Filed by Bowne Pure Compliance

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)


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

For the quarterly period ended June 30, 2008


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

For the transition period from to

Commission File Number: 0-19394

GTSI CORP.

(Exact name of registrant as specified in its charter)


Delaware		54-1248422
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

3901 Stonecroft Boulevard, Chantilly, VA		20151-1010
(Address of principal executive offices)		(Zip Code)

703-502-2000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o

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

The number of shares of common stock, $0.005 par value, outstanding as of July 31, 2008 was 9,791,273.

EXPLANATORY NOTE

This Amendment to the Quarterly Report on Form 10-Q of GTSI Corp. (“GTSI” or the “Company”) is being filed to restate the Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2008.

The information contained in this Amendment, including the financial statements and notes thereto, amends only Items 1, 2 and 4 of the originally filed Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. This Amendment does not reflect events occurring after the original filing date of August 7, 2008, or modify or update those disclosures that may have been affected by subsequent events.

On September 15, 2008, the Company concluded that previously reported financial statement information required restatement to correct an error in the accounting for cost of sales and the related impact on selling, general and administrative costs to record additional incentive compensation costs due to the change in loss before income taxes associated with the error.

For more information on these matters, please refer to Note 2 to the unaudited condensed consolidated financial statements, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations (as restated) and Item 4, Controls and Procedures.

This amended Quarterly Report on Form 10-Q/A should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2007 and subsequent filings with the Securities and Exchange Commission (the “SEC”). In addition, in accordance with applicable SEC rules, this amended Quarterly Report on Form 10-Q/A includes updated certificates from our chief executive officer and chief financial officer as Exhibits 31.1, 31.2 and 32.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GTSI CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)


	June 30,
	2008
	(restated			December 31,
	see Note 2)			2007
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	829
Accounts receivable, net		147,797			165,317
Inventory		12,751			21,577
Deferred costs		9,172			5,615
Other current assets		7,130			5,169

Total current assets		176,850			198,507
Depreciable assets, net		11,773			12,158
Long-term receivables and other assets		9,554			16,002

Total assets	$	198,177		$	226,667


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Borrowings under credit facility	$	—		$	18,031
Accounts payable		99,224			84,715
Financed lease debt, current portion		8,472			8,509
Accrued liabilities		10,403			14,725
Deferred revenue		2,642			2,542

Total current liablilites		120,741			128,522
Long-term debt		—			10,000
Long-term financed lease debt		5,608			9,068
Other liabilities		390			1,364

Total liabilities		126,739			148,954


Commitments and contingencies (See Note 11)

Stockholders’ equity
Preferred stock — $0.25 par value, 680,850 shares authorized; none issued or outstanding		—			—
Common stock — $0.005 par value, 20,000,000 shares authorized; 10,179,946 issued and 9,825,623 outstanding at June 30, 2008; and 10,183,251 issued and 9,700,850 outstanding at December 31, 2007		50			49
Capital in excess of par value		48,218			47,097
Retained earnings		23,660			31,634
Treasury stock, 62,617 shares at June 30, 2008 and 139,994 shares at December 31, 2007, at cost		(490	)		(1,067	)

Total stockholders’ equity		71,438			77,713

Total liabilities and stockholders’ equity	$	198,177		$	226,667

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GTSI CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008						2008
	(restated see						(restated see
	Note 2)			2007			Note 2)			2007

SALES
Product	$	143,082		$	141,198		$	270,650		$	275,081
Service		13,357			12,439			25,269			22,639
Financing		2,761			3,083			6,071			5,616

		159,200			156,720			301,990			303,336

COST OF SALES
Product		129,362			125,512			244,183			245,102
Service		8,816			8,376			14,532			14,415
Financing		1,617			637			2,464			1,451

		139,795			134,525			261,179			260,968


GROSS MARGIN		19,405			22,195			40,811			42,368

SELLING, GENERAL & ADMINISTRATIVE EXPENSES		22,831			25,334			48,702			51,532


LOSS FROM OPERATIONS		(3,426	)		(3,139	)		(7,891	)		(9,164	)


INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income		276			254			405			584
Equity income from affiliates		744			481			1,149			609
Interest and other expense		(492	)		(965	)		(1,674	)		(2,346	)

Interest and other income (expense), net		528			(230	)		(120	)		(1,153	)


LOSS BEFORE INCOME TAXES		(2,898	)		(3,369	)		(8,011	)		(10,317	)

INCOME TAX (PROVISION) BENEFIT		(11	)		(252	)		37			(252	)


NET LOSS	$	(2,909	)	$	(3,621	)	$	(7,974	)	$	(10,569	)


LOSS PER SHARE
Basic	$	(0.30	)	$	(0.38	)	$	(0.82	)	$	(1.11	)

Diluted	$	(0.30	)	$	(0.38	)	$	(0.82	)	$	(1.11	)


WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		9,762			9,551			9,727			9,513

Diluted		9,762			9,551			9,727			9,513

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GTSI CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


	Six Months Ended
	June 30,
	2008
	(restated see
	Note 2)			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(7,974	)	$	(10,569	)
Adjustments to reconcile net loss to net cash provided by operating activities:		36,242			45,597

Net cash provided by operating activities		28,268			35,028


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of depreciable assets		(1,194	)		(1,083	)

Net cash used in investing activities		(1,194	)		(1,083	)


CASH FLOWS FROM FINANCING ACTIVITES:
Payments on Credit Facility		(18,031	)		(30,912	)
Payment of Term Loan		(10,000	)		—
Payment of deferred financing costs		—			(670	)
Common Stock Purchases		(212	)		—
Proceeds from equity transactions		340			842

Net cash used in financing activities		(27,903	)		(30,740	)


NET (DECREASE) INCREASE IN CASH		(829	)		3,205

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		829			705


CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	3,910

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GTSI CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited, condensed consolidated financial statements include the accounts of GTSI Corp. and its wholly owned subsidiaries (“GTSI” or the “Company”). Intercompany accounts and transactions have been eliminated in consolidation. The statements have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Because the accompanying condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America, they should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

The Company recognizes software revenue pursuant to the requirements of Statement of Position (SOP) 97-2, “Software Revenue Recognition,” issued by the American Institute of Certified Public Accountants, as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transaction.” In accordance with SOP 97-2, the Company recognizes software related revenue, which consists of re-selling third party software licenses, which do not require significant production, modification or customization, when persuasive evidence of a sale arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The results of operations for the three and six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the full year, or future periods. GTSI has historically experienced seasonal fluctuations in operations as a result of government buying and funding patterns. Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have no impact on net loss. See Note 1R of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 for a description of the reclassifications.

2. Restatement

In September 2008, the Company concluded that previously reported financial statement information for the three and six months ended June 30, 2008 required restatement to correct an error in the accounting for cost of sales and the related impact on selling, general and administrative costs to record additional incentive compensation costs due to the change in loss before income taxes associated with the error. For the three and six months ended June 30, 2008, the deferred cost of sales on the balance sheet was understated and cost of sales in the statement of operations was overstated by $2.1 million. Incentive compensation costs increased by $0.5 million based on the revised loss before income taxes. An additional immaterial service revenue entry of $0.1 million was also recorded as part of the restatement to correct an error for the three months ended June 30, 2008.

A series of change management control failures related to the May 2008 launching of our system upgrade to the GTSI Enterprise Management System (“GEMS”) resulted in the overstatement of cost of sales for the three and six months ended June 30, 2008.

During the upgrade process, many GEMS reports were altered, including the cost of sales data collected in the logic reporting database. This functionality was prospective, meaning transactions occurring post-cutover would have their cost recorded in a detailed field and the transactions that occurred pre-cutover would have their cost recorded in a different field. To accurately report costs in a post-cutover environment, both fields would have to be recorded in the logic reporting database. The logic reporting database is used to calculate deferred cost of sales for unbilled transactions where revenue recognition criteria has not been met. Because the pre-cutover data was missing from a standardized report, $2.1 million of product cost of sales was not deferred.

