ONE STOP SYSTEMS INC

Company History

One Stop Systems, Inc. (“we,” “our,” “OSS,” or the “Company”) was originally incorporated as a California corporation in 1999, after initially being formed as a California limited liability company in 1998. On December 14, 2017, the Company was reincorporated as a Delaware corporation in connection with its initial public offering. The Company designs, manufactures, and markets specialized rugged high-performance compute ("HPC"), high speed switch fabrics and storage systems, which are designed to target edge applications for artificial intelligence ("AI") / machine learning ("ML"), sensor processing, sensor fusion and autonomy. The Company markets its products to manufacturers of equipment used for autonomous vehicles, medical, industrial, and military applications, with special focus on platforms that move, such as planes, trucks, ships, submarines, and mobile datacenters or command posts where sensor processing, sensor fusion, AI and ML are integrated to support such applications. If an application needs AI and/or autonomous capabilities, and it moves, OSS delivers the highest performance solutions that are designed to survive and enable these challenging applications.

During the year ended December 31, 2015, the Company formed a wholly owned subsidiary in Germany, One Stop Systems, GmbH (“OSS GmbH”). Then, in July 2016, the Company acquired Mission Technologies Group, Inc. (“Magma”) and its operations.

On August 31, 2018, the Company acquired Concept Development Inc. (“CDI”) located in Irvine, California. CDI specialized in the design and manufacture of custom high-performance computing systems for airborne in-flight entertainment, flight safety equipment, and networking systems. CDI’s business was fully integrated into the core operations of the Company as of June 1, 2020.

On October 31, 2018, OSS GmbH acquired 100% of the outstanding stock of Bressner Technology GmbH, a limited liability company registered under the laws of Germany and located near Munich, Germany (“Bressner”). Bressner designs and manufactures standard and customized servers, panel PCs, and PCIe accelerator systems. It also operates as a systems integrator with standard and custom all in one hardware systems and components. In addition, Bressner serves as a channel to market for OSS ruggedized datacenter level compute and storage products to the European and Middle Eastern markets.

Our principal executive offices are located at 2235 Enterprise Street, Suite 110, Escondido, California 92029, and our telephone number is (760) 745-9883. Our website address is www.onestopsystems.com. Information contained in, or accessible through, our website is for reference purposes only.

Business Overview

OSS designs, manufactures, and markets specialized high-performance compute, high speed switch fabrics and storage hardware and software, which are designed to target edge applications for AI/ML, sensor processing, sensor fusion and autonomy. Edge computing is a form of computing that is done on site, near a particular data source or the user, rather than in the cloud, minimizing the need for data to be processed in a remote datacenter. This growing trend increases computing performance and security, as the data does not have to travel to distant datacenter location. Edge computing is most recognizable in applications such as sensor processing, sensor fusion, autonomy and AI/ML. To meet the demands at the edge we offer specialized modules and systems that consist of computers, switch fabrics and storage products that incorporate the latest state-of-the art components with embedded proprietary software. Such modules and systems allow us to offer high-end solutions to target markets to be integrated into platforms, vehicles and applications.

The fast-growing edge computing space consists of three major segments. The first segment is comprised of smaller datacenters located near the user - on the edge. These typically include compute and storage racks in environmentally controlled buildings, similar to large cloud datacenters. Suppliers in this space tend to be the same large server and storage manufacturers whose products are used at cloud datacenters. The second segment includes billions of Internet-of-Things (“IOT”) devices that may reside in everything from home appliances to the factory production floor. These IOT devices and applications tend not to be challenged on performance and easily communicate up to the cloud or the datacenters on the edge. OSS does not focus on either of the foregoing segments. The third segment is called AI Transportables. These are primarily on land, in the air or at sea vehicles that need datacenter level performance for sensor processing, sensor fusion, autonomy and AI/ML applications. This is where OSS’ vision and strategy is aligned, and where we believe that we offer the greatest unique value.

Examples of applications that utilize AI Transportables range from industrial autonomous trucks, mining equipment and smart agricultural equipment to military land, sea, and airborne weapon system platforms. Less mobile applications that utilize High Performance Compute ("HPC") or AI Transportables include items such as medical equipment, mobile command centers and certain datacenters.

Sensor fusion, autonomy and AI capabilities require these demanding applications to connect to a wide array of data sources and sensors, and to have the ability to quickly access and store large and ever-growing data sets. They must be able to maintain ultra-fast processing power to act on data or process sensor inputs in real time at the edge location, which is independent of whether a high-speed network, like 5G or a tactical data link, connects the edge application back to the distant central data or command centers. Standard servers and storage systems available in the market do not address, and typically will not survive, the AI Transportable requirements. Although the network or data link, if it exists, may transfer data, or be used for updates, the latency is not acceptable for many of these applications where time is of the essence. This increases the need for datacenter level performance using the latest generation of products from companies like NVIDIA, AMD, and Intel. In most of these applications, available space is limited and the number of inputs from sensors and other data sources are significant, thus, requiring high speed switch fabrics like the latest in PCI Express, for which OSS is a recognized expert in the market. In all cases at the edge there is a demanding operational environment that requires ruggedized solutions to ensure assured and continued operation, which must be balanced with size weight and power (“SWAP”) requirements. Solutions in this space must not only be light and fit into small volumes, but must also survive drops, g-forces and vibration. Additionally, they must continue to operate at extreme temperatures and in dusty or moist conditions.

While other edge computing suppliers may serve the needs of the environmentally controlled edge datacenters with the latest technology, the deployment of the same performance level in the AI Transportable space requires unique capabilities and know how, which is where we believe that we excel. Many companies that enter this space tend to offer solutions based on older and lower performance technology, whereas we advance our proprietary state-of-the-art technologies and utilize the latest generation of products to ensure superior performance. We leverage our proven track-record of delivering first-to-market advanced technologies and technical strength, working with the latest high-speed networks like PCI Express 5.0 and NVIDIA’s NVLink®. This is in addition to our expertise with rugged servers, compute acceleration and high-performance flash array storage systems. When combined with our execution and knowledge for deploying these systems in challenging environments, we bring the latest commercially available datacenter level technology and products to this market.

Business Strategy

We continue to execute our strategic commitment to the AI Transportable and rugged edge HPC market, and we believe that our engagement over the past two years in the markets and with customers and our current portfolio of business are validating this approach. In this portfolio we are witnessing some of our highest margins and repeat business and expanding levels of interest. Additionally, we have seen our five-year pipeline increase by over 25% in the past year as we pursue this strategy further.

Although we are seeing progress, it will continue to take time to pursue, secure, and turn these target opportunities into increased revenue and profits, especially as we secure positions in the military market. As part of this strategy, we are consistently focusing on expanding the number of customers and platforms while also securing multi-year contract opportunities in this space. We believe this focus provides us with a unique opportunity to drive growth and shareholder value. We will continue to execute current profitable business where we offer product and solution differentiation, but our primary focus will be on the AI Transportable market and our rugged edge HPC strategy.

