##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto
 Commission File Number: 0-19394
 GTSI CORP.
  Delaware
    
    54-1248422(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)3901 Stonecroft Boulevard, Chantilly, VA
    
    20151-1010(Address of principal executive offices)
    
    (Zip Code)
 703-502-2000
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ




---



##### 



GTSI Corp.
Form 10-Q for the Quarter Ended September 30, 2008
 INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements Unaudited Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2008 and 2007
    
    
    2Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
2008 and 2007
    
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    24Item 1A. Risk Factors
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 5. Other Information
    
    
    24Item 6. Exhibits
    
    
    24SIGNATURES
    
    
    25Exhibit 31.1Exhibit 31.2Exhibit 32




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 GTSI CORP.
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    829Accounts receivable, net
    
    
    227,214
    
    
    
    165,317Inventory
    
    
    34,058
    
    
    
    21,577Deferred costs
    
    
    4,504
    
    
    
    5,615Other current assets
    
    
    7,244
    
    
    
    5,169Total current assets
    
    
    273,020
    
    
    
    198,507Depreciable assets, net
    
    
    11,960
    
    
    
    12,158Long-term receivables and other assets
    
    
    15,632
    
    
    
    16,002Total assets
    
    $
    300,612
    
    
    $
    226,667LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Borrowings under credit facility
    
    $
    5,037
    
    
    $
    18,031Accounts payable
    
    
    187,346
    
    
    
    84,715Financed lease debt, current portion
    
    
    6,528
    
    
    
    8,509Accrued liabilities
    
    
    13,660
    
    
    
    14,725Deferred revenue
    
    
    1,673
    
    
    
    2,542Total current liablilites
    
    
    214,244
    
    
    
    128,522Long-term debt
    
    
    
    
    
    
    10,000Long-term financed lease debt
    
    
    5,409
    
    
    
    9,068Other liabilities
    
    
    724
    
    
    
    1,364Total liabilities
    
    
    220,377
    
    
    
    148,954Commitments and contingencies (See Note 10)Stockholders equityPreferred stock  $0.25 par value,
680,850 shares authorized; none
issued or outstanding
    
    
    
    
    
    
    Common stock  $0.005 par value,
20,000,000 shares authorized;
10,159,486 issued and 9,824,241
outstanding at
September 30, 2008; and 10,183,251
issued and 9,700,850 outstanding at
December 31, 2007
    
    
    50
    
    
    
    49Capital in excess of par value
    
    
    48,800
    
    
    
    47,097Retained earnings
    
    
    31,886
    
    
    
    31,634Treasury stock, 63,999 shares at
September 30, 2008 and 139,994
shares at
December 31, 2007, at cost
    
    
    (501
    )
    
    
    (1,067
    )Total stockholders equity
    
    
    80,235
    
    
    
    77,713Total liabilities and
stockholders equity
    
    $
    300,612
    
    
    $
    226,667
   1




---



##### Table of Contents



GTSI CORP.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007SALESProduct
    
    $
    233,545
    
    
    $
    163,227
    
    
    $
    504,196
    
    
    $
    438,308Service
    
    
    15,331
    
    
    
    19,183
    
    
    
    40,599
    
    
    
    41,822Financing
    
    
    8,183
    
    
    
    12,632
    
    
    
    14,254
    
    
    
    18,248257,059
    
    
    
    195,042
    
    
    
    559,049
    
    
    
    498,378COST OF SALESProduct
    
    
    209,896
    
    
    
    143,104
    
    
    
    454,080
    
    
    
    388,206Service
    
    
    8,890
    
    
    
    13,235
    
    
    
    23,422
    
    
    
    27,650Financing
    
    
    3,498
    
    
    
    6,810
    
    
    
    5,961
    
    
    
    8,261222,284
    
    
    
    163,149
    
    
    
    483,463
    
    
    
    424,117GROSS MARGIN
    
    
    34,775
    
    
    
    31,893
    
    
    
    75,586
    
    
    
    74,261SELLING, GENERAL &
ADMINISTRATIVE EXPENSES
    
    
    27,541
    
    
    