The following tables summarize the effects of these errors on GTSI’s financial statements:

Unaudited Consolidated Condensed Balance Sheet
June 30, 2008
(in thousands)



	As Previously
	Reported		Adjustments			As Restated
Accounts Receivable	$	147,945	$	(148	)	$	147,797
Deferred Costs	$	7,065	$	2,107		$	9,172
Total Current Assets	$	174,891	$	1,959		$	176,850
Total Assets	$	196,218	$	1,959		$	198,177
Accrued liabilities	$	9,869	$	534		$	10,403
Total Current Liabilities	$	120,207	$	534		$	120,741
Total Liabilities	$	126,205	$	534		$	126,739
Retained earnings	$	22,235	$	1,425		$	23,660
Total stockholders’ equity	$	70,013	$	1,425		$	71,438
Total liabilities and stockholders’ equity	$	196,218	$	1,959		$	198,177

Unaudited Consolidated Condensed Statement of Operations
(in thousands except per share data)


	For the Three Months Ended June 30, 2008
	As Previously
	Reported			Adjustments			As Restated
Sales
Service	$	13,505		$	(148	)	$	13,357
Cost of Sales
Product	$	131,469		$	(2,107	)	$	129,362
Gross Margin	$	17,446		$	1,959		$	19,405
Selling, General & Administrative Expenses	$	22,297		$	534		$	22,831
Loss from Operations	$	(4,851	)	$	1,425		$	(3,426	)
Loss before Income Taxes	$	(4,323	)	$	1,425		$	(2,898	)
Net Loss	$	(4,334	)	$	1,425		$	(2,909	)
Loss Per Share	$	(0.44	)	$	0.14		$	(0.30	)


	For the Six Months Ended June 30, 2008
	As Previously
	Reported			Adjustments			As Restated
Sales
Service	$	25,417		$	(148	)	$	25,269
Cost of Sales
Product	$	246,290		$	(2,107	)	$	244,183
Gross Margin	$	38,852		$	1,959		$	40,811
Selling, General & Administrative Expenses	$	48,168		$	534		$	48,702
Loss from Operations	$	(9,316	)	$	1,425		$	(7,891	)
Loss before Income Taxes	$	(9,436	)	$	1,425		$	(8,011	)
Net Loss	$	(9,399	)	$	1,425		$	(7,974	)
Loss Per Share	$	(0.97	)	$	0.15		$	(0.82	)

Unaudited Consolidated Condensed Statement of Cash Flows
For the Six Months Ended June 30, 2008
(in thousands)


	As Previously
	Reported			Adjustments			As Restated
Net loss	$	(9,399	)	$	1,425		$	(7,974	)
Adjustments to reconcile net loss to net cash provided by operating activities:	$	37,667		$	(1,425	)	$	36,242

3. New Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement, (“SFAS 157”), which establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position No. 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, which indicates that this statement does not apply under FASB Statement No. 13 and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under Statement No. 13. In February 2008, the FASB issued FASB Staff Position No 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”), which delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis, to fiscal years beginning after November 15, 2008. Early application is encouraged. On January 1, 2008, the Company elected to implement SFAS 157, with the one-year deferral permitted by FSP 157-2. The adoption of SFAS 157 had no impact on the Company’s consolidated financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). This statement gives entities the option to report most financial assets and liabilities at fair value, with changes in fair value recorded in earnings. On January 1, 2008, the Company adopted SFAS 159 by electing not to use the fair value approach. The adoption of SFAS 159 had no impact on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (“SFAS No. 141R”). SFAS No. 141R significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, pre-acquisition contingencies, transaction costs, restructuring costs and income taxes. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the fiscal year beginning after December 15, 2008. The Company is currently evaluating the potential impact of SFAS No. 141R on its financial position and results of operations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, SFAS No. 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact of SFAS 160 on its financial position and results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities— An Amendment of FASB Statement No. 133 (“SFAS 161”). This statement amends and expands the disclosure requirements for derivative instruments and for hedging activities. SFAS 161 is effective for interim periods beginning after November 15, 2008 and is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.

In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60 (“SFAS 163”). This statement clarifies recognition and measurement of claim liabilities for financial guarantee contracts and expands the disclosure requirements for these contracts. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In June 2008, the Financial Accounting Standards Board issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. This FSP addresses whether instruments granted in share-based payment transactions are considered participating securities prior to vesting, and would need to be included in the computation of earnings per share (EPS) under the two-class method described in FASB Statement No. 128, Earnings Per Share (FAS 128). This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Early application is not permitted. The Company is not expecting it to have a material impact on the Company’s consolidated financial position or results of operations.

4. Stock-Based Compensation

Stock Incentive Plans

The Company has two stockholder approved stock incentive plans: the 1994 Stock Option Plan, as amended (“1994 Plan”), and the Amended and Restated 2007 Stock Incentive Plan (“2007 Plan”), which replaced the Amended and Restated 1996 Stock Incentive Plan (“1996 Plan”). The Company has another stockholder approved plan, the 1997 Non-Officer Stock Option Plan (“1997 Plan”), which provides for the granting of non-qualified stock options to employees (other than officers and directors).

Stock Options

A summary of option activity under the Company’s stock incentive plans as of June 30, 2008 and changes during the six-month period then ended is presented below:


						Weighted
						Average
						Remaining		Aggregate
	Shares			Weighted Average		Contractual		Intrinsic Value
	(in thousands)			Exercise Price		Term		(in thousands)
Outstanding at January 1, 2008		1,782		$	8.08
Granted		—			—
Exercised		(45	)		4.88
Forfeited		(7	)		9.04
Expired		(42	)		11.34

Outstanding at June 30, 2008		1,688		$	8.08		3.84	$	1,022

Exercisable at June 30, 2008		1,105		$	8.44		3.33	$	714

There were no options granted during the six months ended June 30, 2008. There were 45,000 options granted during the six months ended June 30, 2007. The total intrinsic value of options exercised during the six months ended June 30, 2008 and 2007 was $0.1 million and $0.6 million, respectively. During the six months ended June 30, 2008 and 2007, 45,000 shares and 131,075 shares, respectively, of stock options were exercised under the Company’s stock option plans. The Company has historically reissued shares from treasury stock or registered shares from authorized common stock to satisfy stock option exercises, restricted stock grants, and employee stock purchases. Due to the full valuation allowance on the Company’s deferred tax assets, no tax benefit for the exercise of stock options was recognized during the six months ended June 30, 2008. During the six months ended June 30, 2008 and 2007, $0.4 million and $0.5 million were recorded as stock compensation expense for stock options.

Restricted Shares

During the six months ended June 30, 2008, there were 39,083 restricted stock awards granted. During the six months ended June 30, 2007, there were 347,995 restricted stock awards granted. During the six months ended June 30, 2008 and 2007, $0.6 million and $0.2 million were recorded as stock compensation expense for restricted stock.

The fair value of nonvested shares of restricted stock is determined based on the closing trading price of the Company’s shares on the grant date. A summary of the status of Company’s nonvested shares as of June 30, 2008, and changes during the six months ended June 30, 2008, is presented below:


				Weighted Average
	Shares			Grant-Date Fair
	(in thousands)			Value

Nonvested at January 1, 2008		378		$	11.71
Granted		39			7.51
Vested		(87	)		12.30
Forfeited		(3	)		12.09

Nonvested at June 30, 2008		327		$	11.04

Stock Appreciation Rights (“SAR”s)

For the first six months of 2008, 26,454 stock appreciation rights were granted. During the six months ended June 30, 2007, there were 918,006 stock appreciation rights granted. All SARs are to be settled in stock. During the six months ended June 30, 2008 and 2007, $0.6 million and $0.2 million was recorded as stock compensation expense for SARs, respectively.