We continue to see and pursue opportunities in both the commercial/industrial and military/government segments. Currently, our OSS military business accounts for approximately 25% of our overall sales, but we anticipate this will grow to 50% over the next few years and will leverage commerciality to increase margins. Commerciality is the ability to use commercial market pricing in defense procurements. We believe a balanced portfolio of commercial and military customers can serve as a strategic benefit in execution of the business, strategy, and growth. Both commercial and military markets are currently seeing an influx of autonomy and AI/ML applications that are driving market growth and strengthening opportunities. Commercial adoption of AI/ML is dramatically moving to the edge across almost all business segments. While military budgets may not expand dramatically on whole, the spend on autonomy and AI/ML represent the fastest areas of growth as the US and allied nations look to augment existing and field new sensors, platforms and weapon systems to maintain advantage over adversaries.

A key element of our business strategy is a product strategy based on technology leadership. We believe a first-to-market strategy is key to our ability to continue to win significant opportunities. As a result, we continue to develop new state-of-the-art products across a range of HPC demand, providing a unique value proposition for our customers in the targeted spaces. Current engagements for our products in the military space cover various autonomy, sensor fusion and AI/ML applications, including for multiple aircraft, drones, ships, helicopters, and land vehicles, as the Pentagon prioritizes incorporating advanced technologies into their equipment. We have pursued these engagements throughout 2023 by incorporating an AI compute and storage product strategy that applies the OSS expertise in three product levels that cover the needs of land, sea and air deployments.

At the high end, we introduced Rigel, which is a super compute edge platform. We believe that this product is currently the highest performance, most compact supercomputer in the market that can survive the most demanding edge environments, especially those in military programs available today and in the future. It brings to market the latest in Graphics Processing Units (“GPU”), Central Processing Unit (“CPU”), high speed PCI express switch fabric and memory products in a rugged compact form factor, to meet sensor processing, sensor fusion and AI/ML applications in this space. Rigel has been vetted by multiple large military prime contractors as well as the U.S. Department of Defense (“DOD”) directly for key, high visibility programs that we are pursuing.

At the mid-level, we have fielded our Short-depth Servers (“SDS”) in many commercial and government program wins due to its flexibility. The SDS provides integrated AI compute, data recording and storage at a performance level approaching Rigel, suitable for wider market adoption. In the fourth quarter of 2023, the 3U SDS was upgraded to the latest PCIe 5.0 performance levels and launched as a standard product and two original equipment manufacturer ("OEM") customer configurations that accounted for two new program wins. These upgrades consisted of advanced cold plate liquid cooling and liquid immersion options that widen the environments in which the SDS can be deployed. Top commercial applications for the SDS include autonomous trucks and ships and edge data analytics. The top applications for government use include AI sensor fusion, simulation, capturing AI datasets through data recording and serving high-speed data to crews with our Ion Accelerator™ data storage software.

At the low end of performance, but with a higher level of ruggedization, we have introduced Cernis™ and Donati™. These products create the most compact solution for autonomy, AI/ML and visualization. The Donati CPU/GPU compute and visualization systems are interconnected using the Cernis PCIe switch, creating an optimized data path that takes advantage of OSS low latency breakthroughs in PCIe interconnect, typically found in Rigel and SDS servers, while being highly rugged for use in wheeled and tracked land vehicles that require conduction cooling.

Our ability to drive the leading edge of technology is enabled by our strong relationships with strategic component manufactures, including NVIDIA (for GPUs, ARM processors and networking), NetList, and Micron (for flash memory), Broadcom (for PCIe switch components), and Intel and AMD (for CPUs). In many cases, we have access to product roadmaps and other technical information relating to future technology. Access to this information allows us to begin our design process well before the future components we are designing even exist. We have also expanded our market relationships to embrace companies in the AI/ML software space. These efforts allow us to establish relationships that enable our ability to offer end-to-end solutions for customers while also creating opportunity for these software companies to standardize on our hardware platforms.

We anticipate that the steps we have taken in implementing our strategy and the fast-growing markets that we are pursuing will provide accelerated revenue and margin growth for the Company over the coming years.

Industry Background and Market Opportunity

The notion of network-based computing dates to the 1960s, but many believe the first use of “cloud computing” in its modern context occurred in 2006 when Google’s then-CEO, Eric Schmidt, introduced the term during an industry conference. Years later, the explosive growth of internet of things (“IoT”) connected devices, along with new applications that require real-time computing power, started to create the drive for edge-computing systems. As the demand for AI on the edge and autonomous vehicles grew, so did the need for high-performance solutions to operate in harsh environments and reduce risk of loss of connectivity to the cloud.

Edge computing is one of the fastest growing markets in the computing space, driven by the need to do more at the edge. The concept of edge computing is simply deploying compute systems closer to the actual user of the system, rather than communicating with a distant cloud computing facility. According to Gartner, Inc., a leader in technology research, only 10% of data was gathered and processed at the edge in 2018; however, it is expected that this number will grow to 75% by 2025. This dramatic change is driving an expected growth of over 38% per year between today and 2028, according to Grand View Research, resulting in an estimated market of $61 billion later this decade.

The AI Transportable markets tend to implement sensor processing, sensor fusion, AI/ML, autonomous, and/or semi-autonomous solutions. We believe markets for these products are large and growing. Applications deploying these technologies today, or that we expect to do so in the future, include, without limitation:

•

Commercial/Industrial- Trucks, buses, trains, aviation, agriculture, mining, medical, oil & gas, etc.

•

Military/Government– Aircraft, rotary winged aircraft, ships, mobile command, mobile radar, submersibles, land vehicles, drones, etc.

We expect these applications to deploy increasingly faster computing systems to meet industry and competitive goals. Whereas the goal used to be for an edge compute platform to perform a single application, such as autonomous navigation, now this has been expanded to include in excess of ten or more AI applications running simultaneously. This expansion requires significantly more compute power and data storage than traditional embedded computers can manage while operating in harsh, challenging, and space constrained environments.

We currently estimate that the market for the AI Transportable portion of the edge computing industry will grow to approximately $5 billion in the coming years. OSS’ objective is to be a technology and market leader in this segment of the market.

Product Offerings

Our systems are built using the latest CPU, GPU, high speed switch fabrics and flash storage technologies that draw upon years of expertise in designing and manufacturing custom, semi-custom as well as standard systems for military and commercial customers. We have a history of being first-to-market with many solutions for emerging technologies. Our technological leadership includes linking different OSS product systems together.

We use leading edge, state-of-the art components from major technology providers to design purpose-built systems that solve customer problems in an efficient, cost-effective manner. We apply the component technology provided by Intel, AMD, NVIDIA, Micron, Broadcom, and others to deliver solutions to provide true value to our customers.

Four technologies are fundamental to the AI Transportable computing space: edge servers, GPU compute accelerators, flash memory-based storage, and high-speed switch fabric for data acquisition I/O. These technologies enable systems to ingest, process and store data at significantly higher rates than traditional systems. By harnessing these components, customers can process data much more quickly and in a more secure manner, and as a result, turn raw data into advantage in action.

