##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 Commission file number 019433
 
 Technology Solutions Company
 Incorporated in the State of Delaware  I.R.S. Employer Identification No. 36-3584201
 205 North Michigan Avenue
Suite 1500
Chicago, Illinois 60601
(312) 228-4500
 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 an accelerated filer (as defined by Exchange
Act Rule
12b-2). Yes o No
þ
 As of August 4, 2005 there were outstanding 47,022,153 shares of TSC Common Stock, par value
$.01.






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TECHNOLOGY SOLUTIONS COMPANY
 Index to Form 10-Q
 PageNumberPart IFINANCIAL INFORMATION (UNAUDITED)ITEM 1. FINANCIAL STATEMENTSConsolidated Balance Sheets as of June 30, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004
    
    
    4Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004
    
    
    5Notes to Consolidated Financial Statements
    
    
    6ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    12ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    25ITEM 4. CONTROLS AND PROCEDURES
    
    
    25Part IIOTHER INFORMATIONITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    26ITEM 6. EXHIBITS
    
    
    26SIGNATURE
    
    
    28CertificationCertificationCertificationCertification
  Page 2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 TECHNOLOGY SOLUTIONS COMPANY
 
 CONSOLIDATED BALANCE SHEETS
  June 30,
    
    December 31,2005
    
    2004(unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    22,714
    
    
    $
    30,032Receivables, less allowance for doubtful receivables
of $72 and $73
    
    
    6,999
    
    
    
    6,182Other current assets
    
    
    1,316
    
    
    
    708Total current assets
    
    
    31,029
    
    
    
    36,922COMPUTERS, FURNITURE AND EQUIPMENT, NET
    
    
    205
    
    
    
    509GOODWILL
    
    
    7,298
    
    
    
    7,884INTANGIBLE ASSETS, NET
    
    
    1,485
    
    
    
    2,090LONG-TERM RECEIVABLES AND OTHER
    
    
    3,633
    
    
    
    5,679Total assets
    
    $
    43,650
    
    
    $
    53,084LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    866
    
    
    $
    960Line of credit
    
    
    
    
    
    
    649Accrued compensation and related costs
    
    
    3,712
    
    
    
    4,987Restructuring accruals
    
    
    1,267
    
    
    
    696Other current liabilities
    
    
    2,602
    
    
    
    3,998Total current liabilities
    
    
    8,447
    
    
    
    11,290COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $.01 par value; shares authorized 
10,000,000; none issued
    
    
    
    
    
    
    Common stock, $.01 par value; shares authorized 
100,000,000; shares issued  50,533,970;
shares outstanding 47,022,153 and 46,851,460
    
    
    505
    
    
    
    505Capital in excess of par value
    
    
    127,451
    
    
    
    127,583Stock based compensation
    
    
    89
    
    
    
    Accumulated deficit
    
    
    (88,091
    )
    
    
    (81,282
    )Treasury stock, at cost, 3,511,817 and 3,682,510 shares
    
    
    (4,975
    )
    
    
    (5,217
    )Accumulated other comprehensive income:Cumulative translation adjustment
    
    
    224
    
    
    
    205Total stockholders equity
    
    
    35,203
    
    
    
    41,794Total liabilities and stockholders equity
    
    $
    43,650
    
    
    $
    53,084
  Page 3




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  For the Three
    
    For the SixMonths Ended
    
    Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(unaudited)
    
    (unaudited)REVENUES:Revenues before reimbursements
    
    $
    9,166
    
    
    $
    7,667
    
    
    $
    18,994
    
    
    $
    16,302Reimbursements
    
    
    1,309
    
    
    
    1,057
    
    
    
    2,549
    
    
    
    2,14910,475
    
    
    
    8,724
    
    
    
    21,543
    
    
    
    18,451COSTS AND EXPENSES:Project personnel
    
    
    6,195
    
    
    
    5,181
    
    
    
