tssi20240930

tssi20240930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2024

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

Commission file number: 001-33627

TSS, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-2027651
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

110 E. Old Settlers Blvd Round Rock, Texas	78664
(Address of principal executive offices)	(Zip Code)

(512) 310-1000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act : None

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 Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Number of shares of common stock outstanding as of November 13, 2024: 22,472,676

TSS, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended September 30, 2024

“SAFE HARBOR” STATEMENT		ii
PART I–FINANCIAL INFORMATION		1
Item 1.	Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
PART II–OTHER INFORMATION		23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 6.	Exhibits	24
SIGNATURES		25

“SAFE HARBOR” STATEMENT

UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

From time to time, we make oral and written statements that may constitute “forward-looking statements” (rather than historical facts) as defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission (the “SEC”) in its rules, regulations and releases, including Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We desire to take advantage of the “safe harbor” provisions in the Private Securities Litigation Reform Act of 1995 for forward looking statements made from time to time, including, but not limited to, the forward- looking statements made in this Quarterly Report on Form 10-Q (the “Form 10-Q”), as well as those made in other filings with the SEC.

Forward looking statements can be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “believe,” “continue,” “forecast,” “foresee” or other similar words. Such forward looking statements are based on management’s current plans and expectations and are subject to risks, uncertainties and changes in plans that could cause actual results to differ materially from those described in the forward-looking statements. Important factors that could cause actual results to differ materially from those anticipated in our forward-looking statements include, but are not limited to, those described under Risk Factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

We expressly disclaim any obligation to release publicly any updates or any changes in our expectations or any changes in events, conditions or circumstances on which any forward-looking statement is based.

As used herein, except as otherwise indicated by the context, the terms “TSS”, “Company”, “we”, “our” and “us” are used to refer to TSS, Inc. and its subsidiaries.

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

TSS, Inc.

Consolidated Balance Sheets

(in thousands except par values)

	September 30, 2024			December 31, 2023
	(unaudited)

Current Assets:
Cash and cash equivalents	$	46,448		$	11,831
Contract and other receivables, net		7,955			3,527
Costs and estimated earnings in excess of billings on uncompleted contracts		190			1,310
Inventories, net		4,983			2,343
Prepaid expenses and other current assets		371			302
Total current assets		59,947			19,313
Property and equipment, net		2,062			628
Lease right-of-use assets		3,605			4,062
Goodwill		780			780
Other assets		888			817
Total assets	$	67,282		$	25,600

Current Liabilities:
Accounts payable and accrued expenses	$	51,927		$	14,362
Deferred revenues, current		2,923			3,370
Lease liabilities, current		774			688
Total current liabilities		55,624			18,420
Deferred revenues, non-current		908			-
Lease liabilities, non-current		3,096			3,631
Total liabilities		59,628			22,051

Commitments and Contingencies

Stockholders’ Equity:
Preferred stock, $.0001 par value; 1,000 shares authorized at September 30, 2024 and December 31, 2023; none issued		-			-
Common stock, $.0001 par value; 49,000 shares authorized at September 30, 2024 and December 31, 2023; 24,086 and 23,533 issued; 22,019 and 21,771 outstanding at September 30, 2024 and December 31, 2023, respectively		2			2
Additional paid-in capital		72,899			72,103
Treasury stock 2,057 and 1,762 shares at cost at September 30, 2024 and December 31, 2023		(2,999	)		(2,245	)
Accumulated deficit		(62,248	)		(66,311	)
Total stockholders’ equity		7,654			3,549
Total liabilities and stockholders’ equity	$	67,282		$	25,600

See accompanying notes to the consolidated financial statements.