Unrecognized Compensation

As of June 30, 2008, there was $8.8 million of total unrecognized compensation cost related to nonvested stock-based awards, which consisted of unrecognized compensation of $1.6 million related to stock options, $4.1 related to stock appreciation rights and $3.1 million related to restricted stock awards. The cost for unrecognized compensation related to stock options and stock appreciation rights and restricted stock awards is expected to be recognized over a weighted average period of 2.0 years, 3.6 years, and 3.3 years, respectively.

5. Lease and Other Receivables

The Company leases computer hardware, generally under sales-type leases, in accordance with FAS 13. In connection with those leases, the Company sometimes sells related services, software and maintenance to its customers. The terms of the receivables from the sale of these related services are often similar to the terms of the leases of computer hardware; that is, receivables are interest bearing and are often due over a period of time that corresponds with the terms of the leased computer hardware.

The Company’s investments in sales-type lease receivables were as follows as of (in thousands):


	June 30, 2008			December 31, 2007
Future minimum lease payments receivable	$	12,401		$	13,558
Unguaranteed residual values		4,703			4,785
Unearned income		(1,590	)		(2,450	)

	$	15,514		$	15,893

The Company’s investment in other receivables was as follows as of (in thousands):


	June 30, 2008			December 31, 2007
Future minimum payments receivable	$	4,280		$	10,240
Unearned income		(804	)		(1,433	)

	$	3,476		$	8,807

6. Transferred Receivables and Financed Lease Debt

For the three and six months ended June 30, 2008 and 2007, the Company did not transfer any financing receivables to third parties that did not meet the sale criteria under Statement of Financial Accounting Standards (“SFAS”) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, (“FAS 140”), and were recorded as sales and cost of sales in the Company’s financial statements.

The Company recognized $0.2 million and $0.5 million of financing cost of sales associated with the secured financed lease debt for the three months ended June 30, 2008 and 2007, respectively, and of $0.5 million and $1.0 million for the six months ended June 30, 2008 and 2007, respectively.

7. Credit Facility and Term Loan

During 2006, the Company obtained a $135 million credit agreement with a group of lenders (the “Credit Facility”). The gross outstanding balance of the Credit Facility as of June 30, 2008 and December 31, 2007 was $2.7 million and $22.7 million, respectively, and is included on the accompanying balance sheet, net of the Company’s lockbox cash accounts that are accessed by the lenders to pay down the Credit Facility outstanding balance, which was $2.7 million and $4.7 million as of June 30, 2008 and December 31, 2007, respectively.

The Credit Facility provides access to capital through June 2, 2010, with borrowings secured by substantially all of the assets of the Company. The Facility matures in full on June 2, 2010. Borrowing under the Credit Facility at any time is limited to the lesser of $135 million or a collateral-based borrowing base less outstanding obligations. The Credit Facility subjects GTSI to certain covenants limiting its ability to (i) incur debt; (ii) make guarantees; (iii) make restricted payments, purchases or investments; (iv) enter into certain transactions with affiliates; (v) acquire real estate and (vi) enter into sale and leaseback transactions. The Credit Facility carries an interest rate generally indexed to the Prime Rate plus 0.25% plus margin. As of June 30, 2008, GTSI had remaining available credit under the Credit Facility of $39.9 million.

The Credit Facility contains negative financial performance covenants, including a minimum EBITDA covenant for each period, information covenants and certain affirmative covenants. As of June 30, 2008, The Company was in compliance with all covenants set forth in the Credit Facility. The Company currently relies on its Credit Facility, along with its cash from operations, as its primary vehicles to finance its operations.

At December 31, 2007, the Company had a subordinated secured long-term loan of $10 million (the “Term Loan”). On February 25, 2008, the Company terminated the Term Loan by making a payment of $10.2 million. The pay-off consisted of $10 million principal, $0.1 million interest and $0.1 million early termination fee.

The Company defers loan financing costs and recognizes these costs throughout the term of the loans. Deferred financing costs as of June 30, 2008 and December 31, 2007 were $2.8 million and $3.7 million, respectively.

8. Contract Termination Costs

In 2006, the Company recorded a charge of $0.2 million for the consolidation of facilities. In March 2007, the Company sub-leased a portion of the excess work space, and reduced its reserve by $0.1 million. These amounts are included in selling, general & administrative expenses on the accompanying Statement of Operations.

Contract termination cost reserve activities for the six months ended June 30, 2008 was as follows (in thousands):


Contract Termination Liability as of 12/31/07	$	30
Less: Cash Payments		(16	)

Contract Termination Liability as of 06/30/08	$	14

9. Loss Per Share

Basic loss per share is calculated by dividing net loss by the weighted average shares outstanding during the period, which includes shares of restricted stock that are fully vested. Diluted loss per share is computed similarly to basic loss per share, except that the weighted average shares outstanding are increased to include equivalents, when their effect is dilutive. In periods of net loss, all dilutive shares are considered anti-dilutive.

Anti-dilutive employee stock options and SARs totaling 122,647 and 373,881 shares, respectively, were excluded for the six months ended June 30, 2008 and 2007. Unvested restricted stock units totaling 26,360 and 32,602 shares, respectively, have been excluded for the six months ended June 30, 2008 and 2007.

The following table sets forth the computation of basic and diluted loss per share (in thousands):


	Three months ended						Six months ended
	June 30,						June 30,
	2008						2008
	(restated see						(restated see
	Note 2)			2007			Note 2)			2007
Basic loss per share
Net loss	$	(2,909	)	$	(3,621	)	$	(7,974	)	$	(10,569	)
Weighted average shares outstanding		9,762			9,551			9,727			9,513

Basic loss per share	$	(0.30	)	$	(0.38	)	$	(0.82	)	$	(1.11	)


Diluted loss per share:
Net loss	$	(2,909	)	$	(3,621	)	$	(7,974	)	$	(10,569	)
Weighted average shares outstanding		9,762			9,551			9,727			9,513
Incremental shares attributable to the assumed exercise of outstanding stock options		N/A			N/A			N/A			N/A

Weighted average shares and equivalents		9,762			9,551			9,727			9,513

Diluted loss per share	$	(0.30	)	$	(0.38	)	$	(0.82	)	$	(1.11	)

10. Income Taxes

In accordance with the Financial Accounting Standards Board (“FASB”) Interpretation No. 48, "Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109,” (“FIN 48”), GTSI recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company adopted the provisions set forth by FIN 48 effective January 1, 2007.

As of June 30, 2008 and December 31, 2007 GTSI had $0.2 million of total unrecognized tax benefits most of which would impact the effective rate if recognized. The Company does not believe that the total amount of unrecognized tax benefits will significantly change within 12 months of the reporting date.

GTSI’s practice is to recognize interest and/or penalties related to uncertain tax positions in income tax expense. The Company had $0.2 million accrued for interest and less than $0.1 million accrued for penalties as of December 31, 2007. During the first six months of 2008, the amount accrued for interest decreased by less than $0.1 million relating to the filing of the amended state returns reflecting adjustments from the IRS audit and increased by an immaterial amount for the remaining issues. Interest will continue to accrue on certain issues for the remainder of 2008 and beyond.

Since the Company’s management believes that it is not more likely than not that the Company’s deferred tax assets will be realized, the Company continues to have a full valuation allowance against its net deferred tax assets and is not anticipating the release of this valuation allowance during the current year, except to the extent that deferred tax assets are utilized within the current year.

