Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Description of Business [Policy Text Block]

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 reseller services. Our corporate offices and our integration facility are located in Round Rock, Texas.

The accompanying consolidated balance sheet as of

December 31, 2018,

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 (deficit) and cash flows. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form

-K for the year ended

December 31, 2018.

New Accounting Pronouncements, Policy [Policy Text Block]

Accounting Changes

Except for the changes discussed below, we have consistently applied the accounting policies to all periods presented in these unaudited consolidated financial statements.

January 1, 2019,

we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, or ASC, Topic

842,

Leases

(“ASC

842”

), which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASC

842

is intended to represent an improvement over previous GAAP, which did

not

require lease assets and lease liabilities to be recognized for most leases. We adopted ASC

842

using a modified retrospective approach for all leases existing at

January 1, 2019.

The adoption of ASC

842

had a substantial impact on our balance sheet. The most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. Accordingly, upon adoption, leases that were classified as operating leases under previous GAAP were classified as operating leases under ASC

842,

and we recorded an adjustment of

$1.96

million to operating lease right-of-use assets and the related lease liability. The lease liability is based on the present value of the remaining lease payments, determined under prior GAAP, discounted using our secured incremental borrowing rate at the effective date of

January 1, 2019.

As permitted under ASC

842,

we elected several practical expedients that permit us

not

to reassess (

) whether a contract is or contains a lease, (

) the classification of existing leases, and (

) whether previously capitalized costs continue to qualify as initial indirect costs. The application of the practical expedients did

not

have a significant impact on the measurement of the right-of-use assets or operating lease liabilities.

See Note

for further information on leases.

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.

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

ervices

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

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

September 30, 2019

and

December 31, 2018,

our allowance for doubtful accounts was less than

$8,000.

Equipment

ales

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 revenue. 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

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. 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 resold directly to the original equipment manufacturer (OEM) and other customers, and in these instances, we act as an agent in the transaction and recognize revenue as the amount of any fee or commissions that we expect to be entitled to. Accounts receivable from our reseller activities are typically due within

days of invoicing.

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.

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.

The following table shows our revenues disaggregated by reportable segment and by product or service type (in

’000’s

	Three-months ended Sept 30,				Nine -months ended Sept 30,
	201 9		201 8		201 9		201 8

FACILITIES:
Maintenance revenues	$	996	$	1,213	$	3,148	$	3,615
Equipment sales		192		958		420		2,085
Deployment and other services		1,362		2,079		3,913		5,096
Total facilities revenues	$	2,550	$	4,250	$	7,481	$	10,796

SYSTEMS INTEGRATION:
Integration services	$	1,486	$	2,121	$	4,754	$	5,791
Reseller services		140		-		140		-
Total Systems Integration revenues	$	1,626	$	2,121	$	4,894	$	5,791

TOTAL REVENUES	$	4,176	$	6,371	$	12,375	$	16,587

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

September 30, 2019,

deferred revenue of

$2,423,000

represents our remaining performance obligations for our maintenance contracts, all of which are expected to be recognized within

one

year. The remaining

$117,000

of deferred revenue is our remaining performance obligations for other services, all of which is expected to be recognized between

one

and

two

years.

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 customers accounted for a significant percentage of our revenues for the periods shown:

	Three months ended Sept. 30,						Nine Months Ended Sept. 30 ,
	2019			2018			201 9			201 8


US-based IT OEM		93	%		66	%		91	%		69	%
US-based IT services company		-	%		13	%		-	%		8	%

other customers represented more than

10%

of our revenues for any periods presented. Our US-based IT OEM customer represented

69%

and

75%

of our accounts receivable at

September 30, 2019

and

December 31, 2018,

respectively. A US-based electrical equipment supplier represented

12%

of our accounts receivable at

September 30, 2019.

other customer represented more than

10%

of our accounts receivable at

September 30, 2019

or at

December 31, 2018.