TSS, Inc.

Condensed Consolidated Balance Sheets

(in thousands except par values)

Unaudited Consolidated Statements of Operations

(in thousands, except per-share amounts)

Unaudited Condensed Consolidated Statements of Changes in Stockholders’** Equity**

(in thousands)

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

Notes to Condensed Consolidated Statements

(unaudited)

Note 1–** Significant Accounting Policies**

Description of Business

TSS, Inc. ("TSS”, the "Company”, "we”, "us” or "our”) provides a comprehensive suite of services for the integration of complex AI technologies, planning, design, deployment, maintenance and refresh of end-user and enterprise systems, including the mission-critical facilities in which they are housed. We provide a single source solution for enabling technologies in data centers, operations centers, network facilities, server rooms, security operations centers, communications facilities and the infrastructure systems that are critical to their function. Our services consist of technology consulting, design and engineering, project management, systems integration, systems installation, facilities management and IT procurement services. Beginning in 2024, our systems integration services have been enhanced to include integration of Artificial Intelligence (AI) enabled data center server racks. TSS was incorporated in Delaware in December 2004. In the second quarter of 2025 we relocated our corporate offices and primary integration facility from Round Rock, Texas to Georgetown, Texas and continued to operate a second integration facility at our former corporate office in Round Rock, Texas during the third quarter of 2025.

The preparation of the condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("U. S. GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates which are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form a basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates are reasonable and that the actual results will not vary significantly from the estimated amounts.

Basis of Presentation

The accompanying condensed consolidated balance sheet as of December 31, 2024, which has been derived from audited consolidated financial statements, and the unaudited interim condensed 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 condensed consolidated financial statements contain all adjustments (consisting only of normal recurring items) necessary to present fairly the consolidated financial position of the Company and its consolidated results of operations, changes in stockholders’ equity and cash flows. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Certain prior year amounts have been reclassified to conform to the current presentation. The reclassifications are: (i) on our statements of operations, we now present revenues from each individual segment whereas the prior year revenues were all presented on a single line item; (ii) on our statements of operations, we now present interest expense and interest income separately whereas we presented a single amount “interest expense, net” in the prior year presentation and (iii) we recast the segment disclosures to present our procurement services as a separate segment consistent with the current year presentation whereas those results were aggregated into the systems integration segment in the prior year presentation. These reclassifications had no net effect on our reported results of operations, financial position or cash flows.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, including money market accounts, and debt.

Based primarily on the short-term nature of cash and cash equivalents, we estimate that their carrying amount approximates their fair value at September 30, 2025 and December 31, 2024. We consider the fair value of our cash and cash equivalents, including money market accounts, to be measured using Level 1 inputs.

As it does not have a quoted market price and its term extends beyond a year, requiring more judgment, we consider our debt balance to be measured using Level 2 inputs. As the debt bears a floating interest rate that is adjusted frequently in line with movements in prevailing interest rates that would be used to discount any future cash flows, we estimate that its carrying value approximates its fair value.

Accounting for Business Combinations

We allocate the purchase price of an acquired business to its identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed, if any, is recorded as goodwill.

We use all available information to estimate fair values. We typically engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets such as customer contracts, leases, and any other significant assets or liabilities and contingent consideration. Preliminary purchase price allocation is adjusted, as necessary, up to one year after the acquisition closing date if management obtains more information regarding asset valuations and liabilities assumed.

Revenue Recognition

We recognize revenues when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations based on relative stand-alone selling prices.

Maintenance services

We generate maintenance services revenues from fees that provide our customers with as-needed maintenance and repair services on modular data centers during the contract term. Our contract terms typically are one year in duration, are billed annually in advance, and are non-cancelable. As a result, we record deferred revenue (a contract liability) and recognize revenue from these services ratably 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 expenses has been insignificant.

Integration services

We generate integration services revenues by providing our customers with customized systems 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.

Pursuant to a multi-year agreement signed in 2024, we also recognize revenue monthly at contractually based amounts for certain billable fixed and facility costs and trained staffing levels to support the weekly quantity of AI-enabled racks, with staffing fees reduced for any under-staffing. The fee for staffing is based on defined services as transferred to the customer and is not variable consideration because the customer’s usage is known weekly and is not contingent on the occurrence of any future events or subject to any estimation.