    27,637
    
    
    
    76,243
    
    
    
    79,169INCOME (LOSS) FROM OPERATIONS
    
    
    7,234
    
    
    
    4,256
    
    
    
    (657
    )
    
    
    (4,908
    )INTEREST AND OTHER INCOME, NETInterest and other income
    
    
    133
    
    
    
    316
    
    
    
    537
    
    
    
    900Equity income from affiliates
    
    
    1,480
    
    
    
    1,997
    
    
    
    2,629
    
    
    
    2,606Interest expense
    
    
    (644
    )
    
    
    (954
    )
    
    
    (2,318
    )
    
    
    (3,299
    )Interest and other income, net
    
    
    969
    
    
    
    1,359
    
    
    
    848
    
    
    
    207INCOME (LOSS) BEFORE INCOME TAXES
    
    
    8,203
    
    
    
    5,615
    
    
    
    191
    
    
    
    (4,701
    )INCOME TAX BENEFIT (PROVISION)
    
    
    24
    
    
    
    (98
    )
    
    
    61
    
    
    
    (350
    )NET INCOME (LOSS)
    
    $
    8,227
    
    
    $
    5,517
    
    
    $
    252
    
    
    $
    (5,051
    )EARNINGS (LOSS) PER SHAREBasic
    
    $
    0.84
    
    
    $
    0.57
    
    
    $
    0.03
    
    
    $
    (0.53
    )Diluted
    
    $
    0.83
    
    
    $
    0.55
    
    
    $
    0.03
    
    
    $
    (0.53
    )WEIGHTED AVERAGE SHARES OUTSTANDINGBasic
    
    
    9,791
    
    
    
    9,619
    
    
    
    9,749
    
    
    
    9,549Diluted
    
    
    9,885
    
    
    
    9,991
    
    
    
    9,874
    
    
    
    9,549
   2




---



##### Table of Contents



GTSI CORP.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedSeptember 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    252
    
    
    $
    (5,051
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
    
    
    24,085
    
    
    
    30,997Net cash provided by operating activities
    
    
    24,337
    
    
    
    25,946CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of depreciable assets
    
    
    (2,296
    )
    
    
    (1,737
    )Net cash used in investing activities
    
    
    (2,296
    )
    
    
    (1,737
    )CASH FLOWS FROM FINANCING ACTIVITES:Payments on Credit Facility
    
    
    (12,993
    )
    
    
    (24,314
    )Payment of Term Loan
    
    
    (10,000
    )
    
    
    Payment of deferred financing costs
    
    
    
    
    
    
    (720
    )Common Stock Purchases
    
    
    (216
    )
    
    
    Proceeds from equity transactions
    
    
    339
    
    
    
    1,023Net cash used in financing activities
    
    
    (22,870
    )
    
    
    (24,011
    )NET (DECREASE) INCREASE IN CASH
    
    
    (829
    )
    
    
    198CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    829
    
    
    
    705CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    
    
    
    $
    903
   3




---



##### Table of Contents



GTSI CORP.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation
  Software Revenue Recognition Modification of SOP 97-2, Software Revenue Recognition, With
Respect to Certain Transactions.
   2. New Accounting Pronouncements
 Fair Value Measurement 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 Effective Date of FASB Statement No. 157
  4




---



##### Table of Contents



The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements An Amendment of ARB No. 51
 Disclosures about Derivative Instruments and Hedging
Activities An Amendment of FASB Statement No. 133
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles
 Accounting for Financial Guarantee Insurance
Contracts an interpretation of FASB Statement No. 60
 Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities Earnings
Per Share
  5




---



##### Table of Contents



3. Stock-Based Compensation
 Stock Incentive Plans
  Stock Options
  WeightedAverageRemaining
    
    
    AggregateShares
    
    
    Weighted Average
    
    
    Contractual
    
    
    Intrinsic Value(in thousands)
    
    
    Exercise Price
    
    
    Term
    
    
    (in thousands)Outstanding at January 1, 2008
    
    
    1,782
    
    
    $
    8.08Granted
    
    
    