11. Commitments and Contingencies

Product Warranties

GTSI offers extended warranties on certain products which are generally covered for three or five years beyond the warranty provided by the manufacturer. Products under extended warranty require repair or replacement of defective parts at no cost to the customer. The Company records warranty liabilities at the time of sale for the estimated costs that may be incurred under its extended warranty contracts. The following table summarizes the activity related to product warranty liabilities (in thousands):


	Six months ended
	June 30,
	2008			2007
Accrued warranties at beginning of period	$	283		$	855
Charges made against warranty liabilities		(20	)		(157	)
Adjustments to warranty reserves		(133	)		(263	)
Accruals for additional warranties sold		61			60

Accrued warranties at end of period	$	191		$	495

Revenue and cost of sales from extended warranty contracts is recorded as deferred revenue and deferred costs, respectively, and subsequently recognized over the term of the contract. The following table summarizes the activity related to the deferred warranty revenue (in thousands):


	Six months ended
	June 30,
	2008			2007
Deferred warranty revenue at beginning of period	$	130		$	506
Deferred warranty revenue recognized		(131	)		(306	)
Revenue deferred for additional warranties sold		369			80

Deferred warranty revenue at end of period	$	368		$	280

Letters of Credit

GTSI was obligated under an operating lease to provide its landlord with a letter of credit in the amount of $0.2 million as of June 30, 2008 and December 31, 2007, as a security deposit for all tenant improvements associated with the lease. Additionally, the Company provided a letter of credit in the amount of $2.4 million as of June 30, 2008 and December 31, 2007, for the new office space lease signed in December 2007.

As of June 30, 2008, the Company had an outstanding letter of credit to a customer in the amount of $1.2 million to guarantee the Company’s performance by the Company under the contract.

Employment Agreements

GTSI has an employment agreement with its Chief Executive Officer. This agreement provides for payments of 12 months of base salary plus bonus equal to the previous year’s bonus payments upon termination of employment. In addition, GTSI has change in control agreements with 18 additional executives and key employees, and severance agreements with nine other executives. These arrangements provide for payments of as much as 18 months of total target compensation and continuation of benefits upon the occurrence of specified events. As of June 30, 2008, no accruals have been recorded for these agreements.

Contingencies

Currently, and from time to time, GTSI is involved in litigation incidental to the conduct of its business. As of June 30, 2008, GTSI is not a party to any lawsuit or proceeding that, in the opinion of management, is likely to have a material adverse effect on its financial position or results of operations.

12. Related Party Transactions

GTSI serves as the mentor to Eyak Technology, LLC (“Eyak”), providing assistance and expertise in many key business areas. In 2002, GTSI made a $0.4 million investment in Eyak and assumed a 37% ownership of the company. GTSI also has a designee on Eyak’s Board of Directors. The investment in Eyak is accounted for under the equity method and adjusted for earnings or losses as reported in the financial statements of Eyak and dividends received from Eyak. At June 30, 2008 and December 31, 2007 the investment balance for Eyak was $2.6 million and $2.9 million, respectively. GTSI receives a fee from Eyak based on sales from products sold at cost by GTSI to Eyak. Fees recorded by the Company, which are recognized when Eyak sells to third party customers, are $0.5 million and $0.8 million for the six months ended June 30, 2008 and 2007, respectively, which are included in sales in the accompanying Unaudited Condensed Consolidated Statements of Operations. GTSI recognized sales to EG Solutions (“EGS”), a wholly owned subsidiary of Eyak, totaling $12.7 million for the six months ended June 30, 2008.

During the fourth quarter of 2007, the Company’s Board of Directors adopted a resolution to pursue possible divestiture of its equity ownership in Eyak. At this time, the Company has not entered into a sales agreement and continues to evaluate its ownership in Eyak. The Company expects proceeds from any such divestiture would exceed the carrying value of our investment in Eyak.

The following table summarizes Eyak’s unaudited financial information for the periods presented in the accompanying Statement of Operations (in thousands):


	Three months ended				Six months ended
	June 30,				June 30,
	2008		2007		2008		2007
Revenues	$	53,815	$	44,521	$	101,532	$	83,323
Gross margin	$	5,742	$	3,343	$	10,488	$	7,018
Net income	$	1,782	$	1,234	$	2,878	$	1,580

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

The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, our unaudited condensed consolidated financial statements and notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q/A and our consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2007. We use the terms “GTSI,” “we,” “our,” and “us” to refer to GTSI Corp. and its subsidiaries.

Disclosure Regarding Forward-Looking Statements

Readers are cautioned that this Quarterly Report on Form 10-Q/A contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, relating to our operations that are based on our current expectations, estimates, forecasts and projections. Words such as “expect,” “plan,” “believe,” “anticipate,” “intend” and similar expressions are intended to identify these forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results in future periods may differ materially from those expressed or projected in any forward-looking statements because of a number of risks and uncertainties, including:

•

Our reliance on a small number of large transactions for significant portions of our sales and gross margins

•

Our ability to shift our business model from a reseller of products to a high-end solutions provider

•

Any issue that compromises our relationship with agencies of the Federal government would cause serious harm to our business

•

Changes in Federal government fiscal spending

•

Our ability to meet the covenants under our Credit Facility in future periods

•

Possible infrastructure failures

•

Any material weaknesses in our internal control over financial reporting

•

Continuing net losses, if we fail to align costs with our sales levels

•

Potential additional expenses to comply with the changing regulations of corporate governance and public disclosure

•

Our quarterly sales and cash flows are volatile, which makes our future financial results difficult to forecast

•

Unsatisfactory performance by third parties with which we work could hurt our reputation, operating results and competitiveness

•

Our qualifications as a small business for certain new contract awards

•

Our ability to integrate any potential future acquisitions, strategic investments or mergers

For a detailed discussion of risk factors affecting GTSI’s business and operations, see Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007. We undertake no obligation to revise or update any forward-looking statements for any reason.

Restatement

In September 2008, the Company concluded that previously reported financial statement information for the three and six months ended June 30, 2008 required restatement to correct an error in the accounting for cost of sales and the related impact on selling, general and administrative costs to record additional incentive compensation costs due to the change in loss before income taxes associated with the error. For the three and six months ended June 30, 2008, the deferred cost of sales on the balance sheet was understated and cost of sales in the statement of operations was overstated by $2.1 million. The incentive compensation costs increased by $0.5 million based on the revised loss before income taxes. An additional immaterial service revenue entry of $0.1 million was also recorded as part of the restatement to correct an error for the three months ended June 30, 2008.

During the upgrade process, many GEMS reports were altered, including the cost of sales data collected in the logic reporting database. This functionality was prospective, meaning transactions occurring post-cutover would have their cost recorded in a detailed field and the transactions that occurred pre-cutover would have their cost recorded in a different field. To accurately report costs in a post cutover environment, both fields would have to be recorded in the logic reporting database. The logic reporting database is used to calculate deferred cost of sales for unbilled transactions where revenue recognition criteria has not been met. Because the pre-cutover data was missing from a standardized report, $2.1 million of product cost of sales was not deferred.

See Item 4 for discussion of control deficiencies.

These restatements resulted in a decrease to net loss of $1.4 million and $1.4 million, or $0.14 and $0.15 per share, for the three and six months ended June, 30, 2008, respectively. In addition, the deferred billings together with the related liabilities are reported in GTSI’s balance sheets following the restatement. These restatement entries resulted in an increase of $2.0 million in total assets as of June 30, 2008 and an increase in total liabilities of $0.5 million June 30, 2008. Additionally, the restatement entries affected the Statement of Cash Flows by reducing net loss and the adjustments to reconcile net loss to net cash provided by operating activities by $1.4 million. This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been modified and updated to reflect the effect of these restatements.

Overview

GTSI has 25 years of experience in selling IT products and solutions primarily to U.S. Federal, state and local governments and to prime contractors who are working directly on government contracts. We believe our key differentiators to be our strong brand among government customers, extensive contract portfolio, close relationships with wide variety of vendors, and a technology lifecycle management approach.

The IT solutions we offer to our customers have a strong product component, along with a services component on many solutions. We connect IT’s leading vendors, products and services inside the core technology areas most critical to government success by partnering with global IT leaders such as Sun Microsystems, Cisco, Microsoft, Hewlett Packard, Panasonic and Network Appliance. GTSI has strong strategic relationships with hardware and software industry leading OEMs and includes these products in the solutions provided to our customers.