Rugged Edge Servers

While simple AI applications, such as facial recognition to open a door to a secure area, may run on traditional low power embedded processor, the needs of the AI Transportable applications require datacenter-class server performance brought to a mobile platform. The sheer amount and speed of sensor processing, sensor fusion and AI/ML processing for operating an autonomous vehicle or a mobile weapon system requires multiple high-speed digitizers, high-performance networking, the fastest flash storage devices, and server-class processors. We enable the power of the datacenter to be deployed at the edge without compromising performance by employing groundbreaking ruggedization and cooling technologies for edge servers operating from various vehicle AC and DC power sources in small spaces.

GPU Compute Acceleration

When GPU technology and solid-state flash were first introduced, we began designing systems that maximized the effectiveness of these technologies. We now produce compute-systems with large numbers of GPUs and flash memory that communicate over PCIe and allow faster processing, data storage, and data retrieval. The more GPUs and flash devices available to a server, the faster that system can process and store data.

The capabilities and speed of GPU accelerated computers are driving significant advances in AI and machine learning. Massive amounts of data are collected, stored, and analyzed by today’s sophisticated algorithms. We are enabling the growth of such AI capability by adding scale with rugged systems that complement the highest performance rugged servers.

High Density Solid-State Flash Storage

The proliferation of larger and larger data sets used in edge computing, including AI, is feeding the need for higher capacity and higher performance storage devices. Traditionally, companies have used hard disk drives for their primary storage. Hard disk drive-based systems are being replaced by flash memory-based systems, which offer higher capacity, performance, reliability, and ruggedness. Flash-based storage systems also consume significantly less power. Our solutions offer the highest capacity and performance with the addition of removable media which enables the quick transportation and delivery of massive amounts of data.

Switch Fabrics For High Speed Data

At the front-end of AI Transportable systems is high speed data acquisition technology through switch fabrics. Depending on the application, data can be generated from a wide array of sensors and inputs. In many cases, such as autonomous driving or mobile weapon system platforms data is generated through arrays of video, Light Detection and Ranging (“LIDAR”), radar, Forward Looking Infrared (“FLIR”), Radio Frequency (“RF”), and other computationally intensive sensors. Our PCI express based switch fabrics provide the highest speed and lowest latency data acquisition and movement.

When PCIe was introduced in 2005, we were the first company to produce PCIe over cable adapters allowing system-to-system communication at the same speed as internal Input/Output (“I/O”) expansion significantly reducing latency. Today, we are one of the largest providers of PCIe adapters and expansion components used worldwide.

What Sets OSS Apart

Several factors differentiate OSS from other suppliers of high-performance edge computing solutions, including, without limitation the following:

•

Ruggedized SwaP-C – We provide systems that can support datacenter performance at the rugged edge by implementing unique form factors optimizing space and weight, variable power inputs sources and cost competitive solutions across a wide range of applications, including full mil-spec systems.

•

Lowest Latency – We have expertise in PCIe and NVLink® switch fabrics that deliver the lowest possible latency. This allows us to design reliable systems using this differentiating high-performance technology with a greater quantity of GPUs and flash storage devices than other suppliers.

•

Advanced Cooling – We provide systems that can withstand extreme environmental temperature ranges. We engineer cooling for extremely high power heat generation, including heat from GPUs and Field Programmable Gate Arrays (“FPGAs”), utilizing differentiated methods for conduction, convection, liquid and immersion cooling.

•

Key Partnerships –We have long and established leading edge technology partnerships with early access to product roadmaps, which include a differentiated relationship with NVIDIA. We are a “Preferred Tier 2 OEM” in the NPN program with unique NVLink® license.

•

Speed To Market –Our short development cycle times allow us to bring the newest technology to market quickly.

•

Powerful Software –We provide software products required to operate high-capacity, low-latency storage systems used by defense systems and commercial applications.

Business Strategy

We have consistently followed a strategy of being first-to-market in leading edge deployment technologies by designing and developing products that are delivered before our competitors. We currently have products spanning the spectrum of high-performance computing, including servers, flash storage, GPU acceleration, networking, and PCIe data acquisition I/O expansion. Within these product areas, the approach implies that we:

•

Anticipate trends in these markets and do not hesitate to share our vision with customers to create thought leadership and deeper engagement;

•

Swiftly deploy resources in engineering and sales to bring innovative products to market before our competitors;

•

Leverage strategic relationships to get early access to future products and technologies;

•

Hunt for early program wins with market leaders and leverage close relationships;

•

Continuously monitor and influence the market for next generation technologies for which a new concepts and solutions may be forming; and

•

Establish leadership in the fast-growing AI Transportable portion of edge computing.

Earnings Growth Strategy

We intend to implement different strategies to increase our revenue growth, while improving earnings. We believe that earnings growth can be accomplished by taking the following actions:

Revenue growth driven by existing OEM and new design wins:

•

Focusing on the fast-growing, higher margin AI Transportable market;

•

Demonstrating technology leadership with a clear, ever building value proposition;

•

Utilizing a higher percentage of leading edge standard products for scalability;

•

Pursuing market leading OEMs in the AI Transportable market;

•

Continuing to layer in recurring high margin business;

•

Constantly improving and expanding a highly skilled direct sales force complimented by well positioned third party manufacture representatives;

•

Expanding worldwide sales efforts and marketing opportunities appropriately; and

•

Completing sizable accretive acquisitions.

Higher margins:

•

Challenging OSS-designed solutions that leverage our skills;

•

Increasing proprietary content, software, stickiness, barriers of entry, and differentiating features;

•

Prioritization of the highest return programs/markets;

•

Maximizing military and other high value applications and sectors;

•

Retaining commerciality on products for the defense market;

•

Leveraging economies of scale and lowering material costs;

•

Eliminating lower margin products and markets;

•

Driving operational efficiencies up through automation, discipline, and process improvements; and

•

Layering in additional high margin services.

Optimize expenses:

•

Promoting a culture built on lean principles that innovates to minimize spending and drive higher efficiency per employee;

•

Utilizing technology and talent on team to increase efficiency;

•

Leveraging efficiencies of scale; and

•

Welcoming organizational change as business and markets adjust.

Our Opportunity

The worldwide edge computing market is expected to grow at a compounded annual growth rate (“CAGR”) of 38% to $61 billion by 2028 (Grandview research, “Edge Computing Market Size,” May 2021). Within this market, we are positioned and focused on the AI/autonomous portion at the very edge, which we call AI Transportables, and we believe that this market could be as large as $5 billion within several years. The products we develop to address this market include high performance compute, storage servers, and PCIe acceleration systems that can perform in the most challenging environments. If an application needs AI and/or autonomous capabilities, and it moves, OSS strives to deliver the highest performance solutions that will survive and enable these challenging applications.

