TSSI TSS Inc (QB)

 

 

“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, 2022.

 

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)

 

 

See accompanying notes to the consolidated financial statements. 

 

 

TSS, Inc.

Consolidated Statements of Operations

(in thousands, except per-share amounts; unaudited)

 

 

See accompanying notes to the consolidated financial statements. 

 

 

TSS, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share amounts, unaudited)

 

 

 

 

See accompanying notes to the consolidated financial statements.  

 

 

TSS, Inc.

Consolidated Statements of Cash Flows

(in thousands; unaudited)

 

 

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 they are housed in. 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 corporate offices and our integration facility are located in Round Rock, Texas.

 

Basis of Presentation

 

The accompanying consolidated balance sheet as of December 31, 2022, 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, 2022.

 

Liquidity

 

As of June 30, 2023, the Company had an accumulated deficit of $66.9 million. We have recorded operating and net income in two of our four most recent quarters, but we have a history of annual operating losses over recent years which have been due, in part, to the effects of COVID-19 and related 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 credit facilities with our bank. 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, or if there is a sudden increase in the level of reseller services. 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 described above, as we have been able to grow our revenues and order backlog and seen an improvement in related supply chain constraints. Our recent quarterly results have also been impacted by transactions being delayed by our customers but we believe that we will be profitable in the next quarter and for the year ended December 31, 2023. As a result, management has concluded that there is not substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern for a reasonable period of time.

 

Revenue Recognition

 

We recognize revenues when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

 

Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations based on relative standalone selling prices.

 

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Maintenance Services

 

We generate maintenance services revenues from fees that provide our customers with as-needed maintenance and repair services on modular data centers during the contract term. Our contract terms are typically one year in duration, are billed annually in advance, and are non-cancellable. As a result, we record deferred revenue (a contract liability) and recognize revenue from these services on a ratable basis over the contract term. We can mitigate our exposure to credit losses by discontinuing services in the event of non-payment, however our history of non-payments and bad debt expense has been insignificant.

 

Integration Services

 

We generate integration services revenues from fees that provide our customers with customized system and rack-level integration services. We recognize revenue upon shipment to the customer of the completed systems as this is when we have completed our services and when the customer obtains control of the promised goods. We typically extend credit terms to our integration customers based on their credit worthiness and generally do not receive advance payments. As such, we record accounts receivable at the time of shipment, when our right to the consideration becomes unconditional. Accounts receivable from our integration customers are typically due within 30-60 days of invoicing. An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ credit worthiness. As of June 30, 2023, and December 31, 2022, our allowance for doubtful accounts was $7,000.

 

Equipment Sales

 

We generate revenues under fixed price contracts from the sale of data center and related ancillary equipment to customers in the United States. We recognize revenue when the product is shipped to the customer as that is when the customer obtains control of the promised goods. Typically, we do not receive advance payments for equipment sales; however, if we do, we record the advance payment as deferred revenues. Normally we record accounts receivable at the time of shipment, when our right to the consideration has become unconditional. Accounts receivable from our equipment sales are typically due within 30-45 days of invoicing.

 

Deployment and Other Services

 

We generate revenues from fees we charge our customers for other services, including repairs or other services not covered under maintenance contracts, installation and servicing of equipment, including modular data centers that we sold, and other fixed-price services, including repair, design and project management services. In some cases, we arrange for a third party to perform warranty and servicing of equipment, and in these instances, we recognize revenue as the amount of any fees or commissions that we expect to be entitled to receive. Other services are typically invoiced upon completion of services or completion of milestones. We record accounts receivable at the time of completion when our right to consideration becomes unconditional.

 

Reseller Services

 

We generate revenues from fees we charge our customers to procure third-party hardware, software and professional services on their behalf that are then used in our integration services as we integrate these components to deliver a completed system to our customer. We recognize our reseller services revenue upon completion of the procurement activity. In some cases, we arrange for the purchase of third-party hardware, software or professional services that are to be provided to our customers by another party and we have no control of the goods before they are transferred to the customer. In these instances, we are acting as an agent in the transaction and recognize revenue as the amount of any fee or commissions that we expect to be entitled to after paying the other party for the goods or services provided to the customer. Accounts receivable from our reseller activities are typically due within 30-60 days of invoicing.

 

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The following table shows our revenues disaggregated by reportable segment and by product or service type (in ’000’s, unaudited):

 

		Three-Months Ended June 30,								Six-Months Ended June 30,
		2023				2022				2023				2022
FACILITIES:
Maintenance revenues		$	1,014			$	859			$	1,953			$	1,662
Equipment sales			320				316				382				370
Deployment and other services			230				2,423				1,465				3,645
Total Facilities revenues		$	1,564			$	3,598			$	3,800			$	5,677
SYSTEMS INTEGRATION:
Integration services		$	2,380			$	2,057			$	4,992			$	3,430
Reseller services			10,593				766				12,319				2,506
Total Systems Integration revenues		$	12,973			$	2,823			$	17,311			$	5,936
TOTAL REVENUES		$	14,537			$	6,421			$	21,111			$	11,613

 

Judgments

 

We consider several factors in determining that control transfers to the customer upon shipment of equipment or upon completion of our services. These factors include that legal title transfers to the customer, we have a present right to payment, and the customer has assumed the risks and rewards of ownership at the time of shipment or completion of the services.

 

Sales Taxes

 

Sales (and similar) taxes that are imposed on our sales and collected from customers are excluded from revenues.

 

Shipping and Handling Costs

 

Costs for shipping and handling activities, including those activities that occur subsequent to transfer of control to the customer, are recorded as cost of revenues and are expensed as incurred. We accrue costs for shipping and handling activities that occur after control of the promised good or service has transferred to the customer.

 

Remaining Performance Obligations

 

Remaining performance obligations include deferred revenue and amounts we expect to receive for goods and services that have not yet been delivered or provided under existing, non-cancellable contracts. For contracts that have an original duration of one year or less, we have elected the practical expedient applicable to such contracts and we do not disclose the transaction price for remaining performance obligations at the end of each reporting period and when we expect to recognize this revenue. As of June 30, 2023, deferred revenue of $1,599,000 includes $1,314,000 of our remaining performance obligations for our maintenance contracts, all of which are expected to be recognized within one year, and $285,000 relating to procurement and integration services where we have yet to complete our services for our customers, all of which are expected to be recognized within one year. Contract liabilities consisting of deferred revenue were $2,080,000 at December 31, 2022 and $2,457,000 at December 31, 2021.

 

Concentration of Credit Risk

 

We are currently economically dependent upon our relationship with a large US-based IT OEM. If this relationship is unsuccessful or discontinues, our business and revenue will suffer. The loss of or a significant reduction in orders from this customer or the failure to provide adequate products or services to it would significantly reduce our revenue.

 

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The following customer accounted for a significant percentage of our revenues for the periods shown (unaudited):

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
US-based IT OEM			96	%			94	%			94	%			94	%

 

No other customers represented more than 10% of our revenues for any periods presented. Our US-based IT OEM customer represented 97% and 93% of our trade accounts receivable at June 30, 2023 and December 31, 2022, respectively. No other customer represented more than 10% of our accounts receivable at June 30, 2023, or at December 31, 2022.

 

Non-recourse factoring

 

We have entered into a factoring agreement with a financial institution to sell certain of our accounts receivables from a US-based IT OEM customer under a non-recourse agreement. Under the arrangement, we sell certain trade receivables on a non-recourse basis and account for the transaction as a sale of the receivables. The financial institution assumes the full risk of collection, without recourse to the Company in the event of a loss. Debtors are directed to send payments directly to the financial institution. The applicable receivables are removed from our consolidated balance sheet when the cash proceeds are received by us. We do not service any factored accounts after the factoring has occurred. We utilize this factoring arrangement as part of our financing for working capital. The aggregate gross amount factored under this arrangement was approximately $37.7 million and $10.3 million for the three-month periods ended June 30, 2023 and 2022, respectively. We paid financing fees under this arrangement of approximately $541,000 and $65,000 for the three-month periods ended June 30, 2023 and 2022, respectively, which was recorded as interest expense in our consolidated statements of operations. The aggregate gross amount factored under this arrangement was approximately $48.5 million and $25.6 million for the six-month periods ended June 30, 2023 and 2022, respectively. We paid financing fees under this arrangement of approximately $672,000 and $156,000 for the six-month periods ended June 30, 2023 and 2022, respectively, which was recorded as interest expense in our consolidated statements of operations

 

Recent Accounting Guidance

 

Recently Issued Accounting Pronouncements

 

In June 2016, FASB issued Accounting Standards Update ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets. Among the provisions of ASU 2016-13 is a requirement that assets measured at amortized cost, which includes trade accounts receivable, be presented at the net amount expected to be collected. This pronouncement requires that an entity reflect all of its expected credit losses based on current estimates which will replace the current standard requiring that an entity need only consider past events and current conditions in measuring an incurred loss. We are subject to this guidance effective with the consolidated financial statements we issue for the year ending December 31, 2023, and the quarterly periods during that year. We adopted this guidance effective January 1, 2023 and it did not have a material impact on our financial results of operations.

 

In May 2019, FASB issued Accounting Standards Update 2019-15, Financial Instruments – Credit Losses (Topic 326), (AASU 2019-15”). ASU 2019-15 provides guidance that allows entities to make an irrevocable one-time election upon adoption of the new credit loss standard to measure financial assets at amortized cost (except held-to-maturity securities) using the fair value option. The effective date and transition methodology are the same as in ASU 2016-13. We adopted this guidance effective January 1, 2023 and it did not have a material impact on our financial results of operations.

 

Note 2 – Supplemental Balance Sheet Information

 

Receivables

 

Contract and other receivables consisted of the following (in ‘000’s):

 

		June 30, 2023 (unaudited)				December 31, 2022
Contract and other receivables		$	10,615			$	2,752
Allowance for doubtful accounts			(7	)			(7	)
Contracts and other receivables, net		$	10,608			$	2,745

 

Contract assets consisting of accounts receivable and costs in excess of billings were $1,846 as of December 31, 2021.

 

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Inventories

 

We state inventories at the lower of cost or net realizable value, using the first-in-first-out-method (in ‘000’s) as follows:

 

		June 30, 2023 (unaudited)				December 31, 2022
Materials and component parts		$	212			$	406
Reseller inventories			1,072				460
Reserve			(21	)			(4	)
Inventories, net		$	1,263			$	862

 

Goodwill and Intangible Assets, Net

 

Goodwill and intangible assets, net consisted of the following (in ‘000’s):

 

		June 30, 2023 (unaudited)								December 31, 2022
		Gross								Gross
		Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
Intangible assets not subject to amortization:
Goodwill		$	780				-			$	780				-
Intangible assets subject to amortization:
Customer relationships		$	906			$	(906	)		$	906			$	(870	)
Acquired software		$	234			$	(234	)		$	234			$	(234	)

 

Goodwill attributable to reporting units (in ‘000’s):

 

		June 30, 2023 (unaudited)				December 31, 2022
Facilities unit		$	643			$	643
Systems Integration unit			137				137
Total		$	780			$	780

 

At June 30, 2023 and December 31, 2022, both the facilities unit and the systems integration unit had negative carrying amounts on our records.

 

We recognized amortization expense related to intangibles of approximately $13,000 and $23,000 for the three-month periods ended June 30, 2023 and 2022, respectively. We recognized amortization expense related to intangibles of approximately $35,000 and $45,000 for the six-month periods ended June 30, 2023 and 2022, respectively.

 

We have elected to use December 31 as our annual date to test goodwill and intangibles for impairment. As circumstances change that could affect the recoverability of the carrying amount of the assets during an interim period, we will evaluate goodwill and other long-lived intangible assets for impairment. We performed a quantitative analysis of our goodwill and intangibles at December 31, 2022 as part of our annual testing for impairment and concluded that there was no impairment. We considered relevant matters, including macroeconomic conditions and the effects of COVID-19 on our operations, and there was no identified material triggering events or circumstances that occurred during the three and six-month periods ended June 30, 2023 or 2022 that indicated the carrying value of our goodwill and other long-lived intangible assets was impaired.