TSS, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except per-share amounts)

	Three Months Ended September 30				Nine Months Ended September 30
	2024		2023		2024		2023
Results of Operations:
Revenues:
Procurement	$	60,484	$	5,422	$	77,022	$	17,742
Facilities management		1,954		1,804		6,384		5,603
Systems integration		7,630		1,654		14,713		6,646
Total revenues		70,068		8,880		98,119		29,991
Cost of revenue:
Procurement		56,766		3,775		71,672		14,230
Facilities management		1,228		773		2,771		2,430
Systems integration		4,187		1,502		8,539		5,593
Total cost of revenues		62,181		6,050		82,982		22,253
Gross profit		7,887		2,830		15,137		7,738

Selling, general and administrative expenses		3,885		2,043		8,993		6,464
Depreciation and amortization		208		72		397		249
Total operating costs		4,093		2,115		9,390		6,713
Operating income		3,794		715		5,747		1,025
Other expense:
Interest expense, net		1,128		482		1,628		1,242
Income (loss) before income taxes		2,666		233		4,119		(217	)
Income tax expense		20		24		56		45

Net income (loss)	$	2,646	$	209	$	4,063	$	(262	)

Income (loss) per common share - Basic	$	0.12	$	0.01	$	0.18	$	(0.01	)
Income (loss) per common share - Diluted	$	0.10	$	0.01	$	0.16	$	(0.01	)

See accompanying notes to the consolidated financial statements.

TSS, Inc.

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

(in thousands)

					Additional											Total
	Common Stock				Paid-in		Treasury Stock						Accumulated			Stockholders’
	Shares		Amount		Capital		Shares			Amount			Deficit			Equity
Balance January 1, 2023		23,197	$	2	$	71,522		(1,657	)	$	(2,205	)	$	(66,385	)	$	2,934
Restricted stock vested		3		-		-		-			-			-			-
Treasury shares repurchased		-		-		-		(1	)		(1	)		-			(1	)
Stock-based compensation		-		-		140		-			-			-			140
Net loss		-		-		-		-			-			(786	)		(786	)
Balance at March 31, 2023		23,200		2		71,662		(1,658	)		(2,206	)		(67,171	)		2,287
Restricted stock vested		88		-		-		-			-			-			-
Treasury shares repurchased		-		-		-		(26	)		(10	)		-			(10	)
Stock-based compensation		-		-		160		-			-			-			160
Net Income		-		-		-		-			-			315			315
Balance at June 30, 2023		23,288		2		71,822		(1,684	)		(2,216	)		(66,856	)		2,752
Restricted stock vested		185		-		-		-			-			-			-
Treasury shares repurchased		-		-		-		(60	)		(22	)		-			(22	)
Stock-based compensation		-		-		153		-			-			-			153
Net income		-		-		-		-			-			209			209
Balance at September 30, 2023		23,473	$	2	$	71,975		(1,744	)	$	(2,238	)	$	(66,647	)	$	3,092

					Additional											Total
	Common Stock				Paid-in		Treasury Stock						Accumulated			Stockholders’
	Shares		Amount		Capital		Shares			Amount			Deficit			Equity
Balance January 1, 2024		23,533	$	2	$	72,103		(1,762	)	$	(2,245	)	$	(66,311	)	$	3,549
Restricted stock vested		376		-		-		-			-			-			-
Treasury shares repurchased		-		-		-		(120	)		(55	)		-			(55	)
Stock-based compensation		-		-		150		-			-			-			150
Net income		-		-		-		-			-			15			15
Balance at March 31, 2024		23,909		2		72,253		(1,882	)		(2,300	)		(66,296	)		3,659
Restricted stock vested		135		-		-		-			-			-			-
Treasury shares repurchased		-		-		-		(60	)		(82	)		-			(82	)
Stock options exercised		200		-		20		-			-			-			20
Stock-based compensation		-		-		155		-			-			-			155
Net income		-		-		-		-			-			1,402			1,402
Balance at June 30, 2024		24,244		2		72,428		(1,942	)		(2,382	)		(64,894	)		5,154
Treasury shares repurchased		-		-		-		(115	)		(617	)		-			(617	)
Stock options exercised		343		-		172		-			-			-			172
Stock-based compensation		-		-		299		-			-			-			299
Net income		-		-		-		-			-			2,646			2,646
Balance at September 30, 2024		24,587	$	2	$	72,899		(2,057	)	$	(2,999	)	$	(62,248	)	$	7,654

See accompanying notes to the consolidated financial statements.