Our Technology

We design and manufacture ruggedized high performance edge computing systems, which are designed to increase compute performance while surviving in harsh environments. Our rugged servers bring the power of leading-edge datacenter-class technologies to the edge for applications in AI/ML, sensor fusion, autonomous navigation, data logging and video rendering. Our high-density compute accelerators connect directly to a server’s PCIe bus, delivering substantial compute performance. Our flash storage arrays support hundreds of terabytes of high-speed storage that can also be accessed by multiple servers.

Technology Drivers for OSS High-Performance Computing Business

We have developed expertise and core competencies in the three fundamental technology drivers within today’s high-performance edge computing market – high-speed serial interconnect technology, compute acceleration utilizing GPUs, and low latency flash storage. In combination, these three fundamental technologies, underpinned by PCI Express, are changing the economics of computing, bringing high-performance computing within the grasp of a wide range of new industries and commercial applications on the edge. Simultaneously, the emergence of massive amounts of data being generated by advanced sensors in each of these industries is pushing the requirement for innovative state-of-the-art technology. We are enabling this technology to be deployed at the edge by merging these fundamental technologies with our expertise in providing system level optimization for meeting requirements for ruggedization and SWAP constraints. Our strategy is to be the disruptive leader in the platforms for rugged edge applications, based on our unique ability to design high-quality, high-performance AI workflow compute/storage engines that can be deployed in harsh dynamic environments, which require unique system level features for vibration, cooling, and power. Our target market, including various types of vehicles that move on land, in the air or at sea, creates extremely demanding requirements for compute systems, which must be compact, survive the elements and disruptions in power, as well as leverage the higher performance capabilities in the market. This is what we believe we do well.

We strive to not only provide competitive advantage for our customers, but also to address some of the most fundamental challenges in military and industrial applications. We believe that we are well situated to leverage these major industry forces. By exploiting our unique set of expertise in the underpinning technologies of high-performance computing, we strive to continue to deliver industry leading solutions, disruptive at times, and to take advantage of the opportunity to capture a growing market share in this rapidly expanding marketplace.

Switched Serial Interconnect

Switched serial interconnects are the data highways connecting many elements of today’s high-performance computing platforms. At ever increasing speeds, these pathways move data between a system’s processing units, storage, networking, and peripheral elements. For high-performance computing, the primary processing, storage, and peripheral interconnect is PCIe. PCIe Gen 5.0 has an ability to run up to 16 lanes in parallel, which allows up to 128 gigabytes (full duplex) per second bandwidth between system elements. We expanded the breadth of our products based on PCIe Gen 5.0 during 2023 to address ever increasing applications in the AI Transportable market.

Compute Acceleration with GPUs

GPUs have evolved from graphics display acceleration to becoming general-purpose processing workhorses for high-performance computing systems. Today, most of the fastest supercomputers in the world utilize GPUs as their primary compute engines. GPUs are ideal for high-performance computing workloads including AI training and inference because of their ability to complete massively parallel processing. While today traditional CPUs may have dozens of processing cores, GPUs have thousands of cores that are able to execute calculations simultaneously.

NVIDIA, a key supplier of GPUs to the market, lists more than 500 such applications across a broad set of market spaces, along with focused teams on specific industries of high growth potential such as their NVIDIA Drive team for autonomous navigation. Main markets serviced by NVIDIA GPUs include, without limitation:

•

Autonomous navigation;

•

Computational finance;

•

Climate, weather and ocean modeling;

•

Computational chemistry and biology;

•

Data science and analytics;

•

Deep learning and machine learning;

•

Federal defense and intelligence;

•

Genomics;

•

Manufacturing;

•

Media and entertainment;

•

Medical imaging;

•

Robotics;

•

Oil and gas; and

•

Safety and security.

While NVIDIA is focused on the deployment of their GPUs in hyperscale datacenters and for consumer gaming purposes, we are focused on taking the datacenter class capability to the AI Transportable market, expanding the overall market significantly. Many of these applications also scale performance, based on the number of GPU components utilized. We have designed multi-GPU systems, including up to 16 GPUs in a single system. Current state-of-the art GPUs (NVIDIA H100) provide over 48 teraflops (FP64) of performance, with future products expected to dramatically increase overall processing capabilities in the years to come.

GPUs also pose significant system design challenges due to their high-power requirements. High-end GPUs can require 500 – 700 watts of power or more, which generates a tremendous amount of heat. Sophisticated power distribution and cooling designs are required, especially for large-scale systems with multiple GPUs per chassis. OSS has significant expertise in addressing these challenges.

PCI Express Flash Storage – NVMe protocol

The use of flash memory technology for system storage has gained traction over the past decade, which we believe to be a result of the continuous decline in the cost per gigabyte. Flash memory has become the ubiquitous storage technology in high-performance systems.

Combined with the move away from traditional rotating hard drive technology, there has been the trend toward eliminating traditional storage protocols in favor of low latency flash memory protocols. Newer flash memory modules utilize a protocol known as NVMe, which connects the flash memory directly to the system’s PCIe interconnect. This direct connection allows for very high bandwidth between the storage and the other system elements, which eliminates the need for protocol translation as data moves from storage subsystems to and from the compute complex.

Today, flash memory modules with capacities up to 60 terabytes and PCIe Gen 5.0 interfaces are now available. PCIe Gen 6.0 devices are expected to be available for purchase in 2025. Our flash storage arrays with up to a thousand terabytes of capacity are available enabling the scaling of high-speed storage to meet the full range of high-performance edge application requirements.

OSS leverages the latest technology to build complete storage and data logging systems, including all the software to provide the highest density and performance in a compact form factor ideal for vehicles of all types. This, combined with our hot swappable canisters, has enabled many autonomous truck and military aircraft applications.

Our Core Technical Capabilities

We have developed unique expertise and core competency across the fundamental technologies of today’s rapidly expanding specialized high-performance edge computing marketplace. These valuable assets are embedded in the leading-edge engineering capabilities of our engineers, the proprietary intellectual property residing in our vast library of designs, and our brand equity based on our reputation as a high-quality producer of state-of-the-art, custom and standard solutions across a broad array of markets.

High Speed System Interconnect Design

Our electrical engineers are experts in high-speed digital signaling design. They have continually designed at the leading edge of the state-of-the-art signaling speeds, even as semiconductor technology has driven up the clock rate of digital transmission. We have consistently been among a small handful of companies able to come to market first with the latest technology. In fact, we delivered the industry’s first PCIe over cable solutions for PCIe Gen 1.0, Gen 2.0, Gen 3.0, Gen 4.0, and Gen 5.0. The expertise required includes circuit design, PCB (printed circuit board) layout and routing optimizations, all of which focus on achieving the highest levels of signal integrity. In our current systems,

PCIe Gen 5.0 signals are propagated across multiple PCBs, connectors, as well as both copper and fiber optic cabling, while maintaining the ability to recognize digital signal transitions at 32 billion times per second.