We typically extend credit terms to our integration customers based on their creditworthiness and generally do not receive advance payments. As such, we record accounts receivable at the time of shipment, when our right to consideration becomes unconditional. Accounts receivable from our integration customers are typically due within 30-105 days of invoicing. An allowance for credit losses 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’ creditworthiness. As of September 30, 2025, we had no allowance for credit losses and $7,000 recorded as of December 31, 2024.

Equipment and Material sales

We generate revenues under fixed price contracts from the sale of data center and related ancillary equipment or materials 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 and when we have completed our contractual obligations. Typically, we do not receive advance payments for equipment or material sales; however, if we do, we record the advance payment as deferred revenues. Normally we record accounts receivable at the time of shipment, when our right to the consideration has become unconditional. Accounts receivable from our equipment and material sales are typically due within 30-45 days of invoicing.

Deployment and Other services

We generate revenues from fees we charge our customers for other services, including repairs or other services not covered under maintenance contracts; installation and servicing of equipment, including modular data centers; and other fixed-price services including repair, design and project management services, or the moving of equipment to a different location. In some cases, we arrange for a third party to perform “break-fix” and servicing of equipment upon customer request, and in these instances, we recognize revenue as the amount of any fees or commissions to which we expect to be entitled. 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.

Procurement services

We generate revenues from fees we charge our customers to procure third-party hardware, software and professional services on their behalf, some of which are then used in our integration services as we integrate these components to deliver a completed system to our customer. We recognize our procurement services revenues upon completion of the procurement activity. For any procurement activities in which we transform the product, the revenues recognized on these transactions are the gross sales amount of the transaction, and we recognize offsetting costs of revenues for any costs we incur to procure the related goods (“gross deals”). In some cases, we arrange for the purchase of third-party hardware, software or professional services that are to be provided directly to our customers by another party, we have no control of the goods before they are transferred to the customer, and we do not transform the product in any way. In these instances, we are acting as an agent in the transaction and recognize revenue on a net basis, recording only the amount of any fee or commissions to which we expect to be entitled after paying the other party for the goods or services provided to the customer (“net deals”). Accounts receivable from our procurement activities are typically due within 80 days of invoicing. The majority of the procurement activities generally involve us transforming the product, and as such most of these transactions are recorded gross. To accelerate the time in which we receive payment, we generally factor the procurement services receivables utilizing a program that we estimate has an effective annualized interest rate below the rate at which we could borrow funds. Regardless of whether the transaction is recorded as a gross deal or a net deal, the interest we are charged through the factoring program is based on the gross value of each transaction.

Revenue* by source*

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

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 after 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 been transferred to the customer.

Deferred Revenue

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, 2025, deferred revenue of $12,063,000 includes:

Contract liabilities consisting of deferred revenues were $3,384,000 on December 31, 2024, and $3,370,000 on December 31, 2023. Substantially all of the recorded deferred revenues at December 31, 2024 and December 31, 2023 had been earned and recorded as revenues in the nine-month periods ended September 30, 2025 and September 30, 2024, respectively.

Concentration of Credit Risk

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

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

No other customer represented more than 10% of our revenues for any period presented. Our US-based IT OEM customer represented 99% of our accounts receivable at September 30, 2025 and 98% at December 31, 2024. No other customer represented more than 10% of our accounts receivable at either date.

Non-recourse factoring

We have entered into a factoring agreement with a financial institution to sell certain of our accounts receivable from a US-based IT OEM customer under a non-recourse agreement. Due to the extended payment terms from that customer, we use this factoring arrangement as the effective interest rate implicit in this arrangement is less than the rate at which we could borrow the funds to carry those receivables through their due date. Under the arrangement, we sell certain trade receivables on a non-recourse basis and account for the transaction as a sale of the receivable. The financial institution assumes the full risk of collection, without recourse to the Company in the event of a loss. Debtors are directed to send payments directly to the financial institution. The applicable receivables are removed from our consolidated balance sheet when we receive the cash proceeds. We do not service any factored accounts after the factoring has occurred. We utilize this factoring arrangement as part of our financing for working capital. The table below presents information relevant to this factoring program (in $’000’s):

Financing fees were recorded as interest expense in our consolidated statements of operations or in deferred costs if the interest related to projects for which revenue has not yet been recognized. The total amounts factored exceed our total recorded revenues, as the factoring fees apply to the gross value of receivables collected through the program, while we record only our agent fee on procurement contracts as revenue for any procurement activity that is shipped directly from third parties to the end customer.