 

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Property and Equipment

 

Property and equipment consisted of the following (in ’000’s):

 

		Estimated Useful Lives (years)					June 30, 2023 (unaudited)				December 31, 2022
Trade equipment			5				$	356			$	322
Leasehold improvements		2	-	5				1,050				964
Motor vehicles			3					28				-
Furniture and fixtures			7					60				36
Computer equipment and software			3					2,266				2,233
								3,760				3,555
Less accumulated depreciation								(3,084	)			(2,968	)
Property and equipment, net							$	676			$	587

 

Depreciation of property and equipment and amortization of leasehold improvements and software totaled $75,000 and $47,000 for the three-month periods ended June 30, 2023 and 2022, respectively. Depreciation of property and equipment and amortization of leasehold improvements and software totaled $142,000 and $135,000 for the six-month periods ended June 30, 2023 and 2022, respectively.

 

Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consisted of the following (in ’000’s):

 

		June 30, 2023 (unaudited)				December 31, 2022
Accounts payable		$	32,957			$	19,959
Accrued expenses			464				494
Compensation, benefits and related taxes			699				1,102
Other accrued expenses			186				61
Total accounts payable and accrued expenses		$	34,306			$	21,616

 

Note 3 – Revolving Line of Credit

 

In May 2023, we renewed our revolving line of credit (the “credit facility”) with Susser Bank, National Association (“Lender”) pursuant to a Business Loan Agreement (Asset Based) (the “Loan Agreement”) dated effective May 5, 2023. The obligations under the credit facility are secured by substantially all of our accounts receivable. Our wholly owned subsidiaries, Vortech LLC, and VTC, L.L.C. jointly and severally guarantee our obligations under the credit facility.

 

The maximum amount of the credit facility is $1,500,000. The credit facility is subject to a borrowing base of the lesser of $1,500,000 and 80% of eligible accounts receivables, subject to customary exclusions and limitations. Certain accounts receivables subject to a vendor payment program with a customer are excluded from the definition of eligible accounts receivables under the credit facility. Borrowings under the credit facility will bear interest based on the U.S. Prime Rate as published in the Money Rates section of The Wall Street Journal (effective rate of 8.25% per annum at June 30, 2023) and such interest rate shall not be less than 3.50% per annum). In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the credit facility, we paid a loan origination fee of 0.5% payable in advance upon entering into the credit facility. The credit facility matures on May 5, 2024.

 

The credit facility requires that we maintain a minimum liquidity of $1,500,000 at all times.

 

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The Loan Agreement and ancillary documents include customary affirmative covenants for secured transactions of this type, including maintaining adequate books and records, periodic financial reporting, compliance with laws, maintenance of insurance, maintenance of assets, timely payment of taxes, and notices of adverse events. The Loan Agreement and ancillary documents include customary negative covenants, including incurrence of other indebtedness, mergers, consolidations and transfer of assets and liens on our assets. The Loan Agreement and ancillary documents also include customary events of default, including payment defaults, failure to perform or observe terms, covenants or agreements included in the Loan Agreement and ancillary documents, insolvency and bankruptcy defaults, judgment defaults, material adverse change defaults, and change of ownership defaults.

 

The maximum amount we would have been eligible to borrow at June 30, 2023 was approximately $285,000. There were no amounts outstanding under this credit facility at June 30, 2023.

 

Note 4- Leasing Arrangements

 

We have operating leases for our office and integration facilities as well as for certain equipment and vehicles. Our leases have remaining lease terms of 21 to 69 months. As of June 30, 2023, we have not entered into any lease arrangement classified as a finance lease.

 

We determine if an arrangement is a lease at inception. Operating leases are included in lease right-of-use assets, current lease liabilities and lease liabilities, non-current, on our consolidated balance sheet. We have elected an accounting policy to not recognize short-term leases (one year or less) on the balance sheet. We also elected the package of practical expedients which applies to leases that commenced before the adoption date. By electing the package of practical expedients, we did not need to reassess whether any existing contracts are or contain leases, the lease classification for any existing leases and initial direct costs for any existing leases.

 

Right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. When the implicit rate of the lease is not provided or cannot be determined, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments is recognized on a straight- line basis over the lease term. Components of lease expense and other information is as follows (in ‘000’s):

 

		Three Months Ended June 30, (unaudited)								Six Months Ended June 30, (unaudited)
		2023				2022				2023				2022
Lease expense
Operating lease cost		$	219			$	217			$	434			$	414
Operating Lease – operating cash flows			(150	)			(150	)			(319	)			(342	)
New right-of-use assets – operating leases			-				-				-				-

 

The following presents information regarding the Company's operating leases as of June 30:

 

		2023				2022
Weighted average remaining lease term – operating leases (months)			69				81
Weighted average discount rate – operating leases			6	%			6	%

 

Future minimum lease payments under non-cancellable leases as of June 30, 2023 were as follows (in ‘000’s):

 

		Fiscal Year
2023		$	435
2024			890
2025			909
2026			934
2027			962
Thereafter			1,241
Total minimum future lease payments			5,371
Less imputed interest			(730	)
Total		$	4,641
Reported as of June 30, 2023:
Current portion of lease liability		$	658
Non-current portion of lease liability			3,983
		$	4,641

 

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Note 5 - Net Income (Loss) Per-Share

 

Basic and diluted net income (loss) per share are based on the weighted average number of shares of common stock and potential common stock outstanding during the period. Potential common stock, for the purposes of determining diluted income (loss) per share, includes the effects of dilutive unvested restricted stock, options to purchase common stock and convertible securities. The effect of such potential common stock is computed using the treasury stock method or the if-converted method, as applicable.

 

The following table presents a reconciliation of the numerators and denominators of the basic and diluted income (loss) per share computations for net income (loss). In the table below, net income (loss) represents the numerator and shares represents the denominator (in thousands except per share amounts; unaudited).

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Basic net income (loss) per share:
Numerator:
Net income (loss)		$	315			$	771			$	(471	)		$	463
Denominator:
Weighted-average shares of common stock outstanding			21,575				19,088				21,558				18,978
Basic net income (loss) per share		$	0.01			$	0.04			$	(0.02	)		$	0.02
Diluted net income (loss) per share:
Numerator:
Net income (loss)		$	315			$	771			$	(471	)		$	463
Denominator:
Weighted-average shares of common stock outstanding			21,575				19,088				21,558				18,978
Dilutive options and warrants outstanding			2,216				1,851				-				1,811
Number of shares used in diluted per share computation			23,791				20,939				21,558				20,789
Diluted net income (loss) per share		$	0.01			$	0.04			$	(0.02	)		$	0.02

 

2,340,000 and 400,000 restricted shares were excluded from the calculation of dilutive shares for the three-month periods ended June 30, 2023 and 2022, respectively, because their effect would have been anti-dilutive. For the six-month periods ended June 30, 2023 and 2022 respectively, 3,647,000 and 400,000 potentially dilutive shares were excluded from the calculation of dilutive shares because their effect would have been anti-dilutive.

 

Note 6 - Segment Reporting

 

Segment information reported in the tables below represents the operating segments of the Company organized in a manner consistent with which separate information is available and for which segment results are evaluated regularly by our chief operating decision-maker in assessing performance and allocating resources. Our activities are organized into two major segments: facilities and systems integration. Our facilities unit is involved in the design, project management and maintenance of data center and mission-critical business operations. Our systems integration unit integrates IT equipment for OEM vendors and customers to be used inside data center environments, including modular data centers, and also includes our reseller services where we procure equipment to be used in our integration activities. All revenues are derived from the U.S. market. Segment operating results reflect earnings before acquisition related expenses, other expenses, net, and provision for income taxes.

 

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Revenue and operating results by reportable segment reconciled to reportable net income (loss) for the three and six-month periods ended June 30, 2023 and 2022 and other segment-related information is as follows (in ‘000’s, unaudited):

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Revenues:
Facilities		$	1,564			$	3,599			$	3,800			$	5,678
Systems integration services			12,973				2,822				17,311				5,935
Total revenues		$	14,537			$	6,421			$	21,111			$	11,613
Depreciation and amortization expense:
Facilities		$	49			$	53			$	69			$	109
Systems integration services			39				17				108				71
Consolidated depreciation and amortization expense		$	88			$	70			$	177			$	180
Income from operations:
Facilities		$	644			$	1,122			$	515			$	1,240
Systems integration services			331				(183	)			(205	)			(474	)
Total income from operations		$	975			$	939			$	310			$	766
Interest expense, net:
Facilities		$	176			$	101			$	192			$	181
Systems integration services			472				57				568				101
Consolidated interest expense		$	648			$	158			$	760			$	282

 

 

		June 30, 2023				December 31, 2022
Total Assets:
Facilities		$	826			$	675
Systems integration services			12,553				3,790
Other consolidated activities			29,919				26,941
Total		$	43,298			$	31,406

 

Other consolidated activities include assets not specifically attributable to each business segment including cash and cash equivalents, prepaid expenses and other assets that are managed at a corporate level.

 

13

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

 

The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, the consolidated financial statements and notes thereto included in Item 1 of this Form 10-Q and the consolidated financial statements and notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2022 included in our 2022 Annual Report on Form 10-K. This report contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that involve risks and uncertainties. Our expectations with respect to future results of operations that may be embodied in oral and written forward-looking statements, including any forward-looking statements that may be included in this report, are subject to risks and uncertainties that must be considered when evaluating the likelihood of our realization of such expectations. Our actual results could differ materially. The words “believe,” “expect,” “intend,” “plan,” “project,” “will” and similar phrases as they relate to us are intended to identify such forward-looking statements. In addition, please see the “Risk Factors” in Part 1, Item 1A of our 2022 Annual Report on Form 10-K for a discussion of items that may affect our future results. 

 

Overview

 

TSS, Inc. (‘‘TSS’’, the ‘‘Company’’, ‘‘we’’, ‘‘us’’ or ‘‘our’’) provides comprehensive services for the planning, design, deployment, maintenance, and refurbishment of end-user and enterprise systems, including the mission-critical facilities they are housed in. 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 include technology consulting, design and engineering, project management, systems integration, systems installation, facilities management and IT procurement and reseller services. Our headquarters and our integration facility are in Round Rock, Texas.

 

Our business is concentrated in the data center infrastructure and services market. This market continues to be highly competitive as commerce moves to cloud-based solutions and as data storage requirements continue to escalate for many industries. These underlying macroeconomic trends are continuing to drive demand for more information technology equipment and more efficient data center design and operation, resulting in continued growth in this market. We compete against many larger competitors who have greater resources than we do, which may affect our competitiveness in the market. We rely on several large customers to win contracts and to provide business to us under ‘‘Master Service Agreements’’, and the loss of such customers or a material decline in volume from such customers would have a material negative effect on our results.

 

The majority of the components used in our systems integration business are consigned to us by our original equipment manufacturer (OEM) or their end-user customers, thus our revenue reflects only the services we perform, and the consigned components are not reflected in our balance sheet. We also offer our customers the ability to procure third-party hardware, software and services on their behalf that are then used in our integration services as we integrate these components to deliver a completed system to our customer. In some cases, we also act as an agent and arrange for the purchase of third-party hardware, software or services that are to be provided to our customers by another party and we have no control of the goods or services before they are transferred to the customer. In these instances, we are acting as an agent in the transaction. These procurement and reseller services allow us to develop relationships with new hardware, software and professional service providers and allow us to generate higher profits on integration projects by broadening our revenue and customer base.

 

Our facilities business rebounded in the latter part of 2022 as COVID related supply chain conditions improved and the number of MDC deployments that we performed increased as we satisfied the backlog that had accumulated during the COVID pandemic. This led to a $3.9 million increase in revenues from MDC deployments in 2022, and we have since seen a decrease in revenues from MDC deployments in 2023. This whiplash impact has altered the underlying demand and delivery of MDC deployments, and we expect that the number of MDC deployments will fluctuate on a quarterly basis for the foreseeable future, causing our quarterly revenues and profits to fluctuate.

 

Our systems integration business has also been negatively impacted since the COVID pandemic due to logistical and supply-chain issues that have continued to affect component supply to us and negatively impact our revenue. The supply-chain disruptions prevented our customers from providing components to us for use in our integration business, thereby preventing us from providing our services, and negatively impacting our revenue. Despite these ongoing challenges, overall, there has been an improvement in supply chain issues since the second half of 2022 that has helped our integration services revenues grow by 46% during the first half of 2023 compared to the first half of 2022.