    13,029
    
    
    
    10,721Other project expenses
    
    
    1,926
    
    
    
    1,276
    
    
    
    4,397
    
    
    
    2,730Reimbursable expenses
    
    
    1,309
    
    
    
    1,057
    
    
    
    2,549
    
    
    
    2,149Bad debt expense
    
    
    
    
    
    
    132
    
    
    
    
    
    
    
    12Management and administrative support
    
    
    3,953
    
    
    
    3,409
    
    
    
    8,594
    
    
    
    6,787Intangible asset amortization
    
    
    256
    
    
    
    
    
    
    
    512
    
    
    
    Goodwill and intangible asset impairment
    
    
    679
    
    
    
    
    
    
    
    679
    
    
    
    Restructuring and other charges (credits)
    
    
    1,674
    
    
    
    
    
    
    
    1,674
    
    
    
    (579
    )Gain on litigation settlement
    
    
    (2,722
    )
    
    
    
    
    
    
    (2,722
    )
    
    
    Incentive compensation
    
    
    
    
    
    
    328
    
    
    
    
    
    
    
    55613,270
    
    
    
    11,383
    
    
    
    28,712
    
    
    
    22,376OPERATING LOSS
    
    
    (2,795
    )
    
    
    (2,659
    )
    
    
    (7,169
    )
    
    
    (3,925
    )OTHER INCOME:Net investment income
    
    
    173
    
    
    
    88
    
    
    
    360
    
    
    
    315LOSS BEFORE INCOME TAXES
    
    
    (2,622
    )
    
    
    (2,571
    )
    
    
    (6,809
    )
    
    
    (3,610
    )INCOME TAX PROVISION
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (2,622
    )
    
    $
    (2,571
    )
    
    $
    (6,809
    )
    
    $
    (3,610
    )BASIC NET LOSS
PER COMMON SHARE
    
    $
    (0.06
    )
    
    $
    (0.06
    )
    
    $
    (0.15
    )
    
    $
    (0.09
    )WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
    
    
    46,938
    
    
    
    40,860
    
    
    
    46,894
    
    
    
    40,840DILUTED NET LOSS
PER COMMON SHARE
    
    $
    (0.06
    )
    
    $
    (0.06
    )
    
    $
    (0.15
    )
    
    $
    (0.09
    )WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING
    
    
    46,938
    
    
    
    40,860
    
    
    
    46,894
    
    
    
    40,840
  Page 4




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TECHNOLOGY SOLUTIONS COMPANY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  For theSix Months EndedJune 30,2005
    
    2004(unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (6,809
    )
    
    $
    (3,610
    )Restructuring and other charges (credits)
    
    
    1,674
    
    
    
    (579
    )Goodwill and intangible asset impairment
    
    
    679
    
    
    
    Adjustments to reconcile net loss to net
cash from operating activities:Depreciation and amortization
    
    
    754
    
    
    
    220Credit for receivable valuation allowances and
reserves for possible losses
    
    
    
    
    
    
    12Non-cash stock compensation
    
    
    89
    
    
    
    Changes in assets and liabilities:Receivables
    
    
    (817
    )
    
    
    (983
    )Sales of trading securities related to deferred
compensation plan
    
    
    
    
    
    
    6,712Other current assets
    
    
    (607
    )
    
    
    (560
    )Accounts payable
    
    
    (86
    )
    
    
    94Accrued compensation and related costs
    
    
    (1,269
    )
    
    
    507Deferred compensation liability
    
    
    
    
    
    
    (6,712
    )Restructuring accruals
    
    
    (1,043
    )
    
    
    (820
    )Other current liabilities
    
    
    (1,339
    )
    
    
    (232
    )Other assets
    
    
    2,046
    
    
    
    5Net cash used in operating activities
    
    
    (6,728
    )
    
    
    (5,946
    )CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    
    
    
    
    (404
    )Net cash used in investing activities
    
    
    