In high-performance computing systems, especially those systems that operate at the edge, the trajectory and need for ever-increasing signaling speeds is continuing; provided, however, the number of companies that have the capability to design robust, highly reliable systems at speeds that can tolerate the harsh conditions at the edge are continuing to decline. We believe our core competency in large-scale, high-speed design, and layout will allow us to remain on the forefront of this growing industry.

Complex System Design

In addition to low-level signal integrity design expertise, we have amassed expertise and intellectual property in high-performance system architecture design and software. This expertise allows us to develop extremely sophisticated systems with massive scaling, while also meeting customer demands for reliability, cost, and flexibility. To do so, we have developed deep knowledge for high-capacity input/output systems, operating system adjustments, and required configuration tuning. Due to this development, our engineers are often called upon to co-design with OEM designers to create the perfect solution to fit the needs of their customers.

For highly scalable systems, a deep understanding and experience with switching topologies, interconnect fabric design and low latency acceleration software is required. We have worked with serial switching technology, starting with the first generation of PCIe, and have been an innovator in creating unique and flexible topologies to meet the specific needs of customers. Creating custom solutions for unique customer solutions is a core competency at OSS, and we rely on this deep knowledge of switch capabilities and limitations.

For maximum system performance, unique software and design for optimizing data transfer, speeds are also important considerations. Our software expertise includes developing unique hardware drivers and configuration software that accelerate bandwidth and lower latency in PCIe GPU and NVMe system designs. We have developed expertise in system design to leverage peer-to-peer data flows between GPUs and pioneering techniques for optimized data flows between flash storage and GPU compute-engines. Our systems optimize switch and GPU configuration topologies to optimize GPU-to-GPU communication without requiring latency-inducing data transfer between host dual processors. Our platforms feature RDMA (remote direct memory access) across compute-nodes, which support data transfer without burdening the host CPU, as well as NVMe over Fabrics for efficient data transfer from remote storage to compute.

We have pioneered the ability to extend the PCIe bus beyond the confines of a single enclosure, opening the possibility of flexible system expansion options. We believe we are one of the leading designers and suppliers of PCIe host bus adapters that extend PCIe signals from the host motherboard across copper or optical cables to expansion enclosures, which provide application acceleration through scale. Our adapters provide both ends of the external cable connection. Our expertise in high-speed signal design in printed circuit boards, connectors, and cables is essential to successful expansion designs. We also hold expertise in incorporating clustering and rack scale expansion into our system designs, including 200/400 gigabit Ethernet, 200/400 gigabit InfiniBand, and emerging PCIe top-of-rack switch technology.

Expertise in power, cooling, and mechanical design are required to address the requirements of the high-performance computing customers, especially while meeting the constrained time requirements of rugged edge deployments. We have developed leadership design capability in high-power design and distribution within large rack enclosures as well as edge optimized configurations. High-end GPUs today require 500 watts or above, and in our high-end systems, up to 16 of GPUs can reside in a single chassis. Thousands of kilowatts of redundant power are required. Power stability and huge thermal loads are some of the critical design issues that must be addressed. Additionally, at the edge for AI applications, a wide range of input power sources need to be supported from standard 110-220 VAC and 48-270 VDC for terrestrial vehicles as well as three phase 400-800Hz AC for airborne applications.

We have expertise in power distribution, redundant power, and complex chassis cooling design, including materials selection, airflow simulation, fan technology, and various liquid cooling options including direct to chip conductive cooling and single and dual phase immersion cooling. We have also developed extensive expertise to help ensure regulatory compliance of our complex high-performance computing system designs that span across emission, shock, vibration, thermal, humidity, and other environmental requirements that are required for highly reliable and highly available solutions. Our engineers are experts in design for regulatory testing for FCC (Federal Communications Commission), CE (European Conformity), UL (Underwriters Laboratories), and Mil-STD (Military Standard)

standards. Additionally, we have expertise in rapid prototyping, design for manufacturability, and design for serviceability.

We also have expertise in system management software that enhances our competitive advantages and provides robust monitoring and management of the functions of complex computer systems. While the baseboard management controllers ("BMCs") of standard servers and workstations provide passable system management for an office or datacenter with a benign environment, the unique missions of our rugged edge systems require a more diverse level of monitoring, management. and control.

First, products like our 4UPro and EB line of PCIe expansion systems are not servers or workstations, but instead, they provide scale-out expansion of high-performance GPUs, FPGAs, NVMe drives and edge I/O devices to a server. To provide the widest compatibility and largest serviceable market for our expansion systems, our U-BMC, or “Unified Baseboard Management Controller,” allows our expansion systems to seamlessly integrate with existing customer servers or our own SDS and EOS server products, allowing a server and one or more of our expansion products to be managed, monitored and controlled, as if it were a single integrated system with a massive amount of PCIe resources interconnected by our highest bandwidth, lowest latency PCIe switched fabric.

Second, unlike the standard datacenter server, our servers are designed to operate in both government and commercial harsh edge environments where “dirty” power from generators, engines and batteries with large spikes are common. Mix in the environmental conditions in which our servers may operate autonomously, such as temperature variances in places from Death Valley to 50,000 feet altitude, with moisture ranging from salt fog to rain and extreme vibration and shock from washboard dirt roadways to a hard-landing propeller aircraft, and one can see that a higher level of management, monitoring and control than a server snug in a power and cooling conditioned datacenter is required. The U-BMC adds unique value to server-level systems in these environments, especially in autonomous operations where there are no service technicians for miles, by allowing the system to adapt to changing conditions automatically or by remote control without failing. The U-BMC has features to handle these environments, such as controlling sensors connected to the server, turning on heaters in extreme cold, changing the PCIe fabric to reroute data around failed components and connecting to the Controller Area Network ("CAN") bus in cars and autonomous trucks to monitor the vehicle conditions to be able to take action on information provided by the vehicle, such as ignition on/off. Many more U-BMC edge features unique to OSS and valuable to our customers were in development in 2023 and will continue to be added in 2024, such as throttling NVIDIA GPUs in real time based on power or temperature fluctuations to keep systems running in a reduced state rather than shutting down.

Third, due to operating in diverse industry standard and regulatory markets required by military standards, commercial aerospace FAA or EASA, and highway NHTSA or ETSC agencies, the U-BMC is designed to adapt to the unique requirements imposed by servers residing on, or controlling, vehicles. A standard datacenter server BMC needs to conform to the basic agency requirements of electrical interference and personal safety regulated by agencies such as the FCC or CE and administered by testing companies such as UL and TüV. The U-BMC is designed to cover all edge requirements of the datacenter as well as adding standards organization compliance, such as those required by military customers including SOSA compliant functions for sensor management, system management, and task management not found in datacenter server BMCs.

In 2022, we introduced the U-BMC, which is included in our Rigel edge supercomputer and PCIe Gen 5 4UPro products. In 2023, we expanded the platforms that include the U-BMC to the PCIe Gen5 SDS rugged server for commercial and military edge applications with more platforms to come. With U-BMC, we provide “single pane of glass” management of complex systems, even if the server is in a separate enclosure, and an open-source Redfish API for easy integration with industry-standard management tools. We expect to continue to expand and enhance our licensable software to create additional value, barriers of entry and stickiness with our program wins.