 

 

RESULTS OF OPERATIONS

 

Revenue

 

Revenue consists of fees earned from the planning, design and project management for mission-critical facilities and information infrastructures, as well as fees earned from providing maintenance services for these facilities. We also earn revenue from providing system configuration and integration services, including procurement and reseller services, to IT equipment vendors. Currently we derive all our revenue from the U.S. market.

 

We contract with our customers under five primary contract types: fixed-price service and maintenance contracts, time and material contracts, cost-plus-fee, guaranteed maximum price and fixed-price contracts. Cost-plus-fee and guaranteed maximum price contracts are typically lower risk arrangements, and thus yield lower profit margins than time-and-materials and fixed-price arrangements which generate higher profit margins generally, relative to their higher risk. Certain of our service and maintenance contracts provide comprehensive coverage of all the customers’ equipment (excluding IT equipment) at a facility during the contract period. Where customer requirements are clear, we prefer to enter into comprehensive fixed-price arrangements or time-and-materials arrangements rather than cost-plus-fee and guaranteed maximum price contracts.

 

Most of our revenue is generated based on services provided either by our employees or subcontractors. To a lesser degree, the revenue we earn includes reimbursable travel and other costs to support the project. Since we earn higher profits from the labor services that our employees provide compared with use of subcontracted labor and other reimbursable costs, we seek to optimize our labor content on the contracts we are awarded to maximize our profitability.

 

We have been concentrating our sales efforts towards maintenance and integration services where we have traditionally earned higher margins. Historically we performed design and project-management services in a concentrated number of high-value contracts for the construction of new data centers. In addition to contributing to large quarterly fluctuations in revenue depending upon project timing, these projects required higher levels of working capital and generated lower margins than our maintenance and integration services. We re-focused our design and project management services towards smaller scaled jobs typically connected with addition/move/retrofit activities rather than new construction, to obtain better margins. We have also focused on providing maintenance services for modular data center applications as this market continues to expand. We continue to focus on increasing our systems integration revenues through more consistent revenue streams that will better utilize our assets in that business, and through adding services such as procurement and reseller services, to help drive volume through the integration facility.

 

Revenues of $14.5 million for the three-month period ended June 30, 2023 represented an increase of $8.1 million or 126% compared to the second quarter of 2022. The increase was primarily driven by an increase in our procurement and reseller services where our revenues increased by $9.8 million compared to the second quarter of 2022, driving a total increase of $10.1 million in our systems integration segment. Demand for our integration services were 16% higher than in the second quarter of 2022. Revenues in our facilities segment decreased by $2 million compared to the second quarter of 2022 due to a $2.1 million decrease in revenues from deployment of modular data centers (MDC). In 2022 we were fulfilling the backlog of MDC deployments we had accumulated during the COVID pandemic, and due to a combination of lower demand and component shortages, the volume of MDC activity has decreased since late 2022.

 

On a year-to-date basis, for the six-month period ended June 30, 2023, our total revenue of $21.1 million has increased by $9.5 million or 82% compared to the first six months of 2022 when we recorded revenue of $11.6 million. This was driven by an $11.3 million increase in revenues from our systems integration segment attributable to a 46% increase in integration services and $9.8 million increase in revenues from procurement and reseller activities. This was offset by a $1.8 million decrease in our facilities revenues as the number of MDC deployments decreased compared to 2022.

 

Although we have seen an improvement in recent quarters in the supply chain constraints that we have been experiencing that prevent our partners and customers from delivering all of the products needed for us to complete and perform integration services, there are still ongoing supply issues that persist. These supply chain disruptions cause delays in the timing of systems integration and MDC deployment revenue for us as we await delivery of required components, and our vendors and partners expect these supply-chain issues to continue for at least the next several quarters.

 

Our reseller and procurement revenues involve us procuring third-party hardware, software and services on our customers’ behalf that are then typically used in our integrated services as we integrate those components to deliver a completed system to our customer. In some cases, we also act as an agent and arrange for the purchase of third-party hardware, software or services that are to be provided to our customers by another party and we have no control of the goods or services before they are transferred to the customer. In these instances, we are acting as an agent in the transaction and recognize revenue as the amount of any fee or commission that we expect to be entitled to after paying the other party for the goods or services provided to the customer. We had an increase in volume of reseller and procurement business during the second quarter of 2023 compared to 2022, and our total revenues from reseller and procurement services was approximately $10.6 million in 2023 compared to $0.8 million in the second quarter of 2022.

 

 

Cost of Revenue

 

Cost of revenue includes the cost of component parts for our products, labor costs expended in the production and delivery of our services, subcontractor and third-party expense, equipment and other costs associated with our test and integration facilities, excluding depreciation of our manufacturing property and equipment, shipping costs, and the costs of support functions such as purchasing, logistics and quality assurance. The cost of revenue as a percentage of revenue was 78% for the three-month period ended June 30, 2023 compared to 59% for the second quarter of 2022. This increase from the second quarter of 2022 reflects higher costs, including labor costs, in our integration business compared to the prior year and the impact of higher reseller and procurement activities. Absent the reseller business, the profit margin from our core integration and maintenance services was 40% in the second quarter of 2023 compared to 44% in the second quarter of 2022.

 

For the six-month period ended June 30, 2023, our cost of revenue as a percentage of revenue was 77%. This compares to 63% in the comparable period of 2022. This increase is primarily due to the higher proportion of our total revenue that is from procurement and reseller services.

 

The level of expected revenue from our reseller services has and will continue to fluctuate significantly on a quarterly basis. As a result, our cost of revenue as a percentage of total revenue will also fluctuate significantly. Cost of revenue for reseller services is higher than cost of revenue for our integration and maintenance services.

 

Since we earn higher profits when using our own labor services, we expect gross margins to improve when our labor services mix increases relative to the use of subcontracted labor or third-party labor. Our direct labor costs are relatively fixed in the short-term, and the utilization of direct labor is critical to maximizing our profitability. As we continue to bid and win contracts that require specialized skills that we do not possess, we would expect to have more third-party subcontracted labor to help us fulfill those contracts. In addition, we can face hiring challenges in internally staffing larger contracts. While these factors could lead to a higher ratio of cost of services to revenue, the ability to outsource these activities without carrying a higher level of fixed overhead improves our overall profitability by increasing income, broadening our revenue base and generating a favorable return on invested capital. As we increase the level of IT reseller services in the future, we anticipate that our overall gross margin will decrease as the normal margins on reseller activities are lower than the margins from our traditional facilities and systems integration services.

 

A large portion of our revenue is derived from fixed price contracts. Under these contracts, we set the price of our services and assume the risk that the costs associated with our performance may be greater than we anticipated. Our profitability is therefore dependent upon our ability to estimate accurately the costs associated with our services. These costs may be affected by a variety of factors, such as lower than anticipated productivity, conditions at the work sites differing materially from what was anticipated at the time we bid on the contract, and higher than expected costs of materials and labor. Certain agreements or projects could have lower margins than anticipated or losses if actual costs for contracts exceed our estimates, which could reduce our profitability and liquidity.

 

Gross Profit

 

Our gross profit margin for the three-month period ended June 30, 2023 was 22% compared to a gross profit margin of 41% in the second quarter of 2022. This decrease in margin as a percentage of revenues compared to the second quarter of 2022 was primarily attributable to an increase in costs, particularly labor costs, in our integration business and from the higher percentage of our total revenue that came from procurement and reseller services. As the percentage of total revenue from procurement and reseller services increases, our gross margin will decrease as the cost of sales is higher for this revenue than our traditional integration and facilities revenues. The growth in our total revenues compared to 2022 allowed us to increase our overall gross profit by 23%, to $3.2 million in the second quarter of 2023 compared to $2.6 million gross profit in the second quarter of 2022. The 82% increase in our total revenues for the first six-months of 2023 compared to the first six months of 2022 has allowed us to increase our gross profits by $630,000 in the first half of 2023 compared to 2022.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses primarily consist of compensation and related expenses, including variable sales compensation, for our executive, administrative and sales and marketing personnel, as well as related travel, selling and marketing expenses, professional fees, facility costs, insurances and other corporate costs. For the three-month period ended June 30, 2023, our selling, general and administrative expenses increased by $556,000 or 35% compared to the second quarter of 2022 primarily due to higher compensation costs and from higher professional fees. For the six-month period ended June 30, 2023, our selling, general and administrative expenses increased by $1.1 million or 33% compared to the first six months of 2022, primarily due to higher compensation costs.

 

Income (Loss) from Operations

 

For the three-month period ended June 30, 2023, we recorded operating income of $975,000. This compares to operating income of $939,000 that we had in the second quarter of 2022. For the six-month period ended June 30, 2023, we recorded operating income of $310,000, compared to operating income of $766,000 that we recorded in the first six months of 2022.

 

 

Interest expense, net

 

For the three-month period ended June 30, 2023, we recorded interest expense of $672,000. This compares to $162,000 in the three-month period ended June 30, 2022. The increase in interest expense was due to a higher number of agent-type transactions that were factored in our procurement and reseller business compared to 2022. For the six-month period ended June 30, 2023, we recorded interest expense of $812,000, compared to $291,000 in the same period of 2022. This increase was due to a $0.6 million increase in interest costs associated with procurement and reseller activities offset by 2023 not having any interest expense for related party debt which was extinguished in July 2022. Interest expense in each period was partially offset by an immaterial amount of interest income.

 

Net Income (Loss)

 

After net interest expense and income taxes we recorded net income of $315,000 or $0.01 per share for the three-month period ended June 30, 2023. This compares to net income of $771,000 or $0.04 per share for the three-month period ended June 30, 2022. For the six-month period ended June 30, 2023, we recorded a net loss of $471,000 or $(0.02) per share. This compares to net income of $463,000 or $0.02 per share that we recorded in the first six-months of 2022.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our primary sources of liquidity at June 30, 2023 are our cash and cash equivalents on hand, funds available to us under our revolving line of credit, vendor trade-credit and projected cash flows from operating activities.

 

As of June 30, 2023, the Company had an accumulated deficit of $66.9 million. We have recorded operating and net income in two of our four most recent quarters but have a history of annual operating and net losses over recent years which have been due, in part, to the effects of COVID-19 and related 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 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, funds available under our bank revolving credit facility and trade credit extended to us by our vendors. If our future results do not meet 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 as a way to increase the scale of our operations, or if there is a sudden increase in the level of reseller and procurement services. There can be no assurance as to the Company’s ability to scale its business operations or terms upon which additional financing may be available.

 

Management believes that we will be able to generate sufficient cash flows and liquidity as described above, as we have been able to grow our revenues and order backlog and seen an improvement in supply-chain constraints. Our quarterly results have been impacted during 2023 by transactions being delayed by our customers, but based on anticipated outlook, we believe that we will be profitable in the next quarter and for the year ended December 31, 2023. As a result, management has concluded that there is not substantial doubt about the Company’s ability to continue as a going concern. 

 

If we continue to meet the cash flow projections in our current business plan, we expect that we will have adequate capital resources necessary to continue operating our business and meet our debt obligations for at least the next twelve months. Our business plan and our assumptions around the adequacy of our liquidity are based on estimates regarding expected revenues and future costs. However, there are potential risks, including that our revenues may not meet our projections, our costs may exceed our estimates, or our working capital needs may be greater than anticipated. Further, our estimates may change, and future events or developments may also affect our estimates. Any of these factors may change our expectation of cash usage in 2023 and beyond or significantly affect our level of liquidity, which may limit our opportunities to grow our business.

 

At June 30, 2023 and December 31, 2022, we had cash and cash equivalents of $24.2 million and $20.4 million, respectively.

 

Significant Uses of Cash

 

Operating Activities:

 

Cash provided by operating activities was $4 million for the six-month period ended June 30, 2023, compared to cash provided by operating activities of $0.5 million for the six-month period ended June 30, 2022. This change was primarily attributable to the timing and financial impacts of our procurement and reseller services. The volume of procurement and reseller activities was higher at the end of our second quarter in 2023 compared to both the second quarter of 2022 and the end of fiscal 2022. At the end of this most recent quarter, we were able to be paid by our customers for a number of large procurement projects, but we had yet to pay our vendors for these same projects. This resulted in an increase of approximately $13 million in our outstanding accounts payable at June 2023 and our accounts receivable increased by approximately $8 million due to these transctions. We have been able to structure our procurement and reseller activities in such a way as to minimize their overall impact on our liquidity by using trade creditors as the primary way to finance these activities. However, due to timing it is possible to see fluctuations on a quarterly basis for reseller contracts in progress at the end of a particular reporting period. We believe that we will have adequate trade credit available to us to continue financing our reseller activities as we grow this business during 2023 and beyond. Otherwise, the change in cash provided by operating activities was primarily due to loss from operations.