    
    
    
    (404
    )CASH FLOWS FROM FINANCING ACTIVITIES:Line of credit
    
    
    (649
    )
    
    
    Proceeds from exercise of stock options
    
    
    9
    
    
    
    1Proceeds from employee stock purchase plan
    
    
    101
    
    
    
    71Net cash (used in) provided by financing activities
    
    
    (539
    )
    
    
    72EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
    
    
    (51
    )
    
    
    (60
    )DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (7,318
    )
    
    
    (6,338
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    30,032
    
    
    
    41,104CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    22,714
    
    
    $
    34,766
  Page 5




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
  NOTE 1  BASIS OF PRESENTATION
  NOTE 2  THE COMPANY
  NOTE 3  NEW ACCOUNTING STANDARDS
  Page 6




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
(Continued)
  NOTE 4  STOCK OPTIONS
   For the Three Months
    
    For the Six Months EndedEnded June 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net loss:As reported
    
    $
    (2,622
    )
    
    $
    (2,571
    )
    
    $
    (6,809
    )
    
    $
    (3,610
    )Less: Stock-based compensation expense
determined under fair value method for
all awards, net of related taxes (as
applicable)
    
    
    (132
    )
    
    
    (458
    )
    
    
    (504
    )
    
    
    (943
    )Pro forma
    
    $
    (2,754
    )
    
    $
    (3,029
    )
    
    $
    (7,313
    )
    
    $
    (4,553
    )Basic net loss per common share:As reported
    
    $
    (0.06
    )
    
    $
    (0.06
    )
    
    $
    (0.15
    )
    
    $
    (0.09
    )Pro forma
    
    $
    (0.06
    )
    
    $
    (0.07
    )
    
    $
    (0.16
    )
    
    $
    (0.11
    )Diluted net loss per common share:As reported
    
    $
    (0.06
    )
    
    $
    (0.06
    )
    
    $
    (0.15
    )
    
    $
    (0.09
    )Pro forma
    
    $
    (0.06
    )
    
    $
    (0.07
    )
    
    $
    (0.16
    )
    
    $
    (0.11
    )
  Page 7




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
(Continued)
 NOTE 5  CAPITAL STOCK
   NOTE 6  LOSS PER COMMON SHARE
   June 30, 2005
    
    June 30, 2004Shares
    
    Per
    
    
    
    
    
    Shares
    
    PerNet
    
    (In
    
    Common
    
    Net
    
    (In
    
    CommonLoss
    
    Thousands)
    
    Share
    
    Loss
    
    Thousands)
    
    ShareBasic loss per share
    
    $
    (2,622
    )
    
    
    46,938
    
    
    $
    (0.06
    )
    
    $
    (2,571
    )
    
    
    40,860
    
    
    $
    (0.06
    )Effect of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted loss per share
    
    $
    (2,622
    )
    
    
    46,938
    
    
    $
    (0.06
    )
    
    $
    (2,571
    )
    
    
    40,860
    
    
    $
    (0.06
    )
 Page 8




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
(Continued)
  June 30, 2005
    
    June 30, 2004Shares
    
    Per
    
    
    
    
    
    Shares
    
    PerNet
    
    (In
    
    Common
    
    Net
    
    (In
    
    CommonLoss
    
    Thousands)
    
    Share
    
    Loss
    
    Thousands)
    
    ShareBasic loss per share
    
    $
    (6,809
    )
    
    
    46,894
    
    
    $
    (0.15
    )
    
    $
    (3,610
    )
    
    
    40,840
    
    
    $
    (0.09
    )Effect of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted loss per share
    
    $
    (6,809
    )
    
    
    46,894
    
    
    $
    (0.15
    )
    
    $
    (3,610
    )
    
    
    40,840
    
    
    $
    (0.09
    )
 NOTE 7  COMPREHENSIVE (LOSS) INCOME
  For the Three Months
    
    For the Six Months EndedEnded June 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net loss
    