Stock-Based Compensation

Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, net of estimated forfeitures. For awards with performance-based vesting criteria, we recognize expense only once it is deemed probable that the performance criteria will be met. We award shares of restricted stock and stock options to employees, managers, executive officers, and directors for both incentive and retention purposes.

During the three-month and nine-month periods ended September 30, 2025, we incurred approximately $1.0 million and $2.9 million, respectively, of non-cash stock-based compensation expense. In the comparable three-month and nine-month prior year periods ended September 30, 2024, we incurred approximately $0.3 million and $0.6 million, respectively, of non-cash stock-based compensation expense. In each period, the expense was included in selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations*.*

Cash, cash equivalents, and restricted cash

Cash and cash equivalents are comprised of cash in banks and highly liquid instruments with original maturities of three months or less, primarily consisting of bank time deposits. We had unrestricted cash of $70.7 million and $18.2 million, almost all of which was beyond FDIC insured limits on September 30, 2025 and December 31, 2024, respectively. At each of those dates, we additionally had $5.0 million of restricted cash in a money market account held by our bank as collateral for our outstanding bank debt, which also exceeded FDIC insured limits. Under the terms of the loan agreement, we can at any point request that the bank apply the deposit as a reduction of loan principal. This balance is presented separately on our balance sheet at September 30, 2025 and was classified with cash and cash equivalents at December 31, 2024.

Contract and Other Receivables

Accounts receivables are recorded at the invoiced amount and may bear interest in the event of late payment under certain contracts.

Allowance for Credit Losses

We estimate an allowance for credit losses based on estimated credit losses, based on factors related to the specific credit risk of each customer. Historically our credit losses have been minimal. We perform credit evaluations of new customers and may require prepayments or the use of bank instruments such as trade letters of credit to mitigate credit risk. We monitor outstanding amounts to limit our credit exposure to individual accounts. We continue to pursue collection even if we have fully provided for an account balance.

The following table summarizes the changes in our allowance for credit losses (in ’000):

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method for purchased inventories other than inventory bearing serial numbers which are tracked using specific identification. We write down obsolete inventory or inventory quantities more than our estimated usage to its estimated realizable value less costs to sell, if less than its cost. Inherent in our estimates of net realizable value in determining inventory valuation are estimates related to future demand and technological obsolescence of our products. Any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventories and our results of operations and financial position could be materially affected.

Property and Equipment

Property and equipment are recorded at cost, including interest incurred during the construction phase of assets financed at least partly with debt. We provide for depreciation using the straight-line method over the estimated useful lives of the assets. Additions and major replacements or improvements are capitalized, while minor replacements and maintenance costs are charged to expense as incurred. Depreciation expense directly related to our revenue producing activities is recorded as a component of cost of revenues in our consolidated statements of operations; the remainder is included in operating expenses. The cost and accumulated depreciation of assets sold or retired are removed from the accounts and any gain or loss is included in the results of operations for the period of the transaction.

Goodwill and Intangible Assets

We have recorded goodwill and intangible assets with definite lives, including customer relationships and acquired software, in conjunction with the acquisition of various businesses. These intangible assets are amortized based on their estimated economic lives. Goodwill represents the excess of the purchase price over the fair value of net identified tangible and intangible assets acquired and liabilities assumed, and it is not amortized. The recorded goodwill is allocated to the reporting unit to which the underlying transaction relates.

U. S. GAAP requires us to perform an impairment test of goodwill on an annual basis or whenever events or circumstances make it more likely than not that impairment of goodwill may have occurred. As part of the annual impairment test, we review for indicators of impairment as “Step Zero” of the annual impairment test as defined by U.S. GAAP and if any exist, we compare the fair value of the reporting unit with its carrying amount. If that fair value exceeds the carrying amount, no impairment charge is required to be recorded. If the carrying value exceeds the reporting unit’s fair value, we would recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit. If necessary, the fair value of a reporting unit will be determined using a discounted cash flow analysis, which requires the use of estimates and assumptions. Significant assumptions that may be required include forecasted operating results and the determination of an appropriate discount rate. Actual results may differ from forecasted results, which may have a material impact on the conclusions reached.

We also review intangible assets with definite lives for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset, a loss is recognized for the difference between the fair value and carrying value of the intangible asset.