 

 

Investing Activities:

 

Cash used in investing activities was $205,000 in the six-month period ended June 30, 2023 which was primarily spent on leasehold improvements for our integration facility, compared to cash used in the same period of 2022 of $122,000 for purchases of property and equipment.

 

Financing Activities:

 

Cash used in financing activities was $10,000 in the six-month period ended June 30, 2023, compared to cash provided by financing activities of $27,000 in the six-month period ended June 30, 2022. The cash used in financing activities in 2023 was for the purchase of stock related to tax obligations around vesting of restricted stock by our employees. In 2022 we used $3,000 for tax obligations around restricted stock vesting and we received $31,000 in proceeds from the exercise of stock options by employees.

 

Future Uses of Cash

 

Our business plans and our assumptions around the adequacy of our liquidity are based on estimates regarding future revenues and costs and our ability to secure sources of funding when needed. However, our revenues may not meet our expectations, or our costs may exceed our estimates. Further, our estimates may change, and future events or developments may also affect our estimates. Any of these factors may change our expectations of cash usage during 2023 or beyond or significantly affect our level of liquidity, which may require us to take other measures to reduce our operating costs in order to continue operating. Any action to reduce operating costs may negatively affect our range of products and services that we offer or our ability to deliver such products and services, which could materially impact our financial results depending on the level of cost reductions taken.

 

Our primary liquidity and capital requirements are to fund working capital from current operations. 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. We believe that if future results do not meet expectations, 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. However, the timing and effect of these steps may not completely alleviate a material effect on liquidity. We may also require additional capital if we seek to introduce a new line of business or if we seek to acquire additional businesses as a way to increase the scale of our operations.

 

Off-Balance Sheet Arrangements

 

As of June 30, 2023 and December 31, 2022, we had no off -balance sheet arrangements.

 

Critical Accounting Policies and Pronouncements

 

There have been no material changes to our critical accounting policies and estimates as set forth in the Annual Report for the year ended December 31, 2022 on our consolidated financial statements and disclosures. See also Item 1. Financial Statements Note 1 – Significant Accounting Policies regarding Recent Accounting Pronouncements.

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

 

Item 4. Controls and Procedures.

 

Our management performed an evaluation under the supervision and with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer) of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of June 30, 2023. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of June 30, 2023, the Company’s disclosure controls and procedures were effective such that information relating to the Company required to be disclosed in the Company’s SEC reports (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding financial disclosures.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting for the three-month period ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting as such term is defined in Rule 13a-15 and 15d-15 of the Exchange Act of 1934, as amended.

 

 

PART II - OTHER INFORMATION

 

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

 

The following table sets forth information about our purchases of outstanding shares of our common stock during the quarter ended June 30, 2023:

 

Monthly Period During the Quarter Ended June 30, 2023		Total Shares Purchased				Average Price paid per Share				Total Shares Purchased as Part of Publicly Announced Plans				Approximate Dollar Amount of Shares Yet To Be Purchased Under Plans
April 1, 2023 – April 30, 2023			-			$	-				-				-
May. 1, 2023 – May 31, 2023			25,513			$	0.40
June 1, 2023 – June 30, 2023			-			$	-				-				-
Total			25,513			$	0.40

 

(a) All of these shares were acquired from associates to satisfy tax withholding requirements upon the vesting of restricted stock.

 

 

Item 6. Exhibits.

 

31.1*	Certification of TSS, Inc. Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of TSS, Inc. Interim Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of TSS, Inc. Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of TSS, Inc. Interim Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

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101.INS *	Inline XBRL Instance Document
101.SCH *	Inline XBRL Taxonomy Extension Schema
101.CAL *	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF *	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB *	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

 

*	Filed herewith.

 

**	Furnished herewith.

 

 

SIGNATURES

 

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

 

	TSS, INC.
Date: August 14, 2023	By:	/s/ John K. Penver
		John K. Penver
		Chief Financial Officer
		(Principal Financial Officer)

 

 

 

Exhibit 31.1

 

CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER

UNDER SECTION 302 OF THE SARBANES–OXLEY ACT OF 2002

 

I, Darryll E. Dewan, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of TSS, 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 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 15d-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 on 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 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 the registrant’s board of directors (or person 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.

 

August 14, 2023	By:	/s/ Darryll E. Dewan
		Darryll E. Dewan
		President and Chief Executive Officer
		(Principal Executive Officer)

 

 

 

Exhibit 31.2

 

CERTIFICATION BY PRINCIPAL FINANCIAL OFFICER

UNDER SECTION 302 OF THE SARBANES–OXLEY ACT OF 2002

 

I, John K. Penver, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of TSS, 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 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 15d-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 on 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 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 the registrant’s board of directors (or person 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.

 

August 14, 2023	By:	/s/ John K. Penver
		John K. Penver
		Chief Financial Officer (Principal Financial Officer)

 

 

 

Exhibit 32.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

 

In connection with the Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “Report”) of TSS, Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Darryll E. Dewan, President and Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

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

 

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

 

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

 

Date: August 14, 2023	By:	/s/ Darryll E. Dewan
		Darryll E. Dewan
		President and Chief Executive Officer
		(Principal Executive Officer)

 

 

 

Exhibit 32.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

 

In connection with the Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “Report”) of TSS, Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John K. Penver, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

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

 

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

 

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

 

Date: August 14, 2023	By:	/s/ John K. Penver
		John K. Penver
		Chief Financial Officer
		(Principal Financial Officer)

 

 

v3.23.2

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2023	Aug. 14, 2023
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity File Number	001-33627
Entity Registrant Name	TSS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-2027651
Entity Address, Address Line One	110 E. Old Settlers Blvd
Entity Address, City or Town	Round Rock
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78664
City Area Code	512
Local Phone Number	310-1000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		21,606,626
Entity Central Index Key	0001320760
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false

v3.23.2

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Current Assets:
Cash and cash equivalents	$ 24,172	$ 20,397
Contract and other receivables, net	10,608	2,745
Costs and estimated earnings in excess of billings on uncompleted contracts	128	231
Inventories, net	1,263	862
Prepaid expenses and other current assets	412	175
Total current assets	36,583	24,410
Property and equipment, net	676	587
Lease right-of-use assets	4,398	4,717
Goodwill	780	780
Intangible assets, net	0	35
Other assets	861	877
Total assets	43,298	31,406
Current Liabilities:
Accounts payable and accrued expenses	34,306	21,616
Deferred revenues	1,599	2,080
Current portion of lease liabilities	658	467
Total current liabilities	36,563	24,163
Non-current portion of lease liabilities	3,983	4,309
Total liabilities	40,546	28,472
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock, $.0001 par value; 1,000 shares authorized at March 31, 2023 and December 31, 2022; none issued	0	0
Common stock, $.0001 par value; 49,000 shares authorized at June 30, 2023 and December 31, 2022; 23,288 and 23,197 issued; 21,604 and 21,540 outstanding at June 30, 2023 and December 31, 2022, respectively	2	2
Additional paid-in capital	71,822	71,522
Treasury stock 1,658 and 1,657 shares at cost at March 31, 2023 and December 31, 2022	(2,216)	(2,205)
Accumulated deficit	(66,856)	(66,385)
Total stockholders’ equity	2,752	2,934
Total liabilities and stockholders’ equity	$ 43,298	$ 31,406

v3.23.2

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares shares in Thousands	Jun. 30, 2023	Dec. 31, 2022
Preferred Stock, Par or Stated Value Per Share (in dollars per share)	$ 0.0001	$ 0.0001
Preferred Stock, Shares Authorized (in shares)	1,000	1,000
Preferred Stock, Shares Issued (in shares)	0	0
Common Stock, Par or Stated Value Per Share (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, Shares Authorized (in shares)	49,000	49,000
Common Stock, Shares, Issued (in shares)	23,288	23,197
Common Stock, Shares, Outstanding (in shares)	21,604	21,540
Treasury Stock, Common, Shares (in shares)	1,684	1,657

v3.23.2

Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Results of Operations:
Revenue	$ 14,537	$ 6,421	$ 21,111	$ 11,613
Cost of revenue	11,315	3,809	16,203	7,335
Gross profit	3,222	2,612	4,908	4,278
Selling, general and administrative expenses	2,159	1,603	4,421	3,332
Depreciation and amortization	88	70	177	179
Total operating costs	2,247	1,673	4,598	3,512
Loss from operations	975	939	310	766
Other income (expense):
Interest expense, net	(648)	(158)	(760)	(282)
Loss from operations before income taxes	327	781	(450)	484
Income tax expense	12	10	21	21
Net loss	$ 315	$ 771	$ (471)	$ 463
Basic income (loss) per common share (in dollars per share)	$ 0.01	$ 0.04	$ (0.02)	$ 0.02
Diluted income (loss) per common share (in dollars per share)	$ 0.01	$ 0.04	$ (0.02)	$ 0.02

v3.23.2

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock, Common [Member]	Retained Earnings [Member]	Total
Balance January 1, 2022 (in shares) at Dec. 31, 2021	20,286		(1,424)
Balance January 1, 2022 at Dec. 31, 2021	$ 2	$ 70,584	$ (2,071)	$ (66,312)	$ 2,203
Restricted stock vested (in shares)	18
Restricted stock vested			$ 0
Treasury shares repurchased (in shares)			(6)
Treasury shares repurchased			$ (3)		(3)
Stock-based compensation		106			106
Net loss				(308)	(308)
Balance at March 31 ,2022 (in shares) at Mar. 31, 2022	20,304		(1,430)
Balance at March 31 ,2022 at Mar. 31, 2022	$ 2	70,690	$ (2,074)	(66,620)	1,998
Balance January 1, 2022 (in shares) at Dec. 31, 2021	20,286		(1,424)
Balance January 1, 2022 at Dec. 31, 2021	$ 2	70,584	$ (2,071)	(66,312)	2,203
Net loss					463
Balance at March 31 ,2022 (in shares) at Jun. 30, 2022	20,620		(1,431)
Balance at March 31 ,2022 at Jun. 30, 2022	$ 2	70,828	$ (2,074)	(65,849)	2,907
Balance January 1, 2022 (in shares) at Mar. 31, 2022	20,304		(1,430)
Balance January 1, 2022 at Mar. 31, 2022	$ 2	70,690	$ (2,074)	(66,620)	1,998
Restricted stock vested (in shares)	6		0
Restricted stock vested	$ 0	0	$ 0	0	0
Treasury shares repurchased (in shares)	0		(1)
Treasury shares repurchased	$ 0	0	$ 0	0	(1)
Stock-based compensation	0	107	0	0	107
Net loss	$ 0	0	$ 0	771	771
Stock options exercised (in shares)	310		0
Stock options exercised	$ 0	31	$ 0	0	31
Balance at March 31 ,2022 (in shares) at Jun. 30, 2022	20,620		(1,431)
Balance at March 31 ,2022 at Jun. 30, 2022	$ 2	70,828	$ (2,074)	(65,849)	2,907
Balance January 1, 2022 (in shares) at Dec. 31, 2022	23,197		(1,657)
Balance January 1, 2022 at Dec. 31, 2022	$ 2	71,522	$ (2,205)	(66,385)	2,934
Restricted stock vested (in shares)	3		0
Restricted stock vested	$ 0	0	$ 0	0	0
Treasury shares repurchased (in shares)	0		(1)
Treasury shares repurchased	$ 0	0	$ (1)	0	(1)
Stock-based compensation	0	140	0	0	140
Net loss	$ 0	0	$ 0	(786)	(786)
Balance at March 31 ,2022 (in shares) at Mar. 31, 2023	23,200		(1,658)
Balance at March 31 ,2022 at Mar. 31, 2023	$ 2	71,662	$ (2,206)	(67,171)	2,287
Balance January 1, 2022 (in shares) at Dec. 31, 2022	23,197		(1,657)
Balance January 1, 2022 at Dec. 31, 2022	$ 2	71,522	$ (2,205)	(66,385)	2,934
Net loss					(471)
Balance at March 31 ,2022 (in shares) at Jun. 30, 2023	23,288		(1,684)
Balance at March 31 ,2022 at Jun. 30, 2023	$ 2	71,822	$ (2,216)	(66,856)	2,752
Balance January 1, 2022 (in shares) at Mar. 31, 2023	23,200		(1,658)
Balance January 1, 2022 at Mar. 31, 2023	$ 2	71,662	$ (2,206)	(67,171)	2,287
Restricted stock vested (in shares)	88		0
Restricted stock vested	$ 0	0	$ 0	0	0
Treasury shares repurchased (in shares)	0		(26)
Treasury shares repurchased	$ 0	0	$ (10)	0	(10)
Stock-based compensation	0	160	0	0	160
Net loss	$ 0	0	$ 0	315	315
Balance at March 31 ,2022 (in shares) at Jun. 30, 2023	23,288		(1,684)
Balance at March 31 ,2022 at Jun. 30, 2023	$ 2	$ 71,822	$ (2,216)	$ (66,856)	$ 2,752