    
    
    
    Exercised
    
    
    (45
    )
    
    
    4.88Forfeited
    
    
    (30
    )
    
    
    7.82Expired
    
    
    (51
    )
    
    
    11.23Outstanding at September 30, 2008
    
    
    1,656
    
    
    $
    8.08
    
    
    
    3.52
    
    
    $
    281Exercisable at September 30, 2008
    
    
    1,141
    
    
    $
    8.41
    
    
    
    3.05
    
    
    $
    281
  Restricted Shares
   Weighted AverageShares
    
    
    Grant-Date(in thousands)
    
    
    Fair ValueNonvested at January 1, 2008
    
    
    378
    
    
    $
    11.71Granted
    
    
    39
    
    
    
    7.51Vested
    
    
    (89
    )
    
    
    12.22Forfeited
    
    
    (24
    )
    
    
    11.92Nonvested at September 30, 2008
    
    
    304
    
    
    $
    11.00
  6




---



##### Table of Contents



Stock Appreciation Rights (SARs)
  Unrecognized Compensation
  4. Lease and Other Receivables
   September 30, 2008
    
    
    December 31, 2007Future minimum lease payments receivable
    
    $
    13,038
    
    
    $
    13,558Unguaranteed residual values
    
    
    3,471
    
    
    
    4,785Unearned income
    
    
    (1,788
    )
    
    
    (2,450
    )$
    14,721
    
    
    $
    15,893
  September 30, 2008
    
    
    December 31, 2007Future minimum payments receivable
    
    $
    10,623
    
    
    $
    10,240Unearned income
    
    
    (1,428
    )
    
    
    (1,433
    )$
    9,195
    
    
    $
    8,807
  7




---



##### Table of Contents



5. Transferred Receivables and Financed Lease Debt
 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities
  6. Credit Facility and Term Loan
      7. Contract Termination Costs
   Contract Termination Liability as of 12/31/07
    
    $
    30Less: Cash Payments
    
    
    (24
    )Contract Termination Liability as of 09/30/08
    
    $
    6
  8




---



##### Table of Contents



8. Earnings (Loss) Per Share
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Basic earnings (loss) per shareNet income (loss)
    
    $
    8,227
    
    
    $
    5,517
    
    
    $
    252
    
    
    $
    (5,051
    )Weighted average shares outstanding
    
    
    9,791
    
    
    
    9,619
    
    
    
    9,749
    
    
    
    9,549Basic earnings (loss) per share
    
    $
    0.84
    
    
    $
    0.57
    
    
    $
    0.03
    
    
    $
    (0.53
    )Diluted earnings (loss) per share:Net income (loss)
    
    $
    8,227
    
    
    $
    5,517
    
    
    $
    252
    
    
    $
    (5,051
    )Weighted average shares outstanding
    
    
    9,791
    
    
    
    9,619
    
    
    
    9,749
    
    
    
    9,549Incremental shares attributable to the
exercise of outstanding stock options
    
    
    94
    
    
    
    372
    
    
    
    125
    
    
    
    N/AWeighted average shares and equivalents
    
    
    9,885
    
    
    
    9,991
    
    
    
    9,874
    
    
    
    9,549Diluted earnings (loss) per share
    
    $
    0.83
    
    
    $
    0.55
    
    
    $
    0.03
    
    
    $
    (0.53
    )
 9. Income Taxes
     9




---



##### Table of Contents



10. Commitments and Contingencies
 Product Warranties
  Nine Months EndedSeptember 30,2008
    
    
    2007Accrued warranties at beginning of period
    
    $
    283
    
    
    $
    855Charges made against warranty liabilities
    
    
    (21
    )
    
    
    (200
    )Adjustments to warranty reserves
    
    
    (152
    )
    
    
    (411
    )Accruals for additional warranties sold
    
    
    84
    
    
    
    147Accrued warranties at end of period
    
    $
    194
    
    
    $
    391
  Nine Months EndedSeptember 30,2008
    
    
    2007Deferred warranty revenue at beginning of period
    
    $
    130
    
    
    $
    506Deferred warranty revenue recognized
    
    
    (210
    )
    