We have elected to use December 31 as our annual assessment date. As circumstances change that could affect the recoverability of the carrying amount of the assets during an interim period, we will evaluate our indefinite lived intangible assets for impairment. At our most recent annual assessment date of December 31, 2024, we identified no such indicators of impairment and determined there was no impairment at that date. In the quarter ended September 30, 2025, we considered relevant matters including macroeconomic and other conditions on our operations and noted no material triggering events or circumstances that occurred during that period that would indicate the carrying value of our goodwill or other long-lived intangible assets was impaired. On September 30, 2025 and December 31, 2024, the carrying value of goodwill was $0.8 million.

Income Taxes

Deferred income taxes are provided for the temporary differences between the financial reporting and tax basis of the Company’s assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The U.S. net operating losses generated prior to 2018 and not utilized can be carried forward for 20 years to offset future taxable income. A full valuation allowance has been recorded against our net deferred tax assets, because we have concluded that under relevant accounting standards it is more likely than not that deferred tax assets will not be realizable. We re-evaluate this assessment quarterly and if we determine, after weighing all positive and all negative evidence available at that time, that it is more likely than not that the deferred tax asset will be realizable, we will remove the valuation allowance at that point in time. As a percentage of our pre-tax earnings, the income tax expense presented on our statement of operations is substantially less than one might normally expect to see, as we are able to utilize our deferred tax asset to offset any current federal income taxes due, and reduce the valuation allowance by an equal amount of the deferred tax asset utilized. The income tax expense recognized represents state income taxes for which we do not have deferred tax assets to offset. We recognize any interest and penalty expense associated with uncertain tax positions as a component of income tax expense in the consolidated statements of operations.

Earnings Per-Common Share

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

Treasury Stock

We account for treasury shares using the cost method. Purchases of shares of common stock are recorded at cost and result in a reduction of stockholders’ equity. We hold repurchased shares in treasury for general corporate purposes, including issuances under various employee compensation plans and from time to time may retire all or a portion of the treasury shares, reducing the issued and treasury share counts. When treasury shares are issued, we use a weighted average cost method. Purchase costs in excess of reissue price are treated as a reduction of retained earnings. Reissue price more than purchase costs is treated as additional paid-in-capital.

Commitments and Contingencies

In the ordinary course of business, the Company may be subject to claims, lawsuits, and proceedings. Management evaluates such matters based on available information and, when necessary, records an accrual for estimated losses. As of September 30, 2025, the Company determined that there were no matters requiring accrual or disclosure as a commitment or contingency under the applicable accounting guidance.

Recently Adopted Accounting Guidance

In November 2023, FASB issued Accounting Standards Update ASU No. 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.("ASU 2023-07”). ASU 2023-07 improves reportable segment disclosure requirements for public business entities primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision-maker and included within each reported measure of segment profit (referred to as the "significant expense principle”). We adopted this guidance effective for the annual period ended December 31, 2024. It did not have a material impact on our financial results of operations or financial position, other than the enhanced disclosures. At the same time as adopting this guidance, we also re-assessed our segmentation and determined we now have three reportable segments whereas we have historically had two reportable segments. In interim periods after December 31, 2024, the new guidance is now applied retrospectively for all prior periods presented in the financial statements, and prior period segment results are recast to conform to the current year presentation.

Recently Issued Accounting Pronouncements

In December 2023, FASB issued ASU No. 2023-09,Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, this ASU requires certain disclosures of state versus federal income tax expense and taxes paid. This ASU is effective for our Annual Report on Form 10-K for the year ending December 31, 2025, with early adoption permitted. We do not expect the adoption of ASU 2023-09 to have a material impact on our financial statements.

In November 2024, FASB issued ASU 2024-03,Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), which will require that entities provide more granular footnote disclosures of the details contained in certain captions on the company’s income statement, such as “Selling, General and Administrative” expenses. This new guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. We have not yet determined all the effects that adoption of this new guidance will have on our statement of operations and related footnote disclosures. We do not expect its adoption to affect our net operating results or financial position.

In July 2025, FASB issued ASU 2025-05,*Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets,*which provides public companies with a practical expedient in developing reasonable and supportable forecasts as part of estimating expected credit losses. All entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. Early adoption is permitted. The amendment is effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Accordingly, it will first be applicable for our three-month period ending March 31, 2026. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

In July 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. This legislation includes changes to the United States federal tax law, which may be subject to further clarification and the issuance of interpretive guidance. We are currently evaluating the impact of the legislation on our consolidated financial statements.