v3.23.2

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash Flows from Operating Activities:
Net loss	$ (471)	$ 463
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	177	179
Amortization of debt discount	0	22
Stock-based compensation	299	213
Changes in operating assets and liabilities:
Contract and other receivables	(7,863)	230
Costs and estimated earnings in excess of billings on uncompleted contracts	103	(2,224)
Inventories, net	(401)	616
Prepaid expenses and other assets	(247)	32
Right-of-use assets	319	346
Accounts payable and accrued expenses	12,690	(1,266)
Deferred revenues	(481)	2,200
Operating lease liabilities	(135)	(342)
Net cash provided by (used in) operating activities	3,990	469
Cash Flows from Investing Activities:
Capital expenditures	(205)	(122)
Net cash used in investing activities	(205)	(122)
Cash Flows from Financing Activities:
Proceeds from issuance of equity	0	31
Repayment of long-term debt	0	(1)
Repurchase of stock	(10)	(3)
Net cash used in financing activities	(10)	27
Net increase (decrease) in cash and cash equivalents	3,775	374
Cash and cash equivalents at beginning of period	20,397	7,992
Cash and cash equivalents at end of period	24,172	8,366
Supplemental disclosure of cash flow information:
Cash paid for interest	672	277
Cash paid for taxes	$ 46	$ 33

v3.23.2

Note 1 - Significant Accounting Policies	6 Months Ended
	Jun. 30, 2023
Notes to Financial Statements
Significant Accounting Policies [Text Block]	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 they are housed in. 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 corporate offices and our integration facility are located in Round Rock, Texas.   Basis of Presentation   The accompanying consolidated balance sheet as of December 31, 2022, 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, 2022.   Liquidity   As of June 30, 2023, the Company had an accumulated deficit of $66.9 million. We have recorded operating and net income in two of our four most recent quarters, but we have a history of annual operating losses over recent years which have been due, in part, to the effects of COVID-19 and related 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 credit facilities with our bank. 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, or if there is a sudden increase in the level of reseller services. 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 described above, as we have been able to grow our revenues and order backlog and seen an improvement in related supply chain constraints. Our recent quarterly results have also been impacted by transactions being delayed by our customers but we believe that we will be profitable in the next quarter and for the year ended December 31, 2023. As a result, management has concluded that there is not substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern for a reasonable period of time.   Revenue Recognition   We recognize revenues when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.   Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations based on relative standalone selling prices.   Maintenance Services   We generate maintenance services revenues from fees that provide our customers with as-needed maintenance and repair services on modular data centers during the contract term. Our contract terms are typically one year in duration, are billed annually in advance, and are non-cancellable. As a result, we record deferred revenue (a contract liability) and recognize revenue from these services on a ratable basis over the contract term. We can mitigate our exposure to credit losses by discontinuing services in the event of non-payment, however our history of non-payments and bad debt expense has been insignificant.   Integration Services   We generate integration services revenues from fees that provide our customers with customized system and rack-level integration services. We recognize revenue upon shipment to the customer of the completed systems as this is when we have completed our services and when the customer obtains control of the promised goods. We typically extend credit terms to our integration customers based on their credit worthiness and generally do not receive advance payments. As such, we record accounts receivable at the time of shipment, when our right to the consideration becomes unconditional. Accounts receivable from our integration customers are typically due within 30-60 days of invoicing. An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ credit worthiness. As of June 30, 2023, and December 31, 2022, our allowance for doubtful accounts was $7,000.   Equipment Sales   We generate revenues under fixed price contracts from the sale of data center and related ancillary equipment to customers in the United States. We recognize revenue when the product is shipped to the customer as that is when the customer obtains control of the promised goods. Typically, we do not receive advance payments for equipment sales; however, if we do, we record the advance payment as deferred revenues. Normally we record accounts receivable at the time of shipment, when our right to the consideration has become unconditional. Accounts receivable from our equipment sales are typically due within 30-45 days of invoicing.   Deployment and Other Services   We generate revenues from fees we charge our customers for other services, including repairs or other services not covered under maintenance contracts, installation and servicing of equipment, including modular data centers that we sold, and other fixed-price services, including repair, design and project management services. In some cases, we arrange for a third party to perform warranty and servicing of equipment, and in these instances, we recognize revenue as the amount of any fees or commissions that we expect to be entitled to receive. Other services are typically invoiced upon completion of services or completion of milestones. We record accounts receivable at the time of completion when our right to consideration becomes unconditional.   Reseller Services   We generate revenues from fees we charge our customers to procure third-party hardware, software and professional services on their behalf that are then used in our integration services as we integrate these components to deliver a completed system to our customer. We recognize our reseller services revenue upon completion of the procurement activity. In some cases, we arrange for the purchase of third-party hardware, software or professional services that are to be provided to our customers by another party and we have no control of the goods before they are transferred to the customer. In these instances, we are acting as an agent in the transaction and recognize revenue as the amount of any fee or commissions that we expect to be entitled to after paying the other party for the goods or services provided to the customer. Accounts receivable from our reseller activities are typically due within 30-60 days of invoicing.   The following table shows our revenues disaggregated by reportable segment and by product or service type (in ’000’s, unaudited):       Three-Months Ended June 30,     Six-Months Ended June 30,       2023     2022     2023     2022   FACILITIES:                                 Maintenance revenues   $ 1,014     $ 859     $ 1,953     $ 1,662   Equipment sales     320       316       382       370   Deployment and other services     230       2,423       1,465       3,645   Total Facilities revenues   $ 1,564     $ 3,598     $ 3,800     $ 5,677                                     SYSTEMS INTEGRATION:                                 Integration services   $ 2,380     $ 2,057     $ 4,992     $ 3,430   Reseller services     10,593       766       12,319       2,506   Total Systems Integration revenues   $ 12,973     $ 2,823     $ 17,311     $ 5,936   TOTAL REVENUES   $ 14,537     $ 6,421     $ 21,111     $ 11,613     Judgments   We consider several factors in determining that control transfers to the customer upon shipment of equipment or upon completion of our services. These factors include that legal title transfers to the customer, we have a present right to payment, and the customer has assumed the risks and rewards of ownership at the time of shipment or completion of the services.   Sales Taxes   Sales (and similar) taxes that are imposed on our sales and collected from customers are excluded from revenues.   Shipping and Handling Costs   Costs for shipping and handling activities, including those activities that occur subsequent to transfer of control to the customer, are recorded as cost of revenues and are expensed as incurred. We accrue costs for shipping and handling activities that occur after control of the promised good or service has transferred to the customer.   Remaining Performance Obligations   Remaining performance obligations include deferred revenue and amounts we expect to receive for goods and services that have not yet been delivered or provided under existing, non-cancellable contracts. For contracts that have an original duration of one year or less, we have elected the practical expedient applicable to such contracts and we do not disclose the transaction price for remaining performance obligations at the end of each reporting period and when we expect to recognize this revenue. As of June 30, 2023, deferred revenue of $1,599,000 includes $1,314,000 of our remaining performance obligations for our maintenance contracts, all of which are expected to be recognized within one year, and $285,000 relating to procurement and integration services where we have yet to complete our services for our customers, all of which are expected to be recognized within one year. Contract liabilities consisting of deferred revenue were $2,080,000 at December 31, 2022 and $2,457,000 at December 31, 2021.   Concentration of Credit Risk   We are currently economically dependent upon our relationship with a large US-based IT OEM. If this relationship is unsuccessful or discontinues, our business and revenue will suffer. The loss of or a significant reduction in orders from this customer or the failure to provide adequate products or services to it would significantly reduce our revenue.   The following customer accounted for a significant percentage of our revenues for the periods shown (unaudited):       Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022                                     US-based IT OEM     96 %     94 %     94 %     94 %   No other customers represented more than 10% of our revenues for any periods presented. Our US-based IT OEM customer represented 97% and 93% of our trade accounts receivable at June 30, 2023 and December 31, 2022, respectively. No other customer represented more than 10% of our accounts receivable at June 30, 2023, or at December 31, 2022.   Non-recourse factoring   We have entered into a factoring agreement with a financial institution to sell certain of our accounts receivables from a US-based IT OEM customer under a non-recourse agreement. Under the arrangement, we sell certain trade receivables on a non-recourse basis and account for the transaction as a sale of the receivables. The financial institution assumes the full risk of collection, without recourse to the Company in the event of a loss. Debtors are directed to send payments directly to the financial institution. The applicable receivables are removed from our consolidated balance sheet when the cash proceeds are received by us. We do not service any factored accounts after the factoring has occurred. We utilize this factoring arrangement as part of our financing for working capital. The aggregate gross amount factored under this arrangement was approximately $37.7 million and $10.3 million for the three-month periods ended June 30, 2023 and 2022, respectively. We paid financing fees under this arrangement of approximately $541,000 and $65,000 for the three-month periods ended June 30, 2023 and 2022, respectively, which was recorded as interest expense in our consolidated statements of operations. The aggregate gross amount factored under this arrangement was approximately $48.5 million and $25.6 million for the six-month periods ended June 30, 2023 and 2022, respectively. We paid financing fees under this arrangement of approximately $672,000 and $156,000 for the six-month periods ended June 30, 2023 and 2022, respectively, which was recorded as interest expense in our consolidated statements of operations   Recent Accounting Guidance   Recently Issued Accounting Pronouncements   In June 2016, FASB issued Accounting Standards Update ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets. Among the provisions of ASU 2016-13 is a requirement that assets measured at amortized cost, which includes trade accounts receivable, be presented at the net amount expected to be collected. This pronouncement requires that an entity reflect all of its expected credit losses based on current estimates which will replace the current standard requiring that an entity need only consider past events and current conditions in measuring an incurred loss. We are subject to this guidance effective with the consolidated financial statements we issue for the year ending December 31, 2023, and the quarterly periods during that year. We adopted this guidance effective January 1, 2023 and it did not have a material impact on our financial results of operations.   In May 2019, FASB issued Accounting Standards Update 2019-15, Financial Instruments – Credit Losses (Topic 326), (AASU 2019-15”). ASU 2019-15 provides guidance that allows entities to make an irrevocable one-time election upon adoption of the new credit loss standard to measure financial assets at amortized cost (except held-to-maturity securities) using the fair value option. The effective date and transition methodology are the same as in ASU 2016-13. We adopted this guidance effective January 1, 2023 and it did not have a material impact on our financial results of operations.