    
    (409
    )Revenue deferred for additional warranties sold
    
    
    415
    
    
    
    81Deferred warranty revenue at end of period
    
    $
    335
    
    
    $
    178
 Letters of Credit
    10




---



##### Table of Contents



Employment Agreements
  Contingencies
  11. Related Party Transactions
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    81,346
    
    
    $
    51,410
    
    
    $
    182,878
    
    
    $
    134,733Gross margin
    
    $
    9,035
    
    
    $
    5,869
    
    
    $
    19,524
    
    
    $
    12,886Net income
    
    $
    4,118
    
    
    $
    3,086
    
    
    $
    6,996
    
    
    $
    4,666
 12. Subsequent Event
   11




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Disclosure Regarding Forward-Looking Statements
  
    
    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
  Overview
   12




---



##### Table of Contents




    
    Total sales increased $62.0 million.
    
    Gross margin increased $2.9 million.
    
    Selling, General & Administrative expenses decreased $0.1 million.
    
    Earnings before income taxes increased $2.6 million.
    
    Cash provided by operations increased $5.2 million.
  
    
    Total sales increased $60.7 million.
    
    Gross margin increased $1.3 million.
    
    Selling, General & Administrative expenses decreased $2.9 million.
    
    Earnings before income taxes increased $4.9 million.
    
    Cash provided by operations decreased $1.6 million.
 Critical Accounting Estimates and Policies
   13




---



##### Table of Contents



Historical Results of Operations
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    86.5
    %
    
    
    83.6
    %
    
    
    86.5
    %
    
    
    85.1
    %Gross margin
    
    
    13.5
    %
    
    
    16.4
    %
    
    
    13.5
    %
    
    
    14.9
    %Selling, general, and administrative expenses
    
    
    10.7
    %
    
    
    14.2
    %
    
    
    13.6
    %
    
    
    15.9
    %Income (loss) from operations
    
    
    2.8
    %
    
    
    2.2
    %
    
    
    (0.1
    )%
    
    
    (1.0
    )%Interest and other income (expense), net
    
    
    0.4
    %
    
    
    0.7
    %
    
    
    0.2
    %
    
    
    0.0
    %Income (loss) before taxes
    
    
    3.2
    %
    
    
    2.9
    %
    
    
    0.1
    %
    
    
    (1.0
    )%Income tax benefit (provision)
    
    
    0.0
    %
    
    
    (0.1
    )%
    
    
    0.0
    %
    
    
    (0.1
    )%Net Income (loss)
    
    
    3.2
    %
    
    
    2.8
    %
    
    
    0.1
    %
    
    
    (1.1
    )%
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,Sales by Type
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Hardware
    
    $
    191.3
    
    
    
    74.3
    %
    
    $
    129.0
    
    
    
    66.2
    %
    
    $
    397.6
    
    
    
    71.1
    %
    
    $
    355.4
    
    
    
    71.2
    %Software
    
    
    42.3
    
    
    
    16.5
    %
    
    
    34.2
    
    
    
    17.5
    %
    
    
    106.5
    
    
    
    19.1
    %
    
    
    83.0
    
    
    
    16.7
    %Service
    
    
    15.3
    
    
    
    6.0
    %
    
    
    19.2
    
    
    
    9.8
    %
    
    
    40.6
    
    
    
    7.3
    %
    
    
    41.8
    
    
    
    8.4
    %Financing
    
    
    8.2
    
    
    
    3.2
    %
    
    
    12.6
    
    
    
    6.5
    %
    
    
    14.3
    
    
    
    2.5
    %
    
    
    18.2
    
    
    
    3.7
    %Total
    
    $
    257.1
    
    
    
    100.0
    %
    
    $
    195.0
    
    
    
    100.0
    %
    
    $
    559.0
    
    
    
    100.0
    %
    
    $
    498.4
    
    
    
    100.0
    %
 Three Months Ended
    
    
    Nine Months EndedSales by Vendor
    
    September 30,
    
    
    September 30,(based on 2008 sales)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Cisco
    