TSS, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	Nine Months Ended September 30,
	2024			2023
Cash Flows from Operating Activities:
Net income (loss)	$	4,063		$	(262	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		397			249
Stock-based compensation		604			453
Changes in operating assets and liabilities:
Contract and other receivables		(4,427	)		(3,566	)
Costs and estimated earnings in excess of billings on uncompleted contracts		1,120			(379	)
Inventories, net		(2,640	)		(1,269	)
Prepaid expenses and other assets		(206	)		(166	)
Right-of-use assets		457			486
Accounts payable and accrued expenses		37,565			640
Deferred revenues		461			12,688
Operating lease liabilities		(449	)		(295	)
Net cash provided by operating activities		36,945			8,579

Cash Flows from Investing Activities:
Capital expenditures		(1,766	)		(240	)
Net cash used in investing activities		(1,766	)		(240	)

Cash Flows from Financing Activities:
Proceeds from exercise of options		192			-
Purchase of treasury shares		(754	)		(33	)
Net cash used in financing activities		(562	)		(33	)
Net increase in cash and cash equivalents		34,617			8,306
Cash and cash equivalents at beginning of period		11,831			20,397
Cash and cash equivalents at end of period	$	46,448		$	28,703
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,963		$	1,572
Cash paid for taxes	$	79		$	47

See accompanying notes to the consolidated financial statements.

TSS, Inc.

Notes to Consolidated Statements

(unaudited)

Note 1 – Significant Accounting Policies

Description of Business

TSS, Inc. (‘‘TSS’’, the ‘‘Company’’, ‘‘we’’, ‘‘us’’ or ‘‘our’’) provides a comprehensive suite of services for the planning, design, deployment, maintenance, refresh and take-back of end-user and enterprise systems, including the mission-critical facilities in which they are housed. We provide a single source solution for enabling technologies in data centers, operations centers, network facilities, server rooms, security operations centers, communications facilities and the infrastructure systems that are critical to their function. Our services consist of technology consulting, design and engineering, project management, systems integration, systems installation, facilities management and IT procurement services. Our systems integration services have recently been enhanced to include integration of Artificial Intelligence (AI) enabled data center server racks. Our corporate offices and our integration facility are located in Round Rock, Texas.

Basis of Presentation

The accompanying consolidated balance sheet as of December 31, 2023, which has been derived from audited consolidated financial statements, and the unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the SEC for interim reporting and include the accounts of the Company and its consolidated subsidiaries. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring items) necessary to present fairly the consolidated financial position of the Company and its consolidated results of operations, changes in stockholders’ equity and cash flows. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no net effect on our reported results of operations, financial position or cash flows.

Liquidity

As of September 30, 2024, the Company had an accumulated deficit of $62.2 million. We have recorded operating and net income in our six most recent quarters and posted a significant increase in net income in the three and nine-month periods ended September 30, 2024 compared to the same periods of the prior year, but we have a history of annual operating or net losses over recent years which have been due, in part, to the effects of the COVID-19 pandemic and subsequent supply chain constraints. These factors may be indicative of doubt regarding the Company’s ability to continue as a going concern. Management has evaluated the significance of these conditions in relation to its ability to meet its ongoing obligations. Our primary sources of funds to meet our liquidity and capital requirements include cash on hand, funds generated from operations including the funds from our customer financing programs and trade credit extended to us by our vendors or under our revolving bank line of credit. If our future results do not meet our expectations, management believes that we can implement reductions in selling, general and administrative expenses to better achieve profitability and therefore improve cash flows, or that we could take further steps such as the issuance of new equity or debt. We may also require additional capital if we seek to acquire additional businesses to increase the scale of our operations. There can be no assurance as to the Company’s ability to continue to operate profitability or to scale its business operations on terms upon which additional financing might be available.

Management believes that we will be able to generate sufficient cash flows and liquidity as describ

SEC Form 10-Q filed by TSS Inc.