v3.23.2

Note 2 - Supplemental Balance-sheet Information	6 Months Ended
	Jun. 30, 2023
Notes to Financial Statements
Supplemental Balance Sheet Disclosures [Text Block]	Note 2 – Supplemental Balance Sheet Information   Receivables   Contract and other receivables consisted of the following (in ‘000’s):       June 30, 2023 (unaudited)     December 31, 2022   Contract and other receivables   $ 10,615     $ 2,752   Allowance for doubtful accounts     (7 )     (7 ) Contracts and other receivables, net   $ 10,608     $ 2,745     Contract assets consisting of accounts receivable and costs in excess of billings were $1,846 as of December 31, 2021.   Inventories   We state inventories at the lower of cost or net realizable value, using the first-in-first-out-method (in ‘000’s) as follows:       June 30, 2023 (unaudited)     December 31, 2022   Materials and component parts   $ 212     $ 406   Reseller inventories     1,072       460   Reserve     (21 )     (4 ) Inventories, net   $ 1,263     $ 862     Goodwill and Intangible Assets, Net   Goodwill and intangible assets, net consisted of the following (in ‘000’s):       June 30, 2023 (unaudited)     December 31, 2022       Gross             Gross               Carrying     Accumulated     Carrying     Accumulated       Amount     Amortization     Amount     Amortization   Intangible assets not subject to amortization:                                 Goodwill   $ 780       -     $ 780       -   Intangible assets subject to amortization:                                 Customer relationships   $ 906     $ (906 )   $ 906     $ (870 ) Acquired software   $ 234     $ (234 )   $ 234     $ (234 )   Goodwill attributable to reporting units (in ‘000’s):       June 30, 2023 (unaudited)     December 31, 2022   Facilities unit   $ 643     $ 643   Systems Integration unit     137       137   Total   $ 780     $ 780     At June 30, 2023 and December 31, 2022, both the facilities unit and the systems integration unit had negative carrying amounts on our records.   We recognized amortization expense related to intangibles of approximately $13,000 and $23,000 for the three-month periods ended June 30, 2023 and 2022, respectively. We recognized amortization expense related to intangibles of approximately $35,000 and $45,000 for the six-month periods ended June 30, 2023 and 2022, respectively.   We have elected to use December 31 as our annual date to test goodwill and intangibles for impairment. As circumstances change that could affect the recoverability of the carrying amount of the assets during an interim period, we will evaluate goodwill and other long-lived intangible assets for impairment. We performed a quantitative analysis of our goodwill and intangibles at December 31, 2022 as part of our annual testing for impairment and concluded that there was no impairment. We considered relevant matters, including macroeconomic conditions and the effects of COVID-19 on our operations, and there was no identified material triggering events or circumstances that occurred during the three and six-month periods ended June 30, 2023 or 2022 that indicated the carrying value of our goodwill and other long-lived intangible assets was impaired.   Property and Equipment   Property and equipment consisted of the following (in ’000’s):       Estimated Useful Lives (years)     June 30, 2023 (unaudited)     December 31, 2022   Trade equipment     5       $ 356     $ 322   Leasehold improvements   2 - 5       1,050       964   Motor vehicles     3         28       -   Furniture and fixtures     7         60       36   Computer equipment and software     3         2,266       2,233                   3,760       3,555   Less accumulated depreciation               (3,084 )     (2,968 ) Property and equipment, net             $ 676     $ 587     Depreciation of property and equipment and amortization of leasehold improvements and software totaled $75,000 and $47,000 for the three-month periods ended June 30, 2023 and 2022, respectively. Depreciation of property and equipment and amortization of leasehold improvements and software totaled $142,000 and $135,000 for the six-month periods ended June 30, 2023 and 2022, respectively.   Accounts Payable and Accrued Expenses   Accounts payable and accrued expenses consisted of the following (in ’000’s):       June 30, 2023 (unaudited)     December 31, 2022   Accounts payable   $ 32,957     $ 19,959   Accrued expenses     464       494   Compensation, benefits and related taxes     699       1,102   Other accrued expenses     186       61   Total accounts payable and accrued expenses   $ 34,306     $ 21,616

v3.23.2

Note 3 - Revolving Line of Credit	6 Months Ended
	Jun. 30, 2023
Notes to Financial Statements
Debt Disclosure [Text Block]	Note 3 – Revolving Line of Credit   In May 2023, we renewed our revolving line of credit (the “credit facility”) with Susser Bank, National Association (“Lender”) pursuant to a Business Loan Agreement (Asset Based) (the “Loan Agreement”) dated effective May 5, 2023. The obligations under the credit facility are secured by substantially all of our accounts receivable. Our wholly owned subsidiaries, Vortech LLC, and VTC, L.L.C. jointly and severally guarantee our obligations under the credit facility.   The maximum amount of the credit facility is $1,500,000. The credit facility is subject to a borrowing base of the lesser of $1,500,000 and 80% of eligible accounts receivables, subject to customary exclusions and limitations. Certain accounts receivables subject to a vendor payment program with a customer are excluded from the definition of eligible accounts receivables under the credit facility. Borrowings under the credit facility will bear interest based on the U.S. Prime Rate as published in the Money Rates section of The Wall Street Journal (effective rate of 8.25% per annum at June 30, 2023) and such interest rate shall not be less than 3.50% per annum). In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the credit facility, we paid a loan origination fee of 0.5% payable in advance upon entering into the credit facility. The credit facility matures on May 5, 2024.   The credit facility requires that we maintain a minimum liquidity of $1,500,000 at all times.   The Loan Agreement and ancillary documents include customary affirmative covenants for secured transactions of this type, including maintaining adequate books and records, periodic financial reporting, compliance with laws, maintenance of insurance, maintenance of assets, timely payment of taxes, and notices of adverse events. The Loan Agreement and ancillary documents include customary negative covenants, including incurrence of other indebtedness, mergers, consolidations and transfer of assets and liens on our assets. The Loan Agreement and ancillary documents also include customary events of default, including payment defaults, failure to perform or observe terms, covenants or agreements included in the Loan Agreement and ancillary documents, insolvency and bankruptcy defaults, judgment defaults, material adverse change defaults, and change of ownership defaults.   The maximum amount we would have been eligible to borrow at June 30, 2023 was approximately $285,000. There were no amounts outstanding under this credit facility at June 30, 2023.

v3.23.2

Note 4 - Leasing Arrangements	6 Months Ended
	Jun. 30, 2023
Notes to Financial Statements
Lessee, Operating Leases [Text Block]	Note 4- Leasing Arrangements   We have operating leases for our office and integration facilities as well as for certain equipment and vehicles. Our leases have remaining lease terms of 21 to 69 months. As of June 30, 2023, we have not entered into any lease arrangement classified as a finance lease.   We determine if an arrangement is a lease at inception. Operating leases are included in lease right-of-use assets, current lease liabilities and lease liabilities, non-current, on our consolidated balance sheet. We have elected an accounting policy to not recognize short-term leases (one year or less) on the balance sheet. We also elected the package of practical expedients which applies to leases that commenced before the adoption date. By electing the package of practical expedients, we did not need to reassess whether any existing contracts are or contain leases, the lease classification for any existing leases and initial direct costs for any existing leases.   Right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. When the implicit rate of the lease is not provided or cannot be determined, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments is recognized on a straight- line basis over the lease term. Components of lease expense and other information is as follows (in ‘000’s):       Three Months Ended June 30, (unaudited)     Six Months Ended June 30, (unaudited)       2023     2022     2023     2022   Lease expense                                 Operating lease cost   $ 219     $ 217     $ 434     $ 414                                     Operating Lease – operating cash flows     (150 )     (150 )     (319 )     (342 ) New right-of-use assets – operating leases     -       -       -       -     The following presents information regarding the Company's operating leases as of June 30:       2023     2022   Weighted average remaining lease term – operating leases (months)     69       81   Weighted average discount rate – operating leases     6 %     6 %   Future minimum lease payments under non-cancellable leases as of June 30, 2023 were as follows (in ‘000’s):       Fiscal Year   2023   $ 435   2024     890   2025     909   2026     934   2027     962   Thereafter     1,241   Total minimum future lease payments     5,371   Less imputed interest     (730 ) Total   $ 4,641             Reported as of June 30, 2023:         Current portion of lease liability   $ 658   Non-current portion of lease liability     3,983       $ 4,641

v3.23.2

Note 5 - Net Income (Loss) Per-share	6 Months Ended
	Jun. 30, 2023
Notes to Financial Statements
Earnings Per Share [Text Block]	Note 5 - Net Income (Loss) Per-Share   Basic and diluted net income (loss) per share are based on the weighted average number of shares of common stock and potential common stock outstanding during the period. Potential common stock, for the purposes of determining diluted income (loss) per share, includes the effects of dilutive unvested restricted stock, options to purchase common stock and convertible securities. The effect of such potential common stock is computed using the treasury stock method or the if-converted method, as applicable.   The following table presents a reconciliation of the numerators and denominators of the basic and diluted income (loss) per share computations for net income (loss). In the table below, net income (loss) represents the numerator and shares represents the denominator (in thousands except per share amounts; unaudited).       Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022                                     Basic net income (loss) per share:                                 Numerator:                                 Net income (loss)   $ 315     $ 771     $ (471 )   $ 463   Denominator:                                 Weighted-average shares of common stock outstanding     21,575       19,088       21,558       18,978   Basic net income (loss) per share   $ 0.01     $ 0.04     $ (0.02 )   $ 0.02                                     Diluted net income (loss) per share:                                 Numerator:                                 Net income (loss)   $ 315     $ 771     $ (471 )   $ 463   Denominator:                                 Weighted-average shares of common stock outstanding     21,575       19,088       21,558       18,978   Dilutive options and warrants outstanding     2,216       1,851       -       1,811   Number of shares used in diluted per share computation     23,791       20,939       21,558       20,789   Diluted net income (loss) per share   $ 0.01     $ 0.04     $ (0.02 )   $ 0.02     2,340,000 and 400,000 restricted shares were excluded from the calculation of dilutive shares for the three-month periods ended June 30, 2023 and 2022, respectively, because their effect would have been anti-dilutive. For the six-month periods ended June 30, 2023 and 2022 respectively, 3,647,000 and 400,000 potentially dilutive shares were excluded from the calculation of dilutive shares because their effect would have been anti-dilutive.

v3.23.2

Note 6 - Segment Reporting	6 Months Ended
	Jun. 30, 2023
Notes to Financial Statements
Segment Reporting Disclosure [Text Block]	Note 6 - Segment Reporting   Segment information reported in the tables below represents the operating segments of the Company organized in a manner consistent with which separate information is available and for which segment results are evaluated regularly by our chief operating decision-maker in assessing performance and allocating resources. Our activities are organized into two major segments: facilities and systems integration. Our facilities unit is involved in the design, project management and maintenance of data center and mission-critical business operations. Our systems integration unit integrates IT equipment for OEM vendors and customers to be used inside data center environments, including modular data centers, and also includes our reseller services where we procure equipment to be used in our integration activities. All revenues are derived from the U.S. market. Segment operating results reflect earnings before acquisition related expenses, other expenses, net, and provision for income taxes.   Revenue and operating results by reportable segment reconciled to reportable net income (loss) for the three and six-month periods ended June 30, 2023 and 2022 and other segment-related information is as follows (in ‘000’s, unaudited):       Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022   Revenues:                                 Facilities   $ 1,564     $ 3,599     $ 3,800     $ 5,678   Systems integration services     12,973       2,822       17,311       5,935   Total revenues   $ 14,537     $ 6,421     $ 21,111     $ 11,613                                     Depreciation and amortization expense:                                 Facilities   $ 49     $ 53     $ 69     $ 109   Systems integration services     39       17       108       71   Consolidated depreciation and amortization expense   $ 88     $ 70     $ 177     $ 180                                     Income from operations:                                 Facilities   $ 644     $ 1,122     $ 515     $ 1,240   Systems integration services     331       (183 )     (205 )     (474 ) Total income from operations   $ 975     $ 939     $ 310     $ 766                                     Interest expense, net:                                 Facilities   $ 176     $ 101     $ 192     $ 181   Systems integration services     472       57       568       101   Consolidated interest expense   $ 648     $ 158     $ 760     $ 282           June 30, 2023     December 31, 2022   Total Assets:                 Facilities   $ 826     $ 675   Systems integration services     12,553       3,790   Other consolidated activities     29,919       26,941   Total   $ 43,298     $ 31,406     Other consolidated activities include assets not specifically attributable to each business segment including cash and cash equivalents, prepaid expenses and other assets that are managed at a corporate level.