Over the past 18 months, we accelerated our realignment around solutions, that we believe provides us with a greater opportunity for sustained return on investment. We directed our attention to government solutions, including unified communications, network security, mobile evidence capture, storage consolidation, and server consolidation.

To help our customers acquire, manage and refresh this technology in a strategic and application-appropriate manner, GTSI has created a mix of professional and financial services capable of managing and funding the entire technology lifecycle. GTSI has grown the professional services organization to handle the increase in engineering, maintenance, and management services supporting our solutions. Additionally, GTSI offers leasing arrangements to allow government agencies to acquire access to technology as an evenly distributed operating expense, rather than the much more budget-sensitive and discontinuous capital expenses. This model is in high demand from our customers, and we believe it represents a distinctive advantage.

The following are some of our key indicators for the quarter and six months ended June 30, 2008.

For the quarter ended June 30, 2008 compared to the quarter ended June 30, 2007:

	•		Total sales increased $2.5 million.

	•		Gross margin as a percentage of sales decreased 2.0%.

	•		Selling, General & Administrative expenses decreased $2.5 million.

	•		Loss before income taxes decreased $0.5 million.

	•		Cash provided by operations decreased $3.5 million.

For the six months ended June 30, 2008 compared to the six months ended June 30, 2007:

	•		Total sales decreased $1.3 million.

	•		Gross margin as a percentage of sales decreased 0.5%.

	•		Selling, General & Administrative expenses decreased $2.8 million.

	•		Loss before income taxes decreased $2.3 million.

	•		Cash provided by operations decreased $6.8 million.

Critical Accounting Estimates and Policies

Our unaudited condensed consolidated financial statements are based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make significant assumptions. We believe that some of the more critical estimates and related assumptions that affect our financial condition and results of operations pertain to revenue recognition, financing receivables, valuation of inventory, capitalized internal use software, estimated payables and income taxes. For more information on critical accounting estimates and policies see the MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2007. We have discussed the application of these critical accounting estimates and policies with the Audit Committee of our Board of Directors.

Historical Results of Operations

The following table illustrates the unaudited percentage of sales represented by items in our condensed consolidated statements of operations for the periods presented.


	Three months ended						Six months ended
	June 30,						June 30,
	2008						2008
	(restated						(restated
	see Note 2)			2007			see Note 2)			2007
Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		87.8	%		85.8	%		86.5	%		86.0	%

Gross margin		12.2	%		14.2	%		13.5	%		14.0	%
Selling, general, and administrative expenses		14.3	%		16.2	%		16.1	%		17.0	%

Loss from operations		(2.1	)%		(2.0	)%		(2.6	)%		(3.0	)%
Interest and other income (expense), net		0.3	%		(0.1	)%		0.0	%		(0.4	)%

Loss before taxes		(1.8	)%		(2.1	)%		(2.6	)%		(3.4	)%
Income tax benefit (provision)		0.0	%		(0.2	)%		0.0	%		(0.1	)%

Net Loss		(1.8	)%		(2.3	)%		(2.6	)%		(3.5	)%

The following tables indicate, for the periods indicated, the approximate sales by type and vendor along with related percentages of total sales (in millions).


	Three months ended								Six months ended
	June 30,								June 30,
Sales by Type	2008				2007				2008				2007
Hardware	$	109.7	68.9	%	$	110.6	70.6	%	$	206.3	68.3	%	$	226.3	74.6	%
Software		33.3	20.9	%		30.6	19.5	%		64.3	21.3	%		48.8	16.1	%
Service		13.4	8.4	%		12.4	7.9	%		25.3	8.4	%		22.6	7.5	%
Financing		2.8	1.8	%		3.1	2.0	%		6.1	2.0	%		5.6	1.8	%

Total	$	159.2	100.0	%	$	156.7	100.0	%	$	302.0	100.0	%	$	303.3	100.0	%


	Three months ended								Six months ended
Sales by Vendor (based	June 30,								June 30,
on 2008 sales)	2008				2007				2008				2007
Cisco	$	31.4	19.7	%	$	25.9	16.5	%	$	52.4	17.4	%	$	43.1	14.2	%
Microsoft		19.6	12.3	%		27.2	17.4	%		38.0	12.6	%		38.8	12.8	%
Sun Microsystems		17.8	11.2	%		18.9	12.1	%		35.1	11.6	%		32.9	10.8	%
Panasonic		15.5	9.7	%		25.0	16.0	%		27.3	9.0	%		48.6	16.0	%
Dell		13.8	8.7	%		3.5	2.2	%		23.9	7.9	%		7.2	2.4	%
Others, net of reserves and adjustments		61.1	38.4	%		56.2	35.8	%		125.3	41.5	%		132.7	43.8	%

Total	$	159.2	100.0	%	$	156.7	100.0	%	$	302.0	100.0	%	$	303.3	100.0	%

Three Months Ended June 30, 2008 Compared With the Three Months Ended June 30, 2007

Sales

Total sales, consisting of product, service and financing revenue, increased $2.5 million, or 1.6% from $156.7 million for the three months ended June 30, 2007 to $159.2 million for the three months ended June 30, 2008. The sales activity of each of the three product lines are discussed below.

Product revenue includes the sale of hardware, software and license maintenance on the related software. Product sales increased $1.9 million, or 1.3%, from $141.2 million for the three months ended June 30, 2007 to $143.1 million for the three months ended June 30, 2008.

Service revenue includes the sale of professional services, resold third-party service products, hardware warranties and maintenance on hardware; we net revenues where we are not the primary obligor, we netted approximately $16.9 million and $21.2 million for the three months ended June 30, 2007 and 2008, respectively. Service revenue increased $1.0 million, or 7.4% from $12.4 million for the three months ended June 30, 2007 to $13.4 million for the three months ended June 30, 2008. Service revenue as a percent of total revenue increased 0.5% from 7.9% for the three months ended June 30, 2007 to 8.4% for the three months ended June 30, 2008. The overall increase in revenue is a result of the Company’s continued focus and increased traction in the Service sector.

Financing revenue consists of lease related transactions and includes the sale of leases that are properly securitized having met the sale criteria under FAS 140, the annuity streams of in-house leases and leases that are not securitized or have not met the sale criteria under FAS 140, and the sale of previously leased equipment. Financing revenue decreased $0.3 million, or 10.4% from $3.1 million for the three months ended June 30, 2007 to $2.8 million for the three months ended June 30, 2008; due to a decrease of $0.8 million in amortized interest income on lease that are not securitized or have not met the sale criteria under FAS 140 offset by increased sales of $0.5 million for lease residuals. Several leases that were expected to close in the three months ended June 30, 2008 were pushed into the third quarter of 2008.

Although we offer our customers access to products from hundreds of vendors, 61.6% of our total sales in the second quarter of 2008 were products from five vendors; Cisco was our top vendor in the second quarter of 2008 with sales of $31.4 million. Sales from these five vendors decreased by $2.4 million, or 2.4% for the three months ended June 30, 2008. As a percent of total sales the second quarter of 2008 top five vendors decreased 2.6 percentage points to 61.6% for the three months ended June 30, 2008 from 64.2% for the three months ended June 30, 2007. Hewlett Packard, which was a top five vendor for the three months ended June 30, 2007, was replaced by Dell in our list of top five vendors for the three months ended June 30, 2008. Our top five vendors may fluctuate between periods because of the timing of certain large contracts. Consistent with 2007, our strategic partners in 2008 are Sun Microsystems, Cisco, Microsoft, Hewlett Packard, Panasonic and Network Appliance.

Gross Margin

Total gross margin, consisting of product, service and financing revenue less their respective cost of sales, decreased $2.8 million, or 12.6%, from $22.2 million for the three months ended June 30, 2007 to $19.4 million for the three months ended June 30, 2008. As a percentage of total sales, gross margin decreased 2.0% from 14.2% for the three months ended June 30, 2007 to 12.2% for the three months ended June 30, 2008. The gross margin activity of each of the three product lines are discussed below.