    $
    61.9
    
    
    
    24.1
    %
    
    $
    46.8
    
    
    
    24.0
    %
    
    $
    114.3
    
    
    
    20.4
    %
    
    $
    89.9
    
    
    
    18.0
    %Sun Microsystems
    
    
    27.3
    
    
    
    10.6
    %
    
    
    27.5
    
    
    
    14.1
    %
    
    
    62.5
    
    
    
    11.2
    %
    
    
    60.4
    
    
    
    12.1
    %Dell
    
    
    30.2
    
    
    
    11.8
    %
    
    
    8.6
    
    
    
    4.4
    %
    
    
    54.1
    
    
    
    9.7
    %
    
    
    15.8
    
    
    
    3.2
    %Microsoft
    
    
    13.5
    
    
    
    5.2
    %
    
    
    11.7
    
    
    
    6.0
    %
    
    
    51.5
    
    
    
    9.2
    %
    
    
    50.5
    
    
    
    10.1
    %Panasonic
    
    
    19.0
    
    
    
    7.4
    %
    
    
    21.4
    
    
    
    11.0
    %
    
    
    46.3
    
    
    
    8.3
    %
    
    
    70.0
    
    
    
    14.0
    %Others, net of reserves
and adjustments
    
    
    105.2
    
    
    
    40.9
    %
    
    
    79.0
    
    
    
    40.5
    %
    
    
    230.3
    
    
    
    41.2
    %
    
    
    211.8
    
    
    
    42.6
    %Total
    
    $
    257.1
    
    
    
    100.0
    %
    
    $
    195.0
    
    
    
    100.0
    %
    
    $
    559.0
    
    
    
    100.0
    %
    
    $
    498.4
    
    
    
    100.0
    %
 Three Months Ended September 30, 2008 Compared With the Three Months Ended September 30, 2007
 Sales
    14




---



##### Table of Contents



Gross Margin
     15




---



##### Table of Contents



Selling, General & Administrative Expenses (SG&A)
  Interest and Other Income, Net
  Income Taxes
     16




---



##### Table of Contents



Nine Months Ended September 30, 2008 Compared With the Nine Months Ended September 30, 2007
 Sales
      Gross Margin
      17




---



##### Table of Contents



Selling, General & Administrative Expenses (SG&A)
  Interest and Other Income, Net
  Income Taxes
    Seasonal Fluctuations
    18




---



##### Table of Contents



Liquidity and Capital Resources
 Cash flows for the nine months ended September 30,
 Increase(in millions)
    
    2008
    
    
    2007
    
    
    (Decrease)Cash provided by operating activities
    
    $
    24.3
    
    
    $
    25.9
    
    
    $
    (1.6
    )Cash used in investing activities
    
    $
    (2.3
    )
    
    $
    (1.7
    )
    
    $
    0.6Cash used in financing activities
    
    $
    (22.9
    )
    
    $
    (24.0
    )
    
    $
    (1.1
    )
     Credit Facility and Term Loan
      19




---



##### Table of Contents



Liquidity
     Capital Requirements
  New Accounting Pronouncements
 Fair Value Measurement 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 Effective Date of FASB Statement No. 157 The Fair Value Option for Financial Assets and Financial Liabilities
  20




---



##### Table of Contents



Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements An Amendment of ARB No. 51
 Disclosures about Derivative Instruments and Hedging
Activities An Amendment of FASB Statement No. 133
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles
 Accounting for Financial Guarantee Insurance
Contracts an interpretation of FASB Statement No. 60
 Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities Earnings Per Share
  21




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
   22




---



##### Table of Contents




    
    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 have 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.
   23




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Items to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
   24




---



##### Table of Contents



SIGNATURES
  GTSI Corp.Date: November 6, 2008
    
    /s/ JAMES J. LETOJames J. Leto

Chief Executive OfficerDate: November 6, 2008
    
    /s/ PETER WHITFIELDPeter WhitfieldSenior Vice President and Chief Financial Officer
  25




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description10.1
    
    
    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.  26