Note 2–** Supplemental Balance Sheet Information**

Receivables

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

Contract and other receivables, net were $3,527,000 as of December 31, 2023.

Inventories

We state inventories at the lower of cost or net realizable value (in ‘000’s) as follows:

Goodwill and Intangible Assets

Goodwill and Intangible Assets consisted of the following (in ‘000’s):

Goodwill is attributable to the following reportable segments (in ‘000’s):

We recognized no amortization expense related to intangible assets in the three-month or nine-month periods ended September 30, 2025 or in the comparable periods of 2024 as all long-lived intangible assets subject to amortization were fully amortized.

Property and Equipment

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

Depreciation of property and equipment and amortization of leasehold improvements and software totaled $1,355,000 and $208,000 for the three-month periods ended September 30, 2025 and 2024, respectively. Depreciation of property and equipment and amortization of leasehold improvements and software totaled $2,409,000 and $397,000 for the nine-month periods ended September 30, 2025 and 2024, respectively.

The following table presents interest capitalized as property and equipment, as the related debt was used to finance a portion of the capital expenditures (in $000’s):

Other Assets

Other assets, non-current is comprised of the following amounts (in $000’s):

Accounts Payable and Accrued Expenses

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

Long-Term Debt

Long-term debt, non-current consisted of the following (in ’000’s):

Amortization of deferred debt issuance costs began in the quarter ended June 30, 2025 once construction was substantially complete. We amortized $32,000 of the deferred financing costs to interest expense during the quarter ended September 30, 2025, with no such amortization in the prior year period. As of September 30, 2025 the effective interest rate on the Company's long-term debt was 7.01%

Note 3 - Long-Term Debt

In May 2024, we renewed our revolving line of credit (the “revolving line of credit”) with Susser Bank (“Lender”) pursuant to a Business Loan Agreement (Asset Based) effective May 5, 2024. The obligations under the revolving line of credit were secured by substantially all of our accounts receivable. Our wholly owned subsidiaries jointly and severally guaranteed our obligations under the revolving line of credit. We terminated the revolving line of credit on December 31, 2024 when we entered into a new credit agreement with Susser Bank described below. There were no borrowings outstanding on the revolving credit facility at any point during the periods presented.

On December 31, 2024, we entered into a new Credit Agreement (the “Credit Agreement”) with Susser Bank to fund improvements at the Georgetown, Texas location we leased on December 2, 2024 to which we have now moved our headquarters and the majority of our operations. The Credit Agreement provides for a $20.0 million term loan facility, and the option for additional incremental term loans of up to $5.0 million (the “accordion feature”), pending Lender approval. Upon closing on December 31, 2024, we borrowed $8.7 million, with $5.0 million of that amount deposited in a required interest-bearing cash collateral account, $3.4 million reimbursed to us for capital expenditures previously funded with our operating cash, and $0.3 million funding loan closing costs. In the three-month period ended June 30, 2025, we borrowed the remaining $11.3 million of available funds, bringing the total amount borrowed to $20.0 million. Per its terms, we made interest-only payments through July 5, 2025. On July 5, 2025, the loan converted to a fully amortizing term loan with a final due date of January 5, 2030 and monthly payments of approximately $437,000 beginning on August 5, 2025. As the loan bears a floating interest rate, the total payment will fluctuate from time to time with prevailing interest rates. The loan is secured by a $5.0 million cash deposit held in a money market account with related earnings payable to the Company and all equipment that is not permanently attached to and which may be removed from our Georgetown, Texas facility and headquarters building without significantly damaging the leased building. Interest accrues at a rate per annum equal to 1-month SOFR plus 3.0%, subject to a 4.5% floor. Upon an event of default, interest would accrue at a rate equal to the normal rate plus 2.0%. Following bank approval, on September 17, 2025 we exercised the accordion feature on our Credit Agreement, increasing the amount borrowed by $5.0 million, The additional $5.0 million has the same terms, including the interest rate, maturity date and payments terms as those of the original $20.0 million. Including the additional borrowed funds, our monthly payments are now approximately $0.5 million, with the October 2025 payment prorated.