Product gross margin decreased $2.0 million, or 12.5%, from $15.7 million for the three months ended June 30, 2007 to $13.7 million for the three months ended June 30, 2008. Product gross margin as a percentage of sales decreased 1.5 percentage points from 11.1% for the three months ended June 30, 2007 to 9.6% for the three months ended June 30, 2008. During the three months ended June 30, 2008, the Company was impacted by several large low margin deals and the Company believes this quarter to be an anomaly.

Service gross margin increased $0.4 million, or 11.8%, from $4.1 million for the three months ended June 30, 2007 to $4.5 million for the three months ended June 30, 2008. Service gross margin as a percentage of sales increased 1.3 percentage points to 34.0% for the three months ended June 30, 2008 from 32.7% for the three months ended June 30, 2007. The Company benefited from an increase in projects for the three months ended June 30, 2008 as compared to the three months ended June 30, 2007.

Financing gross margin decreased $1.3 million, or 53.2%, from $2.4 million for the three months ended June 30, 2007 to $1.1 million for the three months ended June 30, 2008 due to a decrease in amortized interest income from leases that did not meet the criteria for sale under FAS 140. Gross margin as a percentage of sales decreased 37.9 percentage points from 79.3% for the three months ended June 30, 2007 to 41.4% for the three months ended June 30, 2008, mainly due to decreased margin percentages in leases sold that were properly securitized.

Selling, General & Administrative Expenses (“SG&A”)

During the three months ended June 30, 2008, SG&A expenses decreased $2.5 million, or 9.9% from the same period in 2007. SG&A as a percentage of sales decreased to 14.3% in the second quarter of 2008 from 16.2% for the same period in 2007. The decrease in SG&A expenses was mainly due to lower personnel costs of $0.5 million related to lower incentive compensation costs and lower consulting costs of $1.1 million attributed to remediation efforts in 2007.

Interest and Other Income (Expense), Net

Interest and other income (expense), net, for the three months ended June 30, 2008 was interest income, net, of $0.5 million as compared to interest expense, net of $0.2 million for the same period in 2007. The improvement in interest income, net, was mainly due to lower interest expense of $0.5 million due to lower debt balances in 2008 and higher equity income in 2008. Equity income related to our equity investments in Eyak Technology, LLC increased $0.3 million in 2008 compared with prior year. The Company has focused efforts on cash management and continues to maintain a strong balance sheet which enabled the Company to have very minimal borrowings under the Credit Facility for the three months ended June 30, 2008.

Income Taxes

GTSI had losses of $2.9 million and $3.4 million before income taxes for the three months ended June 30, 2008 and 2007, respectively. For the three months ended June 30, 2008 and 2007, there was no tax benefit reported for the quarter to date book loss since it is management’s assessment under FASB Interpretation No. 18 (As Amended), Accounting for Income Taxes in Interim Periods (“FIN 18”), there is insufficient evidence to book the tax benefit of the loss in the quarter.

For the three months ended June 30, 2008, GTSI recorded less than $0.1 million in income tax expense related to an adjustment in a FIN 48 liability. For the three months ended June 30, 2007, GTSI recorded less than $0.3 million in income tax expense as a result of an increase in a FIN 48 liability and related accrued interest.

Since GTSI management believes that it is not more likely than not that the Company’s deferred tax assets will be realized, the Company continues to have a full valuation allowance against its net deferred tax assets and is not anticipating the release of this valuation allowance during the current year, except to the extent that deferred tax assets are utilized within the current year.

Six Months Ended June 30, 2008 Compared With the Six Months Ended June 30, 2007

Sales

Total sales decreased $1.3 million, or 0.4% from $303.3 million for the six months ended June 30, 2007 to $302.0 million for the six months ended June 30, 2008. The sales activity of each of the three product lines are discussed below.

Product revenue decreased $4.4 million, or 1.6%, from $275.1 million for the six months ended June 30, 2007 to $270.7 million for the six months ended June 30, 2008. The decrease in sales is consistent with the trends we experienced during 2007 where our continued focus was on a smaller number of higher margin sales and the Company’s decision to no longer pursue low margin orders, which led to a decline in total sales; however, the Company does not expect this to be as significant a decline as in years past.

Service revenue increased $2.7 million, or 11.6% from $22.6 million for the six months ended June 30, 2007 to $25.3 million for the six months ended June 30, 2008. We net revenues where we are not the primary obligor, we netted approximately $34.4 million and $44.7 million in revenue for the six months ended June 30, 2007 and 2008, respectively. Service revenue as a percent of total revenue increased 0.9% from 7.5% for the six months ended June 30, 2007 to 8.4% for the six months ended June 30, 2008. The overall increase in revenue is a result of the Company’s continued focus and increased traction in the Service sector.

Financing revenue increased $0.5 million, or 8.1% from $5.6 million for the six months ended June 30, 2007 to $6.1 million for the six months ended June 30, 2008; due to an increase of $1.0 million of leases sold that were properly securitized from $1.7 million for the six months ended June 30, 2007 to $2.7 million for the six months ended June 30, 2008.

Sales from our top five vendors increased $6.1 million for the first six months of 2008 as compared to the same period in 2007, despite our decrease in total sales for the period, which is consistent with our ongoing efforts to strengthen our relationships with key vendors. As a percentage of total sales, the top five vendors increased 2.3 percentage points from 56.2% for the year ended June 30, 2007 to 58.5% for the year ended June 30, 2008. Sales from Cisco, Sun Microsystems, and Dell increased $9.3 million, $2.2 million, and $16.6 million, respectively, for the six months ended June 30, 2008 as compared to the same period in 2007. These increases were offset by decreased sales from Microsoft and Panasonic of $0.8 million and $21.3 million, respectively.

Gross Margin

Total gross margin decreased $1.6 million, or 3.7%, from $42.4 million for the six months ended June 30, 2007 to $40.8 million for the six months ended June 30, 2008. As a percentage of total sales, gross margin decreased 0.5 percentage points from 14.0% for the six months ended June 30, 2007 to 13.5% for the six months ended June 30, 2008.

Product gross margin decreased $3.5 million, or 11.7%, from $30.0 million for the six months ended June 30, 2007 to $26.5 million for the six months ended June 30, 2008. Product gross margin as a percentage of sales decreased 1.1 % from 10.9% for the six months ended June 30, 2007 to 9.8% for the six months ended June 30, 2008, primarily due to low margin deals in the three months ended June 30, 2008.

Service gross margin increased $2.5 million, or 30.6%, from $8.2 million for the six months ended June 30, 2007 to $10.7 million for the six months ended June 30, 2008. Service gross margin as a percentage of sales increased 6.2% to 42.5% for the six months ended June 30, 2008 from 36.3% for the six months ended June 30, 2007. This is a continued trend as the Company continues to focus on growing services.

Financing gross margin decreased $0.6 million, or 13.4%, from $4.2 million for the six months ended June 30, 2007 to $3.6 million for the six months ended June 30, 2008 due to decreased amortized interest income from leases that did not meet the criteria for sale under FAS 140. Gross margin as a percentage of sales decreased 14.8% from 74.2% for the six months ended June 30, 2007 to 59.4% for the six months ended June 30, 2008, mainly due to decreased margin percentages in leases sold that were properly securitized.

Selling, General & Administrative Expenses (“SG&A”)

During the six months ended June 30, 2008, SG&A expenses decreased $2.8 million, or 5.5% from the same period in 2007. SG&A as a percentage of sales decreased to 16.1% in the first six months of 2008 from 17.0% for the same period in 2007. The decrease in SG&A expenses was mainly due to lower consulting costs of $1.8 million attributed to remediation efforts in 2007 and lower incentive related costs of $0.4 million.