Storage Management Software

Given our hardware design and integration expertise, we believe that our robust software capability allows us to offer more optimized and customized systems. Our Ion Accelerator™ software design team provides the expertise to deliver full server and storage solutions that produce the highest performance from today’s leading-edge flash storage devices. The Ion Accelerator software allows flash-based modules to be put into a variety of storage and network configurations which can then be accessed by multiple edge servers. The Ion Accelerator software can do this cost-effectively, while preserving the low latency and security that is vital for many mission-critical applications, from secure network boot, database, and transaction processing to massive data collection programs.

Benefits of Technology and Core Capabilities to our Customers

Due to our core capabilities, we can provide our high-performance computing customers with platforms that are highly reliable and cost effective. Such performance allows our customers to solve larger problems faster, and save the cost and time of highly paid engineers, data scientists, and other human resources. Our technology enhances innovation by allowing more “what-if” analysis in a finite amount of time. Our price/performance leadership enhances our customers’ competitiveness and lowers capital expense and total cost of ownership. We work with our OEM customers to develop custom “perfect fit solutions” for their unique requirements when the anticipated return justifies the investment.

Our Products

Compute Servers

Within the server sector, we have secured a niche position of building purpose-built specialty servers, which the major server suppliers do not supply, as they require custom tuning and special features that major OEMs cannot easily provide. Our compute servers are designed to provide the highest level of performance that can be deployed in harsh edge environments. Our expansion optimized (“EOS”) line of servers is optimized for supporting a high number of add-in cards such as GPUs, FPGAs, NVMe drives and sensor inputs. Servers in this product family have a number of slots that are compatible with the PCIe host bus interface cards that we have developed. These cards enable PCIe connection over cable between the host processor and downstream I/O devices. These servers have custom basic input/output systems (“BIOS”) to ensure they work seamlessly with expansion chassis and support a high number of downstream I/O devices. Our short-depth server (“SDS”) line supports rugged deployment in space constrained environments providing a maximum depth of 20 inches. We believe that our “Rigel Edge Super Computer” (“Rigel”) is the highest performing, most dense, AI-compute platform that is deployable in extreme environments, including on military aircraft.

GPU computing uses hardware components that are optimized to perform mathematical calculations in a rapid fashion. NVIDIA is the market leader in the design and manufacturing of these components. We work closely with NVIDIA to design and build systems which use multiple GPUs to accelerate applications.

Emerging markets and applications such as AI, image rendering and processing, autonomous vehicles, deep learning, molecular modeling, genomics, advanced visualization, machine learning, and image processing, all benefit from the ability to use GPUs to accelerate the application. We build specialized compute-servers and accelerators used in these emerging growth markets. We estimate these markets to be very large and growing.

Storage Servers

We also build standard and custom flash storage arrays utilizing our unique know-how in PCIe device fan-out, packaging, cooling, and PCIe-over-cable. We deliver dense, high-performance systems that provide customers with high value and utility in the most demanding, data-intensive operations. These OSS storage servers complement our compute servers to provide an end-to-end edge solution for AI workflows.

Through a strategic agreement with Western Digital, we acquired an exclusive software license for Ion Accelerator™ Storage Area Networking (“SAN”) source code and software development rights, as well as hired their core engineering team in July 2017. Since acquiring this software asset, we have extended its capability to align with our AI Transportable strategy by adding Network Attached Storage (“NAS”), support for NVMe flash drives, NVMe over Fabric expansion capability, and several encryption methods required for government security applications. We have also implemented a proprietary Follow Me™ capability for removing a bulk pack of NVMe drives that can be easily transported to another system without rebuilding the data, operating much like a massive capacity USB stick. This provides our flash arrays with a high level of differentiation relating to storage management, latency, portability, and throughput. We provide standard flash array products and have the in-house hardware and software expertise to provide customized systems for demanding applications that are not suitable for standard offerings. For example, we provide products to a large military contractor for integration into military aircraft that requires us to design and manufacture a highly ruggedized mil-spec flash array. The resulting product provides high data density with low weight, a high degree of portability, and security for data protection. We believe our experience and capability in high speed, low-latency, digital signaling via PCIe gives us an edge in providing custom designs to OEMs, military programs, and other special purpose applications.

We believe that because our products are positively differentiated by speed, density, and management features for challenging edge applications, our offerings compete favorably in this market and provide a substantial growth opportunity.

PCIe Expansion and Adaptors

PCIe is the high-speed standard for communications within a computer. This standard defines the signals and connectors (i.e., slots) that are used for computer add-in cards (such as Ethernet or graphics). Traditionally, communication between computers in the network is completed via Ethernet. Although Ethernet is great for large networks, this introduces delays and latency challenges. To keep performance at the highest level, PCIe signaling can also be routed over a cable, allowing expansion input/output slots to be physically located in a separate chassis. This provides for high-performance and low latency, which are essential in this market.

Being able to separate the server from the I/O expansion, by using PCIe over a cable, facilitates disaggregation of server functionality. That is, with PCIe, server I/O functions no longer need to be contained in the physical server chassis, but instead, can be separated into a separate chassis and continue to operate at full speed. This offers many advantages over higher latency and power consuming traditional networking communications like Ethernet. From a practical perspective, servers can be connected directly to larger storage arrays or other peripheral devices, with the resulting group of chassis operating as if they were all in the same physical chassis.

We began developing our first PCIe-over-cable adaptor in 2006 and were one of the early providers of PCIe adaptors. We recognized this space as a prime opportunity to utilize our core strengths, such as:

•

High-speed board design and layout;

•

Signal integrity masters;

•

Hardware tuning to improve signal integrity;

•

Design optimization for low cost;

•

Rapid design capability;

•

Rugged design to survive in harsh AI Transportable applications;

•

Custom BIOS to support a high number of connected PCIe I/O devices, well beyond what can be supported in off the shelf BIOS; and

•

Manufacturing and supply chain management.

This technology has now become a standard within the computer industry, our customers have used our adaptors to connect their custom input/output chassis and achieve performance equivalence as if the I/O was integrated into the server box. This gives designers and integrators a degree of flexibility and utility in architecting computer systems that is unprecedented. We have expanded our PCIe adaptor market in breadth and depth, including making adaptors for many OEM customers.

With our expertise developed in designing adaptor cards, the logical extension of our capability led us to develop a method for expanding the PCIe bus into an external chassis containing one or many expansion slots and using this expansion to provide storage and AI application acceleration. This allows a customer to install multiple standard PCIe boards into a chassis and accelerate their system without having to add additional servers. These are typically GPUs, FPGAs or NVMe drives to create large-scale Compute and Storage appliances. For example, we have developed a product for deployment in a mobile command center, which aggregates large amounts of high frequency data from sensors and allows in the field AI algorithms to operate in real time. This is achieved through a cluster of our compute and storage products. A user can now connect a multiplicity of PCIe devices to a single server using a single memory domain, and achieve performance throughput and low latency, which was not possible prior to the introduction of PCIe.

