
TechXtend	2,949			2,994		1,527		1,454
	11,677			11,278		6,139		5,965
Direct Costs:
Lifeboat Distribution	$	2,479		$	2,350	$	1,248	$	1,245
TechXtend	1,595			1,654		801		765
	4,074			4,004		2,049		2,010
Segment Income:
Lifeboat Distribution	$	6,249		$	5,934	$	3,364	$	3,266
TechXtend	1,354			1,340		726		689
Segment Income	7,603			7,274		4,090		3,955
General and administrative	$	3,928		$	3,727	$	1,908	$	1,804
Interest, net	255			276		132		146
Foreign currency translation (loss) gain	(4		)	21		8		16
Income before taxes	$	3,926		$	3,844	$	2,322	$	2,313
	As of June 30, 2014
Selected Assets By Segment:
Lifeboat Distribution	$	32,284
TechXtend	36,933
Segment Select Assets	69,217
Corporate Assets	16,632
Total Assets	$	85,849