Interest and Other Income (Expense), Net

Interest and other income (expense), net, for the six months ended June 30, 2008 was interest expense, net of $0.1 million as compared to $1.2 million for the same period in 2007. The decrease in interest expense, net, was mainly due to lower interest expense of $1.1 million due to lower debt balances in 2008 and higher equity income in 2008. Equity income related to our equity investments in Eyak Technology, LLC increased $0.5 million in 2008 compared with prior year. The decrease in interest expense was partially offset by $0.3 million of costs related to the pay-off of the Term Loan in February 2008.

Income Taxes

GTSI had losses of $8.0 million and $10.3 million before income taxes for the first six months of 2008 and 2007, respectively. For the first six months of 2008 and 2007, there was no tax benefit reported for the year to date book loss since it is management’s assessment under FASB Interpretation No. 18 (As Amended), Accounting for Income Taxes in Interim Periods (“FIN 18”), there is insufficient evidence to book the tax benefit of the loss in the first six months.

For the six months ended June 30, 2008, GTSI recorded less than $0.1 million in income tax benefit as a result of a reduction in a FIN 48 liability and related accrued interest. For the six months ended June 30, 2007, GTSI recorded less than $0.3 million in income tax expense as a result of an increase in a FIN 48 liability and related accrued interest.

Seasonal Fluctuations

Historically over 90% of our annual sales have been earned from departments and agencies of the U.S. Federal Government, either directly or indirectly through system integrators to which GTSI is a sub-contractor. We have historically experienced, and expect to continue to experience, significant seasonal fluctuations in our operations as a result of government buying and funding patterns, which also affect the buying patterns of GTSI’s prime contractor customers. These buying and funding patterns historically have had a significant positive effect on our bookings in the third quarter ended September 30 each year (the Federal government’s fiscal year end), and consequently on sales and net income in the third and fourth quarters of each year. Conversely, sales during the first quarter of our fiscal year have traditionally been the weakest for GTSI, consisting of less than 20% of our annual sales. Our SG&A expenses are more level throughout the year, although our sales commissions programs generally result in marginally increased expenses in the fourth quarter of our fiscal year.

Quarterly financial results are also affected by the timing of contract awards and the receipt of products by our customers. The seasonality of our business, and the unpredictability of the factors affecting such seasonality, makes GTSI’s quarterly and annual financial results difficult to predict and subject to significant fluctuation.

Liquidity and Capital Resources

Cash flows for the six months ended June 30,


							Increase
(in millions)	2008			2007			(Decrease)

Cash provided by operating activities	$	28.3		$	35.0		$	(6.7	)

Cash used in investing activities	$	(1.2	)	$	(1.1	)	$	0.1
Cash used in financing activities	$	(27.9	)	$	(30.7	)	$	(2.8	)

During the six months ended June 30, 2008, our cash balance decreased $0.8 million from our December 31, 2007 balance.

Cash provided by operating activities for the six months ended June 30, 2008 was $28.3 million, a decrease of $6.7 million compared to the same period last year. GTSI’s current assets excluding cash decreased $20.8 million as of June 30, 2008 when compared to our December 31, 2007 balance. This decrease is due to decreased accounts receivable of $17.5 million and inventory of $8.8 million as of June 30, 2008, offset by an increase in other current assets of $2.0 million.

Cash used in investing activities for the six months ended June 30, 2008 was $1.2 million, an increase of $0.1 million as compared with the same period in 2007.

Cash used in financing activities for the six months ended June 30, 2008 was $27.9 million, a decrease of $2.8 million as compared with the same period in 2007. The reduction was predominantly due to $12.9 million decrease in net repayments under the Credit Facility, offset by the $10.0 million pay-off of the Term Loan.

Credit Facility and Term Loan

During 2006, we obtained a $135 million credit agreement with a group of lenders (the “Credit Facility”).

The Credit Facility provides access to capital through June 2, 2010 with borrowings secured by substantially all of the assets of the Company. Borrowing under the Credit Facility at any time is limited to the lesser of $135 million or a collateral-based borrowing base less outstanding obligations. The Credit Facility subjects GTSI to certain covenants limiting its ability to (i) incur debt; (ii) make guarantees; (iii) make dividends and other restricted payments, purchases or investments; (iv) enter into certain transactions with affiliates; (v) acquire real estate and (vii) enter into sale and leaseback transactions. The Credit Facility carries an interest rate generally indexed to the prime rate plus 0.25% plus margin. As of June 30, 2008 we had available credit under the Credit Facility of $39.9 million.

At December 31, 2007, the Company had a subordinated secured long-term loan of $10 million (the “Term Loan”). The debt covenants and maturity date on the Term Loan are the same as the Credit Facility. On February 25, 2008, the Company terminated the Term Loan of $10 million, by making a payment of $10.2 million. The pay-off consisted of $10 million principal, $0.1 million interest and $0.1 million early termination fee.

Liquidity

Our working capital as of June 30, 2008 decreased approximately $13.9 million from our working capital at December 31, 2007. GTSI’s current assets decreased $21.7 million as of June 30, 2008 when compared to our December 31, 2007 balance. This decrease is due to decreased accounts receivable of $17.5 million, inventory of $8.8 million and decreased cash of $0.8 million offset by increases in other current assets of $2.0 million. Current liabilities decreased $7.8 million from December 31, 2007 due to decreased borrowings under the Credit Facility of $18.0 million and accrued liabilities of $4.3 million offset by an increase in accounts payable of $14.5 million.

As the Company continues to improve its credit worthiness, we are no longer required to extend letters of credit with our vendors as collateral for lines of credit. As of June 30, 2008, we no longer had outstanding letters of credit extended to our vendors, which has increased our availability within our Credit Facility. The Company continues to secure increased vendor lines of credit to manage purchasing and maintain a higher level of liquidity which has also increased our availability within the Credit Facility. As of June 30, 2008, the balance outstanding under these vendor lines of credit was $46.9 million with additional availability of $106.3 million.

The Company has historically reissued shares from treasury stock or registered shares from authorized common stock to satisfy stock option exercises, restricted stock grants, and employee stock purchases. No shares of common stock were purchased during the six months ended June 30, 2007 for treasury stock. Through net share settlements, the Company acquired 23,358 shares during the six months ended June 30, 2008 at a cost of $9.06. Although $5.1 million remains authorized by our Board of Directors for share repurchases, the terms of our Credit Agreement, excluding net share settlements, restrict us from purchasing our stock until 2010.

Capital Requirements

Our ongoing capital requirements depend on a variety of factors, including the extent to which we are able to fund the cash needs of our business from operations. GTSI recorded a net loss of $8.0 million for the six months ended June 30, 2008. Despite this fact, we were able to maintain positive cash flow from operations due to our collection efforts during the first six months.

New Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement, (“SFAS 157”), which establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position No. 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, which indicates that this statement does not apply under FASB Statement No. 13 and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under Statement No. 13. In February 2008, the FASB issued FASB Staff Position No 157-2, Effective Date of FASB Statement No. 157(“FSP 157-2”), which delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis, to fiscal years beginning after November 15, 2008. Early application is encouraged. On January 1, 2008, the Company elected to implement SFAS 157, with the one-year deferral permitted by FSP 157-2. The adoption of SFAS 157 had no impact on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, SFAS No. 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact of SFAS 160 on its financial position and results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133 (“SFAS 161”). This statement amends and expands the disclosure requirements for derivative instruments and for hedging activities. SFAS 161 is effective for interim periods beginning after November 15, 2008 and is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60 (“SFAS 163”). This statement clarifies recognition and measurement of claim liabilities for financial guarantee contracts and expands the disclosure requirements for these contracts. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

SEC Comment Letter

On May 2, 2008, we received a comment letter from the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the “Staff”), regarding our Form 10-K for the year ended December 31, 2007. The SEC comments included questions regarding: (i) revenue recognition related to maintenance; (ii) revenue recognition related to software products and software related offerings; (iii) reclassifications and adjustments (iv) related party transactions related to Rule 3-09 of Regulation S-X and (v) Non-GAAP financial measures in Form 8-K.