We have been a leader in PCIe acceleration through generations 1.0, 2.0, 3.0, 4.0 and 5.0. We delivered our initial PCIe Gen 5.0 products in 2022, well ahead of any of our direct competitors, and started shipping a full line of Gen 5.0 products throughout 2023. As PCIe evolves through generations 6.0 and beyond, we believe that we are uniquely positioned to continue our leadership role in this market. We currently offer what we believe to be the largest

PCIe acceleration product line, with chassis and backplanes that offer expansion from one to 64 slots. Due to its greater data throughput, lower latency and flexibility of design, we believe this is a growing market, and we intend to maintain our leadership role.

Additional Compute Products

Through Bressner, we provide small form factor IoT and high-performance industrial and panel PCs compute-platforms customizable to meet needs in commercial applications on the edge where space constraint is a fundamental consideration. We also provide ruggedized, mobile tablets and handhelds that meet the specialized requirement for devices deployed at the edge in a diverse set of environmental conditions for commercial and government applications.

Customers

We deliver the highest performance scalable products and solutions at the source of the data that enable AI/ML, sensor fusion, and sensor processing for global defense and commercial markets. We serve a global clientele consisting of multinational companies, governmental agencies, military contractors, military services, and leading technology providers. Some of our key customers are set forth below, illustrating the class of customers we pursue with our sales, product marketing and marketing communications efforts.

Raytheon – We work closely with many of the U.S. Government agencies and prime contractors to bring the latest technologies to mobile edge applications. Raytheon provides an excellent example of how we adapted high-performance computing elements used in air-conditioned datacenters to the rigorous environment encountered in a U.S. Navy aircraft. We worked closely with Raytheon to build a customized NVMe storage array, with drives installed in removable canisters for high-speed sensor data acquisition, encryption, and recording. This massive amount of mission data can then be easily off-loaded upon landing the aircraft and sent to the traditional government datacenter, which is a significant development given that satellite network links are too slow to handle transmitting that amount of data. To further enhance the data collected, we embarked on a second project with Raytheon to build a GPU accelerated “datacenter in the sky” system to enable mission data collected in the flash array to be analyzed and run through AI algorithms in real time while the mission was in process. This allowed the aircraft and crew to make real time decisions using the same level of processing power available in a ground-based system. Finally, we enhanced that “datacenter in the sky” with a 3-system cluster to provide large scale resources during missions and to carry out multiple AI tasks in real time. These applications are great examples of rugged edge products. We have continued to enhance and refresh the technology for this program while working on opportunities with other prime contractors, including other mobile applications such as video surveillance, video analytics and autonomous vehicles on land, in the sea and in the air. OSS is currently expanding its footprint within in the military market with multiple new engagements with other prime contractors and the DOD directly. Much of this activity addresses the needs of AI, sensor fusion, and autonomy required in the battlefield. Current applications include land vehicles, aircraft, drones, ships, and submersibles.

LIQID– LIQID is a market leader in composable infrastructure hardware and software solutions. Leveraging industry standard datacenter components to deliver a flexible, scalable architecture built from disaggregated resources. We provide optimized high performance computer solutions, expansion chassis and PCI Express interface cards that are used to address next-generation application in AI, IOT deployment, DevOps, cloud and edge computing, NVMe and GPU over fabric support.

Teledyne LeCroy - Teledyne LeCroy is a leading provider of test, validation and benchmarking test platforms to the storage and CXL memory device industry. We provide several PCI Express-based interface cards, PCI Express switches, NVME controllers, and host buss adaptors that are used in Teledyne’s test bed applications and end devices. We act as an extension to Teledyne’s engineering group, allowing Teledyne to complete their product roadmap in a timely and cost-effective manner.

Alcon – Alcon is a market leader in the production of computer assisted medical equipment. Bressner provides several rugged, purpose-built, high-performance workstations used in performing these AI assisted surgeries. Bressner works directly with Alcon engineers to co-design and assist in securing medical certifications for the products that doctors and patient trust for pinpoint accuracy and speed.

Torc Robotics –Torc Robotics, is a market leader in US truck manufacturing and is a subsidiary of Daimler, which manufactures globally. Daimler Technologies North America embraced a clear roadmap to level 4 autonomous trucking with planned deployments by the end of the decade. We provide the current Torc Robotics truck fleet with several OSS products, including multiple 3U SDS models for the autonomous driving functionality and our Centauri data logging system that provides high-speed sensor recording and fast data transport using our removable NVMe drive canister technology.

Sales and Marketing

Our sales and marketing efforts are focused on the identification, engagement, and closure of significant targeted opportunities within the AI Transportables market.

Sales (OSS)

Our OSS sales efforts consist of five main channels:

•

General Sales – OSS maintains a website, a web store and direct sales teams that sell directly to end-users, primarily in the U.S., Asia and Europe, Middle East and Africa (“EMEA”) regions. This includes e-commerce sales via typical web store functionality, outbound calling and direct interaction with customers and potential customers to provide standard and unique solutions that fit their needs. We are currently expanding our international sales efforts to address additional focus on Canada, and Oceania.

•

OEM Focused Sales – Our direct outside sales team, which consists of OSS employees as well as third-party manufacture representatives, is organized to best identify, target, and develop the top potential commercial OEM and government program customers in the datacenter class, rugged AI, compute and storage space. These OEM and government programs form the largest and fastest growing parts of our business. The OSS direct sales teams interface directly with new potential customers at their facilities, live events, and virtual industry tradeshows, and present standard solutions and/or proposals for customized solutions (if solid return on investment) to address such customers’ datacenter class, rugged AI needs at the edge.

•

Our Commercial Sales Team – Our commercial sales team focuses on OEM customers to whom we sell standard products, solutions or design and build customer specified systems based on OSS technology expertise that are branded with the OEM’s name and label. This includes target markets like autonomous semi-trucks, farming, medical and mining equipment deploying the latest technology. These companies, many of which are market leaders, then resell the products through their own sales channels. We actively seek this type of relationship, which is leveraged as a sales multiplier, allowing us to grow sales at a faster rate without adding as many dedicated sales resources. This tends to be a recurring sales model that lasts several years.

•

Our Government Sales Team – Our government sales team focuses on the large and growing portion of our business that provides products and systems to DOD programs, global Ministry of Defense (“MOD”) programs, government agencies, and national research laboratories. Our government sales team has the knowledge and expertise to identify major program opportunities in the emerging AI/ML, sensor processing, sensor fusion and autonomy markets, and to provide the extensive technical and business development processes to take these programs from concept to successful completion. This is a growing part of our business, one of our primary focuses, and provides a higher contribution of profit margin. Examples include compute and storage systems for aircraft, radar systems, command, control, intelligence, surveillance and reconnaissance platforms and mobile command centers.