v3.23.2

Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
Basis of Accounting, Policy [Policy Text Block]	Basis of Presentation   The accompanying consolidated balance sheet as of December 31, 2022, 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, 2022.
Going Concern and Liquidity [Policy Text Block]	Liquidity   As of June 30, 2023, the Company had an accumulated deficit of $66.9 million. We have recorded operating and net income in two of our four most recent quarters, but we have a history of annual operating losses over recent years which have been due, in part, to the effects of COVID-19 and related 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 credit facilities with our bank. 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, or if there is a sudden increase in the level of reseller services. 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 described above, as we have been able to grow our revenues and order backlog and seen an improvement in related supply chain constraints. Our recent quarterly results have also been impacted by transactions being delayed by our customers but we believe that we will be profitable in the next quarter and for the year ended December 31, 2023. As a result, management has concluded that there is not substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern for a reasonable period of time.
Revenue from Contract with Customer [Policy Text Block]	Revenue Recognition   We recognize revenues when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.   Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations based on relative standalone selling prices.   Maintenance Services   We generate maintenance services revenues from fees that provide our customers with as-needed maintenance and repair services on modular data centers during the contract term. Our contract terms are typically one year in duration, are billed annually in advance, and are non-cancellable. As a result, we record deferred revenue (a contract liability) and recognize revenue from these services on a ratable basis over the contract term. We can mitigate our exposure to credit losses by discontinuing services in the event of non-payment, however our history of non-payments and bad debt expense has been insignificant.   Integration Services   We generate integration services revenues from fees that provide our customers with customized system and rack-level integration services. We recognize revenue upon shipment to the customer of the completed systems as this is when we have completed our services and when the customer obtains control of the promised goods. We typically extend credit terms to our integration customers based on their credit worthiness and generally do not receive advance payments. As such, we record accounts receivable at the time of shipment, when our right to the consideration becomes unconditional. Accounts receivable from our integration customers are typically due within 30-60 days of invoicing. An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ credit worthiness. As of June 30, 2023, and December 31, 2022, our allowance for doubtful accounts was $7,000.   Equipment Sales   We generate revenues under fixed price contracts from the sale of data center and related ancillary equipment to customers in the United States. We recognize revenue when the product is shipped to the customer as that is when the customer obtains control of the promised goods. Typically, we do not receive advance payments for equipment sales; however, if we do, we record the advance payment as deferred revenues. Normally we record accounts receivable at the time of shipment, when our right to the consideration has become unconditional. Accounts receivable from our equipment sales are typically due within 30-45 days of invoicing.   Deployment and Other Services   We generate revenues from fees we charge our customers for other services, including repairs or other services not covered under maintenance contracts, installation and servicing of equipment, including modular data centers that we sold, and other fixed-price services, including repair, design and project management services. In some cases, we arrange for a third party to perform warranty and servicing of equipment, and in these instances, we recognize revenue as the amount of any fees or commissions that we expect to be entitled to receive. Other services are typically invoiced upon completion of services or completion of milestones. We record accounts receivable at the time of completion when our right to consideration becomes unconditional.   Reseller Services   We generate revenues from fees we charge our customers to procure third-party hardware, software and professional services on their behalf that are then used in our integration services as we integrate these components to deliver a completed system to our customer. We recognize our reseller services revenue upon completion of the procurement activity. In some cases, we arrange for the purchase of third-party hardware, software or professional services that are to be provided to our customers by another party and we have no control of the goods before they are transferred to the customer. In these instances, we are acting as an agent in the transaction and recognize revenue as the amount of any fee or commissions that we expect to be entitled to after paying the other party for the goods or services provided to the customer. Accounts receivable from our reseller activities are typically due within 30-60 days of invoicing.   The following table shows our revenues disaggregated by reportable segment and by product or service type (in ’000’s, unaudited):       Three-Months Ended June 30,     Six-Months Ended June 30,       2023     2022     2023     2022   FACILITIES:                                 Maintenance revenues   $ 1,014     $ 859     $ 1,953     $ 1,662   Equipment sales     320       316       382       370   Deployment and other services     230       2,423       1,465       3,645   Total Facilities revenues   $ 1,564     $ 3,598     $ 3,800     $ 5,677                                     SYSTEMS INTEGRATION:                                 Integration services   $ 2,380     $ 2,057     $ 4,992     $ 3,430   Reseller services     10,593       766       12,319       2,506   Total Systems Integration revenues   $ 12,973     $ 2,823     $ 17,311     $ 5,936   TOTAL REVENUES   $ 14,537     $ 6,421     $ 21,111     $ 11,613     Judgments   We consider several factors in determining that control transfers to the customer upon shipment of equipment or upon completion of our services. These factors include that legal title transfers to the customer, we have a present right to payment, and the customer has assumed the risks and rewards of ownership at the time of shipment or completion of the services.   Sales Taxes   Sales (and similar) taxes that are imposed on our sales and collected from customers are excluded from revenues.   Shipping and Handling Costs   Costs for shipping and handling activities, including those activities that occur subsequent to transfer of control to the customer, are recorded as cost of revenues and are expensed as incurred. We accrue costs for shipping and handling activities that occur after control of the promised good or service has transferred to the customer.   Remaining Performance Obligations   Remaining performance obligations include deferred revenue and amounts we expect to receive for goods and services that have not yet been delivered or provided under existing, non-cancellable contracts. For contracts that have an original duration of one year or less, we have elected the practical expedient applicable to such contracts and we do not disclose the transaction price for remaining performance obligations at the end of each reporting period and when we expect to recognize this revenue. As of June 30, 2023, deferred revenue of $1,599,000 includes $1,314,000 of our remaining performance obligations for our maintenance contracts, all of which are expected to be recognized within one year, and $285,000 relating to procurement and integration services where we have yet to complete our services for our customers, all of which are expected to be recognized within one year. Contract liabilities consisting of deferred revenue were $2,080,000 at December 31, 2022 and $2,457,000 at December 31, 2021.
Concentration Risk, Credit Risk, Policy [Policy Text Block]	Concentration of Credit Risk   We are currently economically dependent upon our relationship with a large US-based IT OEM. If this relationship is unsuccessful or discontinues, our business and revenue will suffer. The loss of or a significant reduction in orders from this customer or the failure to provide adequate products or services to it would significantly reduce our revenue.   The following customer accounted for a significant percentage of our revenues for the periods shown (unaudited):       Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022                                     US-based IT OEM     96 %     94 %     94 %     94 %   No other customers represented more than 10% of our revenues for any periods presented. Our US-based IT OEM customer represented 97% and 93% of our trade accounts receivable at June 30, 2023 and December 31, 2022, respectively. No other customer represented more than 10% of our accounts receivable at June 30, 2023, or at December 31, 2022.
Non-recourse Factoring, Policy [Policy Text Block]	Non-recourse factoring   We have entered into a factoring agreement with a financial institution to sell certain of our accounts receivables from a US-based IT OEM customer under a non-recourse agreement. Under the arrangement, we sell certain trade receivables on a non-recourse basis and account for the transaction as a sale of the receivables. The financial institution assumes the full risk of collection, without recourse to the Company in the event of a loss. Debtors are directed to send payments directly to the financial institution. The applicable receivables are removed from our consolidated balance sheet when the cash proceeds are received by us. We do not service any factored accounts after the factoring has occurred. We utilize this factoring arrangement as part of our financing for working capital. The aggregate gross amount factored under this arrangement was approximately $37.7 million and $10.3 million for the three-month periods ended June 30, 2023 and 2022, respectively. We paid financing fees under this arrangement of approximately $541,000 and $65,000 for the three-month periods ended June 30, 2023 and 2022, respectively, which was recorded as interest expense in our consolidated statements of operations. The aggregate gross amount factored under this arrangement was approximately $48.5 million and $25.6 million for the six-month periods ended June 30, 2023 and 2022, respectively. We paid financing fees under this arrangement of approximately $672,000 and $156,000 for the six-month periods ended June 30, 2023 and 2022, respectively, which was recorded as interest expense in our consolidated statements of operations
New Accounting Pronouncements, Policy [Policy Text Block]	Recent Accounting Guidance   Recently Issued Accounting Pronouncements   In June 2016, FASB issued Accounting Standards Update ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets. Among the provisions of ASU 2016-13 is a requirement that assets measured at amortized cost, which includes trade accounts receivable, be presented at the net amount expected to be collected. This pronouncement requires that an entity reflect all of its expected credit losses based on current estimates which will replace the current standard requiring that an entity need only consider past events and current conditions in measuring an incurred loss. We are subject to this guidance effective with the consolidated financial statements we issue for the year ending December 31, 2023, and the quarterly periods during that year. We adopted this guidance effective January 1, 2023 and it did not have a material impact on our financial results of operations.   In May 2019, FASB issued Accounting Standards Update 2019-15, Financial Instruments – Credit Losses (Topic 326), (AASU 2019-15”). ASU 2019-15 provides guidance that allows entities to make an irrevocable one-time election upon adoption of the new credit loss standard to measure financial assets at amortized cost (except held-to-maturity securities) using the fair value option. The effective date and transition methodology are the same as in ASU 2016-13. We adopted this guidance effective January 1, 2023 and it did not have a material impact on our financial results of operations.

v3.23.2

Note 1 - Significant Accounting Policies (Tables)	6 Months Ended
	Jun. 30, 2023
Notes Tables
Disaggregation of Revenue [Table Text Block]	Three-Months Ended June 30,     Six-Months Ended June 30,       2023     2022     2023     2022   FACILITIES:                                 Maintenance revenues   $ 1,014     $ 859     $ 1,953     $ 1,662   Equipment sales     320       316       382       370   Deployment and other services     230       2,423       1,465       3,645   Total Facilities revenues   $ 1,564     $ 3,598     $ 3,800     $ 5,677                                     SYSTEMS INTEGRATION:                                 Integration services   $ 2,380     $ 2,057     $ 4,992     $ 3,430   Reseller services     10,593       766       12,319       2,506   Total Systems Integration revenues   $ 12,973     $ 2,823     $ 17,311     $ 5,936   TOTAL REVENUES   $ 14,537     $ 6,421     $ 21,111     $ 11,613
Schedules of Concentration of Risk, by Risk Factor [Table Text Block]	Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022                                     US-based IT OEM     96 %     94 %     94 %     94 %

v3.23.2

Note 2 - Supplemental Balance-sheet Information (Tables)	6 Months Ended
	Jun. 30, 2023
Notes Tables
Financing Receivable, Past Due [Table Text Block]	June 30, 2023 (unaudited)     December 31, 2022   Contract and other receivables   $ 10,615     $ 2,752   Allowance for doubtful accounts     (7 )     (7 ) Contracts and other receivables, net   $ 10,608     $ 2,745
Schedule of Inventory, Current [Table Text Block]	June 30, 2023 (unaudited)     December 31, 2022   Materials and component parts   $ 212     $ 406   Reseller inventories     1,072       460   Reserve     (21 )     (4 ) Inventories, net   $ 1,263     $ 862
Schedule of Intangible Assets and Goodwill [Table Text Block]	June 30, 2023 (unaudited)     December 31, 2022       Gross             Gross               Carrying     Accumulated     Carrying     Accumulated       Amount     Amortization     Amount     Amortization   Intangible assets not subject to amortization:                                 Goodwill   $ 780       -     $ 780       -   Intangible assets subject to amortization:                                 Customer relationships   $ 906     $ (906 )   $ 906     $ (870 ) Acquired software   $ 234     $ (234 )   $ 234     $ (234 )
Schedule of Goodwill [Table Text Block]	June 30, 2023 (unaudited)     December 31, 2022   Facilities unit   $ 643     $ 643   Systems Integration unit     137       137   Total   $ 780     $ 780
Property, Plant and Equipment [Table Text Block]	Estimated Useful Lives (years)     June 30, 2023 (unaudited)     December 31, 2022   Trade equipment     5       $ 356     $ 322   Leasehold improvements   2 - 5       1,050       964   Motor vehicles     3         28       -   Furniture and fixtures     7         60       36   Computer equipment and software     3         2,266       2,233                   3,760       3,555   Less accumulated depreciation               (3,084 )     (2,968 ) Property and equipment, net             $ 676     $ 587
Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]	June 30, 2023 (unaudited)     December 31, 2022   Accounts payable   $ 32,957     $ 19,959   Accrued expenses     464       494   Compensation, benefits and related taxes     699       1,102   Other accrued expenses     186       61   Total accounts payable and accrued expenses   $ 34,306     $ 21,616