On May 16, 2008, we filed our response. On June 20, 2008, we received a letter from the Staff with follow-up comments and, on July 7, 2008, we filed our response. On July 23, 2008, we received another letter from the Staff with four follow-up questions for which we are currently responding. While we do not believe that there are any material open items, since this matter has not been resolved with the Staff we have no assurance that no material open item exists.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

GTSI had a $135 million Credit Facility indexed at the Prime Rate plus 0.25% plus margin as of June 30, 2008. GTSI’s Term Loan of $10 million indexed at Prime plus 5.25% was paid-off in full on February 25, 2008. The Credit Facility exposes us to market risk from changes in interest rates. For purposes of specific risk analysis, we use sensitivity analysis to determine the effects that market risk exposures may have.

Our results of operations are affected by changes in interest rates due to the impact those changes have on borrowings under our credit facilities. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, which would require more cash to service our indebtedness. The effect of a 5% increase in interest rates would have resulted in no additional interest expense during the three months ended June 30, 2008 because the borrowings under the Credit Facility were very minimal throughout the quarter. We have not used derivative instruments to alter the interest rate characteristics of our borrowings. At June 30, 2008 we had no outstanding variable rate debt subject to interest.

Included in our long-term debt are amounts related to lease transactions. We have reported these amounts as long-term financed lease debt. These amounts will amortize over the period of the lease instruments with no cash affect to the Company. The balances of these liabilities were $5.6 million and $9.1 million at June 30, 2008 and December 31, 2007, respectively. A change in interest rates would result in no additional interest expense related to financed lease debt.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In our original Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2008. Subsequent to the restatement as discussed in Note 2 to the unaudited condensed consolidated financial statements, an evaluation was carried out under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as of June 30, 2008. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of June 30, 2008, because of the material weaknesses described below. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

In May 2008, our GTSI Enterprise Management System was upgraded to a new version. Although management had a documented implementation plan in place and contracted with a third party to test the data migration and the overall company transition plan, a logic error in a standardized report used to record a closing journal entry went undetected during the upgrade process. When the error was discovered during September 2008, an internal review was commenced. Through this review, management determined that a change was made to a standardized report using the database that was not supported by the implementation plan. Due to this logic error, $2.1 million of costs were expensed as cost of sales when these costs should have been deferred at June 30, 2008. A control deficiency in the data validation process of the implementation plan also caused this error to go undetected as of the end of the second quarter.

During the review, the Company discovered that a report used in connection with a financial statement close key control process contained an error. The underlying key control is a review of gross margins by order for the quarter. This gross margin review should have detected the logic error noted above. The primary report used in this key control was modified during June 2008 and was revised using the same incorrect logic noted above therefore the amounts included in the costs of sales were left off the primary report used to perform the gross margin key control review. This was a control deficiency in the key control change management process. Additionally, the Company determined that the design of the gross margin key control was not effective since the gross margin report did not contain totals to support that the report contained all of the Company’s reported gross margins.

As a result, management identified the following material weaknesses as of June 30, 2008 in change management:

	•		We did not maintain effective controls over changes in our information technology systems’ operational and financial applications. Specifically, we lacked adequate controls over changes to logic in a reporting database relative to deferred cost of sales for unbilled transactions where revenue recognition criteria has not been met. Changes to the logic in the reporting database did not follow the approved change management process and lacked adequate user testing.
	•		Further, an effective business performance review of gross margin was not designed and/or in operation to detect incomplete data relative to deferred cost of sales for unbilled transactions where revenue recognition criteria has not been met.

These control deficiencies resulted in the restatement of the Company’s consolidated financial statements for the three and six months ended June 30, 2008. Accordingly, our management has determined that these control deficiencies constitute material weaknesses as of June 30, 2008. The control failures that caused the error are in the process of being remediated. Management believes that the material weakness related to the logic in the reporting database has been remediated as of the filing date of this document. Management expects that the material weakness related to the business performance review of the gross margin analysis will be remediated prior to the filing of the September 30, 2008 Form 10-Q.

Changes in Internal Control over Financial Reporting

Based on the changes to the Change Management Process and the material weaknesses, discussed above, the Chief Executive Officer and the Chief Financial Officer concluded that there were changes in our internal control over financing reporting that occurred during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

In addition to the other information set forth in this Form 10-Q/A and our 2007 Form 10-K, you should carefully consider the risk factors associated with our business discussed under the heading “Risk Factors” in Part I, Item 1A of our 2007 Form 10-K. There has been no material changes to the risk factors discussed in our 2007 Form 10-K. The risks discussed in our 2007 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, financial condition and/or results of operations in the future.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Items to a Vote of Security Holders

(a)

The Company held its annual meeting of stockholders on April 24, 2008.

(b)

Set forth below are the matters that were presented to and voted upon by the Company’s stockholders, and the results of such stockholders’ votes.

Election of Directors


Nominees	Votes For		Votes Withheld
James J. Leto		8,328,611		99,104
Lee Johnson		7,796,477		631,238
Thomas L. Hewitt		8,246,524		181,191
Lloyd Griffths		8,345,023		82,692

Approval of Amendments to 1991 Employee Stock Purchase Plan


Votes For	Votes Against	Abstained
5,208,789	2,183,943	435

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits set forth in the Exhibit Index are filed as part of this Quarterly Report on Form 10-Q/A.

EXHIBIT INDEX


Exhibit
Number		Description

	10.1	Credit Agreement dated as of June 2, 2006 between GTSI Corp., SunTrust Bank and Bank of America (1)

	10.2	First Amendment to Credit Agreement dated as of July 13, 2006 between GTSI Corp., SunTrust Bank and Bank of America (2)

	10.3	Second Amendment to Credit Agreement dated as of November 30, 2006 between GTSI Corp., the Lenders, the other Borrower Parties, and SunTrust Bank (3)

	10.4	Third Amendment to Credit Agreement dated as of March 30, 2007 between GTSI Corp., the Lenders, the other Borrower Parties, and SunTrust Bank (4)

	10.5	2008 Short Term Incentive Plan Description (5)

	31.1	Section 302 Certification of Chief Executive Officer (filed herewith)

	31.2	Section 302 Certification of Chief Financial Officer (filed herewith)

	32	Section 906 Certification of Chief Executive Officer and Chief Financial Officer (filed herewith)


(1)		Incorporated by reference to the Registrant’s current report on Form 8-K dated June 2, 2006.

(2)		Incorporated by reference to the Registrant’s current report on Form 8-K dated July 13, 2006.

(3)		Incorporated by reference to the Registrant’s current report on Form 8-K dated December 5, 2006.

(4)		Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.

(5)		Incorporated by reference to the Registrant’s current report on Form 8-K dated April 23, 2008.


	Page

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements —

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2008 (as restated) and December 31, 2007		2

Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2008 (as restated) and 2007		3

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 (as restated) and 2007		4

Notes to Unaudited Condensed Consolidated Financial Statements (as restated)		5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (as restated)		15

Item 3. Quantitative and Qualitative Disclosures About Market Risk		25

Item 4. Controls and Procedures		25

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		27

Item 1A. Risk Factors		27

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		27

Item 3. Defaults Upon Senior Securities		27

Item 4. Submission of Matters to a Vote of Security Holders		27

Item 5. Other Information		27

Item 6. Exhibits		27

SIGNATURES		28

Exhibit 31.1
Exhibit 31.2
Exhibit 32


	GTSI Corp.
Date: September 19, 2008	/s/ JAMES J. LETO
	James J. Leto
	Chief Executive Officer

Date: September 19, 2008	/s/ PETER WHITFIELD
	Peter Whitfield
	Interim Chief Financial Officer


/s/ JAMES J. LETO
James J. Leto
Chief Executive Officer

/s/ PETER WHITFIELD
Peter Whitfield
Interim Chief Financial Officer

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