    $
    (2,622
    )
    
    $
    (2,571
    )
    
    $
    (6,809
    )
    
    $
    (3,610
    )Other comprehensive income (loss):Translation adjustment
    
    
    16
    
    
    
    6
    
    
    
    19
    
    
    
    (9
    )Other comprehensive income (loss)
    
    
    16
    
    
    
    6
    
    
    
    19
    
    
    
    (9
    )Total comprehensive loss
    
    $
    (2,606
    )
    
    $
    (2,565
    )
    
    $
    (6,790
    )
    
    $
    (3,619
    )
 NOTE 8  GOODWILL AND INTANGIBLE ASSETS, NET
  Balance as of December 31, 2004
    
    $
    7,884Impairment loss
    
    
    (586
    )Balance as of June 30, 2005
    
    $
    7,298
  Balance as of December 31, 2004
    
    $
    2,090Amortization
    
    
    (512
    )Impairment loss
    
    
    (93
    )Balance as of June 30, 2005
    
    $
    1,485
  Page 9




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
(Continued)
  NOTE 9  OTHER EVENTS
  Restructuring and
    
    
    
    
    
    Cash(1)
    
    Non-cash
    
    Balance as ofOther Charges  2005
    
    Charge
    
    Payments
    
    Usage
    

June 30, 2005Severance costs (23
employees)
    
    $
    1,173
    
    
    $
    424
    
    
    $
    
    
    
    $
    749Office closures
    
    
    511
    
    
    
    
    
    
    
    58
    
    
    
    453Other costs
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Total
    
    $
    1,687
    
    
    $
    424
    
    
    $
    58
    
    
    $
    1,205
 
 (1)Paid during the quarter ended June 30, 2005.  Restructuring and Other
    
    
    
    
    
    Cash(2)
    
    Non-cash
    
    Balance as ofCharges  2003
    
    Charge
    
    Payments
    
    Usage
    
    June 30, 2005Severance costs
(approximately 30
employees)
    
    $
    3,917
    
    
    $
    3,860
    
    
    $
    33
    
    
    $
    24Office reductions
    
    
    921
    
    
    
    592
    
    
    
    2
    
    
    
    327Professional fees
    
    
    373
    
    
    
    383
    
    
    
    
    
    
    
    (10
    )Total original charge
    
    
    5,211
    
    
    
    4,835
    
    
    
    35
    
    
    
    3412004 adjustment
    
    
    (266
    )
    
    
    
    
    
    
    
    
    
    
    (266
    )2005 adjustment
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    (13
    )Total
    
    $
    4,932
    
    
    $
    4,835
    
    
    $
    35
    
    
    $
    62
 
 (2)Net cash payments totaling $621 were made during the six months ended June 30,
2005. Page 10




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
(Continued)
  Cash
    
    Non-cash
    
    Balance as ofLatin America Charge  2000
    
    Charge
    
    Payments
    
    Usage
    
    June 30, 2005Severance costs
(approximately
40 employees)
    
    $
    1,785
    
    
    $
    1,574
    
    
    $
    
    
    
    $
    211Other costs
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    (30
    )Asset write-offs
    
    
    2,916
    
    
    
    
    
    
    
    2,916
    
    
    
    Total original charge
    
    
    4,701
    
    
    
    1,604
    
    
    
    2,916
    
    
    
    181Accounts receivable
collections  2000
    
    
    (400
    )
    
    
    (400
    )
    
    
    
    
    
    
    2004 adjustment
    
    
    (181
    )
    
    
    
    
    
    
    
    
    
    
    (181
    )Total
    
    $
    4,120
    
    
    $
    1,204
    
    
    $
    2,916
    
    
    $
    
  Restructuring and Other
    
    
    
    
    
