In an oversupply situation, other distributors may elect to proceed with price reductions to dispose of their existing
inventories, forcing the Company to lower its prices to stay competitive. The Company’s ability to manage its inventory and
protect its business against price erosion is critical to its success.
Several of the Company’s most significant contracts with its major suppliers contain advantageous contract terms that
protect the Company against exposure to price fluctuations, defective products and stock obsolescence.
Our business is highly dependent on distribution contracts with a limited number of suppliers; a loss of or
change in the material terms of these contracts could have a material adverse effect on our business, operating
results and financial condition.
The part of our business consisting of the distribution of third-party products is dependent on the CIS region and actions
of a limited number of suppliers. In the year ended 31 December 2024, the Company held contracts with Apple, Intel,
Advanced Micro Devices (AMD), Logitech, Dell, Lenovo, Seagate, HP, Microsoft, IBM, Bang&Olufsen, Asus, and other
international suppliers. Contracts with these suppliers are typically on a non-exclusive basis, allow for termination with or
without cause and are open-ended with respect to requirements and output rather than imposing any commitment to a
specific volume of business or scope of work.
We face a risk of termination of our distribution agreements, if we do not perform pursuant to the supplier's expectations
or for any other reason, including several factors outside our control. Changes in the suppliers' business strategies,
including moving part or all their distribution arrangements to our competitors, or directly distributing products to end-users,
could result in the termination of the respective distribution contracts. Any of these suppliers may merge with, acquire or
be acquired by any of our competitors which already has its own distribution network in the market. Any supplier may
consider us redundant as a distributor and may terminate our distribution agreement or may experience financial difficulties,
as a result of which it may not be able to grant beneficial credit terms and/or honour financial terms in the relevant
distribution agreements, such as those relating to price protection, stock returns, rebates, performance incentives, credit
from returned materials and reimbursement of advertising expenses incurred during joint promotion campaigns.
Termination or material change in the terms of a vendor contract due to any of the aforesaid factors could have a material
adverse effect on our business, results of operations and financial condition.
Our inability to maintain or renew our distribution and supply contracts on favourable terms with key customers
and suppliers could have a material adverse effect on our business, operating results and financial condition.
In the part of our business related to the distribution of third-party products, we have significant contracts with a limited
number of customers and other business partners, some of which are oral agreements, terms of which and the
enforceability of which, remain uncertain, or are agreements that may be terminated without cause or by written notice at
the expiry of their term.
In addition, a number of our most significant contracts with our major suppliers contain terms that protect us against
exposure to price fluctuations, defective products and stock obsolescence.
Specifically, our contracts terms including terms such as (i) a price protection policy, which allows us to request
reimbursement from the suppliers for inventory in transit or held at our warehouses in the event that product prices decline;
(ii) a stock rotation policy under which we have the right to return to the supplier slow moving inventory in exchange for
credit, which reduces our exposure to obsolescence of inventory; and (iii) a return material authorization policy under which
we can return defective items to our suppliers in return for either credit, replacements or refurbished products.
If we are unable to maintain or enforce our significant contracts, or if any of our significant suppliers refuse to renew
contracts with us on similar terms, or new significant suppliers of ours do not make such terms available to us, we could
face a higher risk of exposure to price fluctuations and stock obsolescence, which given our narrow gross profit margins,
could have a material adverse effect on our business, operating results and financial condition.
Our suppliers' increasing involvement in e-commerce activities, which would enable them to directly sell to our
customers, could threaten our market share, and therefore adversely affect our business, operating results and
financial condition.
In the third-party products distribution part of our business, we operate as a distributor, or a "middleman", between
manufacturers and our customers. Manufacturers are sometimes able to outsource their sales and marketing functions by
engaging in the services of a distributor and concentrating on their core competencies.
With the emergence, however, of new internet technologies and e-commerce, more manufacturers are developing their
own online commerce platforms with the capability to accept orders and conduct sales through the internet. Global
distributors have also set up their own web-sites to enable sales and purchases to be conducted online.
