TSS, Inc. (OTC: TSSI) – “ Supported by high volumes & outlook for growth, constrained by liquidity crunch”

TSS, Inc. (OTC: TSSI), is a data center and mission critical facilities and technology Services Company. It also provides solutions for highly technical mission-critical facilities such as data centers, operation centers, network facilities, server rooms, security operations centers, communications facilities and the infrastructure systems.

On March 16, 2017, due to abnormally high volume of trading in Company’s stock, management contacted OTC MarketsGroup Inc. (OTC Markets), which informed them that it had become aware of certain promotional activities concerning the Company and its common stock.

As a response, On March 17, TSSI issued a press release announcing that it had been made aware of this recent trading and promotional activity. They confirmed that they did not engaged any third party to provide investor relations services, public relations services, marketing, or other related services including promotion of Company. Moreover, they never issued shares or convertible instruments allowing conversion to equity securities at prices constituting a discount to the current market rate at the time of issuance.

In its most recent earnings announcement for Third quarter 2016, TSSI reported revenue of $5.4 million compared with $6.3 million in the third quarter of 2015 along with Gross margin of 27% (Q3-2016) as against 32% during Q3-2015.

Notwithstanding this muted performance, company is bullish about the changes they made in business during third quarter (2016) & additional streams of business that the company has recently won.  TSSI is optimistic about 2017 as they further develop its systems integration and modular facilities businesses.

About the company:

TSS is a provider of mission-critical planning, design, system integration, deployment, maintenance and evolution of data centers facilities and information infrastructure. TSS specializes in customizable end-to-end solutions powered by industry experts and innovative services that include technology consulting, engineering, design, construction, operations, facilities management, technology system installation and integration, as well as maintenance for traditional and modular data centers.

Major client set:

Over the last 3 decades, TSS has worked with organizations large and small in almost every public and private sector industry.  TSS provides full-lifecycle solutions for each client’s unique mission-critical needs and enterprise objectives. As a critical facility focused solution provider, TSS services majority of private and public sector markets. Its solutions scale from small server and telecom rooms to large purpose built facilities to now even modular data centers.

Recent announcements:

On March 16, 2017, due to unusually high volume of trading in its stock, TSSI contacted the OTC Markets, which informed that it had become aware of certain promotional activities concerning the Company and its common stock. Specifically, OTC Markets had been made aware of promotional newsletters promoting the Company & encouraging investors to purchase its stock.

The management confirmed that:

  • Until this disclosure from OTC Markets, the Company was unaware of the existence of the most recent promotional newsletters and their effect on the trading activity. In addition to the promotional newsletters received last month, the Company has since received from OTC Markets samples of three promotional newsletters, which were sent from Monster Alerts and from ProTrader on March 16 and 17, 2017, but the Company is otherwise unaware of the existence of additional promotional newsletters, if any, and any related promotional activity, the parties responsible for the production of the newsletters and the extent of any of the email newsletters’ dissemination.
  • The Company is not aware of the promotional materials’ author or its affiliated entities or persons, and has not engaged directly or indirectly in any promotional activities nor retained any parties to engage in any promotional activities on behalf of the Company.
  • The Company has not engaged any third party to provide investor relations services, public relations services, marketing, or other related services including the promotion of the Company or its securities since January 1, 2016. The Company has never issued shares or convertible instruments allowing conversion to equity securities at prices constituting a discount to the current market rate at the time of issuance.


Key Risk Factors & stock influences:

The company’s business risk profile continues to suffer from substantial client concentration risk: TSSI is currently economically dependent upon its relationship with a large US-based IT Original Equipment Manufacturer (OEM). Therefore, if this relationship is unsuccessful or discontinues, TSSI’s business and revenue is likely to suffer. The loss of or a significant reduction in orders from this individual customer or the failure to provide adequate products or services to them would significantly reduce TSSI future revenue. Furthermore, this may also cause large fluctuations/variances in its quarterly revenues.

Source: Company filings


Liquidity & Financial flexibility risk: On September 28, 2016, company sold certain identified assets and liabilities connected with its Maryland-based facilities maintenance business component for $950,000. This asset sale allowed them to improve overall liquidity situation. The management expects that they should have adequate capital resources necessary to continue operations for at least the next twelve months subject to meeting its cash flow projections. Any deviation from these expectations, could significantly affect level of liquidity, which may limit TSSI’s opportunities to grow or operate business.


Moreover, the company has seen significant fluctuation in its topline and bottom-line. This uncertainty continues to impinge the overall business & financial risk profile of the company. While management is evaluating both debt and equity financing alternatives. There can be no guarantee that such financing will be available or that company will complete any such financing.

Risk of substantial dilution: If TSSI raise additional funds through convertible debt or equity securities, the ownership of existing stockholders could be significantly diluted. On the flip side, if they obtain additional debt financing, a substantial portion of operating cash flow may be dedicated to the payment of principal and interest on such incremental indebtedness.


Earnings Review

For 3rd quarter 2016, revenue was $5.4 million compared with $6.3 million in the third quarter of 2015 and $7.0 million in the second quarter of 2016. TSSI’s quarterly operating results have shown mixed results over the last year with large quarterly fluctuations in both revenue and operating results.



 Operating Metrics & profitability:

TSSI reported a gross margin of 27% in the third quarter of 2016 compared with 32% in the third quarter of 2015 and 31% in the second quarter of 2016. Further, it reported a net income of $165,000 or $0.01 per share, compared to a net loss of $601,000 or $(0.04) per share in the third quarter of 2015.

Cash Flow & Balance Sheet:

As of September 30, 2016 and December 31, 2015, TSSI had cash and cash equivalents of $1.0 million and $1.1 million, respectively.


Company’s history of operating losses, debt deferment/restructuring, declining current ratio, and stockholders’ deficit, causes significant uncertainty about its ability to continue to operate business as a going concern. Therefore, if future results do not meet expectations, TSSI might need to implement reductions in selling, general and administrative expenses to better achieve profitability and therefore improve cash flows, or it could take further steps such as the issuance of new equity or debt or the sale of further parts or all of operations. In spite of these steps, risk of liquidity might not be alleviated completely.

Stock Performance:

On Friday, March 17th, 17, TSSI shares declined by -17.12% to $0.145 on an average volume of 220,763 shares exchanging hands. Market capitalization is $7.21M. The current RSI is 72.97

In the past 52 weeks, shares of TSSI have traded as low as $0.04 and as high as $0.40

At $0.145, shares of TSSI are trading above its 50-day moving average (MA) at $0.07 and 200-day MA at $0.0.

The present support and resistance levels for the stock are at $0.1040 & $0.2020 respectively.


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