    Cash
    
    Non-cash
    
    Balance as ofCharges  1999
    
    Charge
    
    Payments
    
    Usage
    
    June 30, 2005Lease terminations
    
    $
    3,011
    
    
    $
    725
    
    
    $
    35
    
    
    $
    2,251Former executive
severance costs
    
    
    1,814
    
    
    
    1,747
    
    
    
    150
    
    
    
    (83
    )CourseNet Systems, Inc.
acquisition costs
    
    
    1,300
    
    
    
    
    
    
    
    1,300
    
    
    
    Asset write-offs
    
    
    842
    
    
    
    
    
    
    
    842
    
    
    
    Total original charge
    
    
    6,967
    
    
    
    2,472
    
    
    
    2,327
    
    
    
    2,1682000 adjustment
    
    
    (404
    )
    
    
    
    
    
    
    
    
    
    
    (404
    )2001 adjustment
    
    
    (1,488
    )
    
    
    
    
    
    
    
    
    
    
    (1,488
    )2002 adjustment
    
    
    (144
    )
    
    
    
    
    
    
    
    
    
    
    (144
    )2004 adjustment
    
    
    (132
    )
    
    
    
    
    
    
    
    
    
    
    (132
    )Total
    
    $
    4,799
    
    
    $
    2,472
    
    
    $
    2,327
    
    
    $
    
 Page 11




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 RESULTS OF OPERATIONS
 OVERVIEW
 ®
    Page 12




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
     REVENUES
  Page 13




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 COSTS AND EXPENSES
 Project Personnel
  Other Project Expenses
  Reimbursable Expenses
  Bad Debt Expense
  Management and Administrative Support
  Intangible asset amortization
  Page 14




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 Incentive Compensation
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Revenue Recognition
  Allowance for Doubtful Receivables
  Page 15




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
  Accounting for Income Taxes
  Valuation of Stock Options and Warrants
   Goodwill and Intangible Assets
  Page 16




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##### Table of Contents



TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
   Restructuring and Other Charges
  THREE MONTHS ENDED JUNE 30, 2005 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2004
 Revenues
   Page 17




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TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 Costs and Expenses
        Restructuring and Other
    
    
    
    
    
    Cash(1)
    
    Non-cash
    
    Balance as ofCharges
 2005 (in thousands)
    
    Charge
    
    Payments
    
    Usage
    

June 30, 2005Severance costs (23
employees)
    
    $
    1,173
    
    
    $
    424
    
    
    $
    
    
    
    $
    749Office closures
    
    
    511
    
    
    
    
    
    
    
    58
    
    
    
    453Other costs
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Total
    
    $
    1,687
    
    
    $
    424
    
    
    $
    58
    
    
    $
    1,205
 
 (1)Paid during the quarter ended June 30, 2005. Page 18




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TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
    Operating Loss
  Other Income
  Income Tax Provision
  Shares Outstanding
  Page 19




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TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
  SIX MONTHS ENDED JUNE 30, 2005 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2004
 Revenues
  Costs and Expenses
       Page 20




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TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
     Operating Loss
  Other Income
  Income Tax Provision
  Page 21




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TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
  Shares Outstanding
  LIQUIDITY AND CAPITAL RESOURCES
    Payments Due By Period (In thousands)RemainingQuarters in2005
    
    2006
    
    2007
    
    2008
    
    TotalOperating leases (net of
restructuring and other
charges)
    
    $
    437
    
    
    $
    659
    
    
    $
    363
    
    
    $
    6
    
    
    $
    1,465Cash outlay for
restructuring and
other charges
    
    
    980
    
    
    
    259
    
    
    
    28
    
    
    
    
    
    
    
    1,267Purchase obligations (net of
restructuring and other
charges)
    
    
    370
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    375Total
    
    $
    1,787
    
    
    $
    923
    
    
    $
    391
    
    
    $
    6
    
    
    $
    3,107
 Page 22




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TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
     NEW ACCOUNTING STANDARDS
  Page 23