The Credit Agreement includes customary affirmative covenants for secured transactions of this type, including maintaining adequate books and records, periodic financial reporting, compliance with laws, maintenance of insurance, maintenance of assets, timely payment of taxes, and notices of adverse events. It also includes customary negative covenants including incurrence of other indebtedness, mergers, consolidations and transfers of assets and liens on our assets. The Loan Agreement and ancillary documents also include customary events of default, including payment defaults, failure to perform or observe terms, covenants or agreements included in the Loan Agreement and ancillary documents, insolvency and bankruptcy defaults, judgment defaults, material adverse change defaults, and change of ownership defaults. Financial covenants require us to maintain a leverage ratio, as defined in the agreement, of no more than 3.75x through September 30, 2025; 2.75x from then to September 30, 2026; and 2.00x after September 30, 2026, and a debt service coverage ratio, as defined in the agreement, of at least 1.25x. We were in compliance with all covenants at September 30, 2025.

As of September 30, 2025, all available funds under the Credit Agreement, including the accordion feature, have been drawn.

Note 4- Leasing Arrangements

We have operating leases for our office and integration facilities in both Round Rock, Texas and Georgetown, Texas as well as for certain equipment. Our leases have remaining lease terms of 5 to 116 months. As of September 30, 2025, we have not entered into any lease arrangement classified as a finance lease.

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

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

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

Future minimum lease payments under non-cancellable leases as of September 30, 2025 were as follows (in ‘000’s):

During the three-month period ended September 30, 2025, the Company resolved all required contractual contingencies in order to receive the tenant leasehold improvement allowance of $6.8 million from the lessor and remeasured the associated right-of-use asset and lease liability accordingly. We expect to collect the $6.8 million from the lessor in the quarter ending December 31, 2025.

Note 5 - Earnings (loss) Per-Share

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

The following table presents a reconciliation of the numerators and denominators of the computations of basic and diluted income (loss) per share from continuing operations. In the table below, income (loss) represents the numerator, and shares represent the denominator (in thousands except per share amounts):

For the three-month periods ended September 30, 2025 and 2024, respectively,2,332,292 and 1,939,834 restricted shares and options were excluded from the calculation of dilutive shares because their effect would have been anti-dilutive. For the nine-month periods ended September 30, 2025 and 2024, respectively,50,000 and 2,461,000 restricted shares and options were excluded from the calculation of dilutive shares because their effect would have been anti-dilutive.

In August 2025, we sold 3,450,000 shares of our common stock, netting cash inflows of $55.3 million after deducting transaction costs of $0.4 million.

Note 6 - Segment Reporting

Segment information reported in the tables below represents the operating segments of the Company organized in a manner consistent with which separate information is available and for which segment results are evaluated regularly by our President and CEO, who is our chief operating decision-maker (CODM), in assessing performance, allocating resources and awarding incentive compensation. Prior to the fourth quarter of 2024, our activities were organized and managed in two reportable segments: facilities management and systems integration, with our procurement operating segment aggregated into the systems integration reportable segment. In the fourth quarter of 2024, we reorganized our structure such that our CODM now evaluates our operations and allocates resources on the basis of three segments. Accordingly, we determined that we now have three reportable segments as noted below. Comparable prior period amounts presented have been recast to conform with the current period presentation, including the costs allocated to each reportable segment as provided to our CODM. Our revenues are substantially all derived from the U.S. market, and all revenues presented are from external customers; we have no intercompany revenues.

The Company’s reportable segments are as follows:

The CODM evaluates the performance of the segments based on segment revenue, gross profit and pre-tax income, including the significant expenses presented separately in the table below. Segment results are exclusive of certain corporate activities and expenses that are not allocated to specific segments, and which are reconciled below to our consolidated pre-tax income.

Other consolidated assets not specifically attributable to or allocated to business segments are principally cash and cash equivalents, prepaids and deposits, certain fixed assets, and operating lease right-of use assets. Other operating expenses in the following tables generally represent property taxes, rent and related costs, travel and entertainment, professional fees, office supplies and other similar items utilized by the specific reportable segments but not separately identified in the tables below as none of the costs is individually significant.

Information regarding our reportable segments is presented below (in thousands):

The table below reconciles total segment pre-tax income for each period presented above to consolidated pre-tax income (in thousands):

The table below presents segment total assets for September 30, 2025 and December 31, 2024 (in thousands):

The table below reconciles combined segment total assets for each period presented above to consolidated total assets (in thousands):