v3.23.2

Note 4 - Leasing Arrangements (Tables)	6 Months Ended
	Jun. 30, 2023
Notes Tables
Lease, Cost [Table Text Block]	Three Months Ended June 30, (unaudited)     Six Months Ended June 30, (unaudited)       2023     2022     2023     2022   Lease expense                                 Operating lease cost   $ 219     $ 217     $ 434     $ 414                                     Operating Lease – operating cash flows     (150 )     (150 )     (319 )     (342 ) New right-of-use assets – operating leases     -       -       -       -       2023     2022   Weighted average remaining lease term – operating leases (months)     69       81   Weighted average discount rate – operating leases     6 %     6 %
Lessee, Operating Lease, Liability, to be Paid, Maturity [Table Text Block]	Fiscal Year   2023   $ 435   2024     890   2025     909   2026     934   2027     962   Thereafter     1,241   Total minimum future lease payments     5,371   Less imputed interest     (730 ) Total   $ 4,641             Reported as of June 30, 2023:         Current portion of lease liability   $ 658   Non-current portion of lease liability     3,983       $ 4,641

v3.23.2

Note 5 - Net Income (Loss) Per-share (Tables)	6 Months Ended
	Jun. 30, 2023
Notes Tables
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]	Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022                                     Basic net income (loss) per share:                                 Numerator:                                 Net income (loss)   $ 315     $ 771     $ (471 )   $ 463   Denominator:                                 Weighted-average shares of common stock outstanding     21,575       19,088       21,558       18,978   Basic net income (loss) per share   $ 0.01     $ 0.04     $ (0.02 )   $ 0.02                                     Diluted net income (loss) per share:                                 Numerator:                                 Net income (loss)   $ 315     $ 771     $ (471 )   $ 463   Denominator:                                 Weighted-average shares of common stock outstanding     21,575       19,088       21,558       18,978   Dilutive options and warrants outstanding     2,216       1,851       -       1,811   Number of shares used in diluted per share computation     23,791       20,939       21,558       20,789   Diluted net income (loss) per share   $ 0.01     $ 0.04     $ (0.02 )   $ 0.02

v3.23.2

Note 6 - Segment Reporting (Tables)	6 Months Ended
	Jun. 30, 2023
Notes Tables
Schedule of Segment Reporting Information, by Segment [Table Text Block]	Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022   Revenues:                                 Facilities   $ 1,564     $ 3,599     $ 3,800     $ 5,678   Systems integration services     12,973       2,822       17,311       5,935   Total revenues   $ 14,537     $ 6,421     $ 21,111     $ 11,613                                     Depreciation and amortization expense:                                 Facilities   $ 49     $ 53     $ 69     $ 109   Systems integration services     39       17       108       71   Consolidated depreciation and amortization expense   $ 88     $ 70     $ 177     $ 180                                     Income from operations:                                 Facilities   $ 644     $ 1,122     $ 515     $ 1,240   Systems integration services     331       (183 )     (205 )     (474 ) Total income from operations   $ 975     $ 939     $ 310     $ 766                                     Interest expense, net:                                 Facilities   $ 176     $ 101     $ 192     $ 181   Systems integration services     472       57       568       101   Consolidated interest expense   $ 648     $ 158     $ 760     $ 282       June 30, 2023     December 31, 2022   Total Assets:                 Facilities   $ 826     $ 675   Systems integration services     12,553       3,790   Other consolidated activities     29,919       26,941   Total   $ 43,298     $ 31,406

v3.23.2

Note 1 - Significant Accounting Policies 1 (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Retained Earnings (Accumulated Deficit), Total	$ (66,856,000)		$ (66,856,000)		$ (66,385,000)
Accounts Receivable, Allowance for Credit Loss, Ending Balance					7,000
Contract with Customer, Liability, Total					$ 2,080,000	$ 2,457,000
Factoring Agreement, Gross Amount Factored	37,700,000	$ 10,300,000	48,500,000	$ 25,600,000
Factoring Agreement, Finance Fees Paid	$ 541,000	$ 65,000	$ 672,000	$ 156,000
Customer Concentration Risk [Member] | Accounts Receivable [Member] | US-based IT OEM Company [Member]
Concentration Risk, Percentage			97.00%		93.00%

v3.23.2

Note 1 - Significant Accounting Policies 2 (Details Textual) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-01	Jun. 30, 2023 USD ($)
Revenue, Remaining Performance Obligation, Amount	$ 1,599,000
Maintenance [Member]
Revenue, Remaining Performance Obligation, Amount	$ 1,314,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year)	1 year
Integration Services [Member]
Revenue, Remaining Performance Obligation, Amount	$ 285,000
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year)	1 year

v3.23.2

Note 1 - Significant Accounting Policies - Disaggregated Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		18 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023
Revenue	$ 14,537	$ 6,421	$ 21,111	$ 11,613	$ 11,613
Facilities Segment [Member]
Revenue	1,564	3,598	3,800		5,677
Facilities Segment [Member] | Maintenance [Member]
Revenue	1,014	859	1,953		1,662
Facilities Segment [Member] | Equipment Sales [Member]
Revenue	320	316	382		370
Facilities Segment [Member] | Deployment and Other Services [Member]
Revenue	230	2,423	1,465		3,645
System Integration Services Segment [Member]
Revenue	12,973	2,823	17,311		5,936
System Integration Services Segment [Member] | Integration Services [Member]
Revenue	2,380	2,057	4,992		3,430
System Integration Services Segment [Member] | Procurement Services [Member]
Revenue	$ 10,593	$ 766	$ 12,319		$ 2,506

v3.23.2

Note 1 - Significant Accounting Policies - Major Customers (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | US-based IT OEM Company [Member]
US-based IT OEM	96.00%	94.00%	94.00%	94.00%

v3.23.2

Note 2 - Supplemental Balance-sheet Information (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2021
Contract with Customer, Asset, after Allowance for Credit Loss, Total					$ 1,846
Amortization of Intangible Assets	$ 13,000	$ 23,000	$ 35,000	$ 45,000
Depreciation, Depletion and Amortization, Nonproduction, Total	$ 75,000	$ 47,000	$ 142,000	$ 135,000

v3.23.2

Note 2 - Supplemental Balance Sheet Information - Contract and Other Receivables (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Contract and other receivables	$ 10,615	$ 2,752
Allowance for doubtful accounts	(7)	(7)
Contracts and other receivables, net	$ 10,608	$ 2,745

v3.23.2

Note 2 - Supplemental Balance Sheet Information - Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Materials and component parts	$ 212	$ 406
Reseller inventories	1,072	460
Reserve	(21)	(4)
Inventories, net	$ 1,263	$ 862

v3.23.2

Note 2 - Supplemental Balance Sheet Information - Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Goodwill	$ 780	$ 780
Customer Relationships [Member]
Gross carrying amount	906	906
Accumulated Amortization	(906)	(870)
Computer Software, Intangible Asset [Member]
Gross carrying amount	234	234
Accumulated Amortization	$ (234)	$ (234)

v3.23.2

Note 2 - Supplemental Balance Sheet Information - Goodwill Attributable to Reporting Units (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Goodwill	$ 780	$ 780
Facilities Segment [Member]
Goodwill	643	643
System Integration Services Segment [Member]
Goodwill	$ 137	$ 137

v3.23.2

Note 2 - Supplemental Balance Sheet Information - Property and Equipment (Details) - USD ($)	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Sep. 30, 2022
Property and equipment, gross	$ 3,760,000		$ 3,555,000
Less accumulated depreciation	(3,084,000)		(2,968,000)
Property and equipment, net	676,000		587,000
Equipment [Member]
Useful life (Year)		5 years
Property and equipment, gross	356		322,000
Leasehold Improvements [Member]
Property and equipment, gross	$ 1,050,000		964,000
Leasehold Improvements [Member] | Minimum [Member]
Useful life (Year)				2 years
Leasehold Improvements [Member] | Maximum [Member]
Useful life (Year)	5 years
Vehicles [Member]
Useful life (Year)		3 years
Property and equipment, gross	$ 28,000		0
Furniture and Fixtures [Member]
Useful life (Year)		7 years
Property and equipment, gross	60,000		36,000
Software and Software Development Costs [Member]
Useful life (Year)		3 years
Property and equipment, gross	$ 2,266,000		$ 2,233,000

v3.23.2

Note 2 - Supplemental Balance Sheet Information - Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Accounts payable	$ 32,957	$ 19,959
Accrued expenses	464	494
Compensation, benefits and related taxes	699	1,102
Other accrued expenses	186	61
Total accounts payable and accrued expenses	$ 34,306	$ 21,616

v3.23.2

Note 3 - Revolving Line of Credit (Details Textual) - Revolving Credit Facility [Member] - USD ($)	6 Months Ended
	Jun. 30, 2023	May 31, 2022
Line of Credit Facility, Current Borrowing Capacity	$ 285,000
Long-Term Line of Credit, Total	$ 0
Susser Bank, National Association [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 1,500,000
Line of Credit Facility, Borrowing Base, Percent of Receivables		80.00%
Debt Instrument, Interest Rate, Effective Percentage	8.25%
Debt Instrument, Interest Rate, Minimum Interest Rate Required		3.50%
Line of Credit Facility, Line of Credit Facility, Loan Origination Fee	0.50%
Line of Credit Facility, Minimum Liquidity Threshold		$ 1,500,000

v3.23.2

Note 4 - Leasing Arrangements (Details Textual)	Jun. 30, 2023
Minimum [Member]
Lessee, Operating Lease, Remaining Lease Term (Month)	21 months
Maximum [Member]
Lessee, Operating Lease, Remaining Lease Term (Month)	69 months

v3.23.2

Note 4 - Leasing Arrangements - Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Weighted average remaining lease term – operating leases (months) (Month)			69 months	81 months
Operating lease cost	$ 219	$ 217	$ 434	$ 414
Weighted average discount rate – operating leases	6.00%	6.00%	6.00%	6.00%
Operating lease – operating cash flows	$ (150)	$ (150)	$ (319)	$ (342)
New right-of-use assets – operating leases	$ 0	$ 0	$ 0	$ 0

v3.23.2

Note 5 - Leasing Arrangements - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
2023	$ 435
2024	890
2025	909
2026	934
2027	962
Thereafter	1,241
Total minimum future lease payments	5,371
Less imputed interest	(730)
Total	4,641
Current portion of lease liabilities	658	$ 467
Non-current portion of lease liabilities	3,983	$ 4,309
Operating Lease, Liability	$ 4,641

v3.23.2

Note 5 - Net Income (Loss) Per-share (Details Textual) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,340,000	400,000	3,647,000	400,000

v3.23.2

Note 5 - Net Income (Loss) Per-share - Reconciliation of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022
Net loss	$ 315	$ (786)	$ 771	$ (308)	$ (471)	$ 463
Weighted-average shares of common stock outstanding (in shares)	21,575		19,088		21,558	18,978
Basic net income (loss) per share (in dollars per share)	$ 0.01		$ 0.04		$ (0.02)	$ 0.02
Dilutive options and warrants outstanding (in shares)	2,216		1,851		0	1,811
Number of shares used in diluted per share computation (in shares)	23,791		20,939		21,558	20,789
Diluted income (loss) per common share (in dollars per share)	$ 0.01		$ 0.04		$ (0.02)	$ 0.02

v3.23.2

Note 6 - Segment Reporting (Details Textual)	6 Months Ended
	Jun. 30, 2023
Number of Operating Segments	2

v3.23.2

Note 6 - Segment Reporting - Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		18 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Dec. 31, 2022
Revenue	$ 14,537	$ 6,421	$ 21,111	$ 11,613	$ 11,613
Assets	43,298		43,298		43,298	$ 31,406
Depreciation	88	70	177	180
Income from operations	975	939	310	766
Interest expense	648	158	760	282
Facilities Segment [Member]
Revenue	1,564	3,598	3,800		5,677
System Integration Services Segment [Member]
Revenue	12,973	2,823	17,311		5,936
Operating Segments [Member] | Facilities Segment [Member]
Revenue	1,564	3,599	3,800	5,678
Assets	826		826		826	675
Depreciation	49	53	69	109
Income from operations	644	1,122	515	1,240
Interest expense	176	101	192	181
Operating Segments [Member] | System Integration Services Segment [Member]
Revenue	12,973	2,822	17,311	5,935
Assets	12,553		12,553		12,553	3,790
Depreciation	39	17	108	71
Income from operations	331	(183)	(205)	(474)
Interest expense	472	$ 57	568	$ 101
Corporate, Non-Segment [Member]
Assets	$ 29,919		$ 29,919		$ 29,919	$ 26,941

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