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TECHNOLOGY SOLUTIONS COMPANY
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 ASSUMPTIONS UNDERLYING CERTAIN FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE
RESULTS
 This Form 10-Q contains or may contain certain forward-looking statements concerning our financial
position, results of operations, cash flows, business strategy, budgets, projected costs and plans
and objectives of management for future operations as well as other statements including words such
as anticipate, believe, plan, estimate, expect, intend, project, and other similar
expressions. These forward-looking statements involve significant risks and uncertainties. Although
we believe that the expectations reflected in such forward-looking statements are based on
reasonable assumptions, readers are cautioned that no assurance can be given that such expectations
will prove correct and that actual results and developments may differ materially from those
conveyed in such forward-looking statements. We claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for
all forward-looking statements. Important factors that could cause actual results to differ
materially from the expectations reflected in the forward-looking statements in this Form 10-Q
include, among others, our ability to successfully introduce new service offerings, our ability to
manage the pace of technological change including our ability to refine and add to our service
offerings to adapt to technological changes, our ability to manage the current downturn in our
business and in our industry and changes in the economy, our ability to manage our current
decreased revenue levels, our ability to attract new business and increase revenues, our ability to
attract and retain employees, the limited level of options available for grants to attract new
employees and to retain existing employees, our ability to accommodate a changing business
environment, general business and economic conditions in our operating regions, market conditions
and competitive factors, our dependence on a limited number of clients and the potential loss of
significant clients, our ability to continue to attract new clients and sell additional work to
existing clients, our ability to successfully integrate the Zamba business with our business, our
ability to manage costs and headcount relative to expected revenues, and the impact of delisting
from the Nasdaq National Market if our stock price remains below $1 per share, all as more fully
described herein and in our Annual Report on Form 10-K for the year ended December 31, 2004 under
Managements Discussion and Analysis of Financial Condition and Results of Operations Assumptions
Underlying Certain Forward-Looking Statements and Factors that May Affect Future Results and
elsewhere from time to time in our other SEC reports. Such forward-looking statements speak only as
of the date on which they are made and we do not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after the date of this Form 10-Q. If
we do update or correct one or more forward-looking statements, readers, investors and others
should not conclude that we will make additional updates or corrections with respect thereto or
with respect to other forward-looking statements. Actual results may vary materially.
 Page 24




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TECHNOLOGY SOLUTIONS COMPANY
 PART I. FINANCIAL INFORMATION
(Continued)
 
 ITEM 3QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
   
 ITEM 4CONTROLS AND PROCEDURES
  Page 25




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TECHNOLOGY SOLUTIONS COMPANY
 
 PART II. OTHER INFORMATION
 
 ITEM 2UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 6EXHIBITS
  Exhibit #
    
    Description of Document10.01
    
    Employment agreement with Philip J. Downey, filed as Exhibit
99.1 to TSCs Current Report on Form 8-K dated July 18, 2005,
file no. 0-19433, is herby incorporated by reference.10.02
    
    Employment agreement with Sandor Grosz, filed as Exhibit 99.2 to
TSCs Current Report on Form 8-K dated July 18, 2005, file no.
0-19433, is herby incorporated by reference.31.1*
    
    CEO Certification31.2*
    
    CFO Certification32.1*
    
    Certification of Michael R. Gorsage Pursuant to Section 1350 of
Chapter 63 of Title 18 of the United States Code32.2*
    
    Certification of Sandor Grosz Pursuant to Section 1350 of
Chapter 63 of Title 18 of the United States Code
 Page 26




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TECHNOLOGY SOLUTIONS COMPANY
 PART II. OTHER INFORMATION- (Continued)
  
 *
    
    Filed herewith Page 27




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SIGNATURE
  TECHNOLOGY SOLUTIONS COMPANYDate:  August 15, 2005
    By:
    /s/ SANDOR GROSZSandor GroszChief Financial Officer Page 28