•

Channels – We have dedicated sales resources that manage our worldwide network of resellers and distributors. We sell a large breadth of standard products through these channels, which allow us to achieve global customer touch without requiring a physical presence in all geographies. The master distributors in several countries have dedicated sales expertise to capture additional OEM business, with both Fortune 500 and second tier OEM firms extending our international footprint.

Sales (Bressner)

Our Bressner sales efforts consist of four main sales channels:

OEM Industrial PC products:

Our OEM industry-focused sales team plays a vital role in driving growth and market penetration. Comprised of passionate technical experts, they actively cultivate and develop strategic partnerships with major commercial players across diverse sectors, including industrial automation, automotive, medical, artificial intelligence, security and defense, and aerospace.

This dynamic team fosters close relationships with OEM-customers, engaging directly at their facilities, industry events, and tradeshows. By deeply understanding their unique needs and challenges, our team tailors existing solutions or custom offerings, ensuring a compelling return on investment (“ROI”) and empowering their success within their respective environments.

This customer-centric approach, combined with our focus on technical expertise and strategic partnerships, has been instrumental in propelling our market expansion and securing significant customer wins.

Looking ahead, we remain dedicated to strengthening existing partnerships and forging new ones across diverse industries. We believe that our continuous investment in recruiting and developing highly skilled technical experts, coupled with our focus on delivering tangible ROI, positions us for further success in establishing ourselves as a leading provider of customized solutions for the industrial IT landscape.

Modular IPC system integration:

Our expertise in modular system integration, driven by strategic partnerships and a diverse portfolio, unlocks sales growth in emerging markets like AI, automation, medical, automotive, smart cities, imaging and more. We achieve this by:

•

Offering cutting-edge modular product lines: Fan-less Embedded Box PCs, Panel PCs as well as Industrial Rack Mount Servers, focused on individual client requirements.

•

Precisely addressing client requirements: Ensuring ROI maximization and repeat business through tailored solutions.

•

Optimizing system integrations: Delivering cost-effective, performance-driven systems that boost sales through value propositions.

Driving ROI, Shaping the Future:

We invest in continuous portfolio expansion, strategic partnerships, and top talent recruitment to uphold technical expertise and anticipate market demands. We believe that this unwavering focus on ROI positions us for continued leadership in modular system integration, empowering diverse industries to realize operational excellence and drive sustainable sales growth in emerging markets.

VAD Distribution Sales –Empowering Innovation, Bridging Continents:

We surpass distribution as a leading value-added distributor (“VAD”) across Europe, propelling cutting-edge technology in networking, industrial IoT, and industrial flash memory. Strategic partnerships with top-tier suppliers fuel our pipeline, while our in-house expertise delivers solutions tailored to individual needs.

EMEA Sales –Local, Agile, Customer-Centric: The Heartbeat of Our EMEA Success

Our relentless pursuit of operational excellence for EMEA customers fuels our regional ascent. This translates into three unwavering commitments:

•

Building a Robust Local Presence - Bressner, our dedicated footprint in Europe, bridges the gap between understanding and action. We respond swiftly to customer needs with tailored solutions, thanks to the expertise of our highly skilled sales and engineering teams. Close collaboration ensures customers feel heard and supported throughout their journey.

•

Expanding Reach and Impact through Partnerships -We cultivate strong relationships with a network of resellers and distributors across EMEA, expanding our reach and guaranteeing seamless product delivery. Strategic master distributor partnerships unlock hidden potential within both Fortune 500 and smaller OEM firms, significantly amplifying our impact in the region.

•

Acting as the Responsive On-the-Ground Support Network -We stand beyond mere distribution, serving as the responsive on-the-ground support network for EMEA. Swift solutions, regardless of the size or complexity of the need, are our cornerstone. This dedication fosters trust and loyalty, solidifying our position as a reliable partner in the region.

Investing in the Future of EMEA Success:

We remain committed to:

•

Deeper Local Footprint -Expanding our direct presence in key EMEA markets forging, closer customer engagement and understanding.

•

Talent Acquisition & Retention -Attracting and retaining top sales and engineering talent in the EMEA to uphold our expertise and ensures exceptional service.

•

Strengthening Strategic Partnerships -Actively pursuing collaborations with leading distributors and resellers, further amplifying our reach and impact within the region.

Marketing Communications

Our marketing communications department is responsible for positioning OSS as an expert, thought leader, and visionary in the AI Transportables market. We generate expert content to support our market leading products, while also building cost effective brand/product awareness in several ways. We use traditional and non-traditional marketing communications, as well as partnerships and word of mouth, to convey the uniqueness and compelling value of our products and services. The AI Transportable market applications we target include AI inference applications in autonomous vehicles, medical equipment, commercial aerospace, defense/government, agriculture, and mining. Bressner also targets embedded industrial and IoT customers in the EMEA region. Among the many channels utilized are:

•

Trade Shows – OSS participates in several live and virtual tradeshows and events during the year to generate new relationships and foster existing relationships with customers and partners. These engagements allow us to showcase our standard and custom product expertise to our target customers. The target trade shows include AUSA (US Army), Sea, Air and Space (Navy/NASA), Advanced Driver Assistance Systems (autonomous vehicle), MOVE America (autonomous vehicle), AFCEA West (military), DSEI (international military), Supercomputing, AUVSI (autonomous vehicle) and Embedded World. We evaluate ROI and costs of each show on an annual basis; accordingly, participation may change from year to year.

•

Electronic Media – OSS uses various forms of electronic advertising media to market both the rugged edge products and capabilities of the Company. Electronic media includes internal direct email campaigns, such as monthly newsletters and various press releases for new products, technology developments, partnerships and significant application design wins. In addition, we use media companies relevant to our target markets to disseminate information about the Company to a larger set of potential customers. The format of the electronic advertising varies, but includes a common focus on content advertising demonstrating our market expertise with a secondary focus on brand awareness. The various electronic media formats that we utilize include, but are not limited to, search engine ads and keyword campaigns, digital ads, display ads, datasheet emails, customer use cases, e-newsletters, and text ads. Our web site is key at leveraging our leadership content, positioning, and search engine optimization (“SEO”) capabilities. We periodically update our website to capture new products, as well as align with new applications and emerging markets.

•

Social Media – OSS regularly uses Facebook, LinkedIn, and Twitter to instantly alert the Company’s followers to new events, products, services, and customer stories.

•

Publications – We periodically publish white papers, customer success stories, and other demand generation technology articles in printed and electronic periodicals and newsletters, including, but not limited to, Autonomous Vehicle International, Military Embedded Systems, Edge Industry Review, Aerospace and Defense and Auto News. We also invest in print ads in the EMEA region, with the highest ROI in select industry magazines for brand awareness.

As we grow, it is anticipated our marketing efforts will likewise continue to increase in size and focus on the AI Transportable market.

Competition

Our core business is to provide specialized high-performance edge AI computing platforms to OEMs who incorporate these products into their complete solutions, which they then sell to end users in the datacenter class, rugged AI compute and storage markets. By contrast, competitors in the AI hardware market space typically provide solutions designed to meet either high performance non-rugged or low performance highly rugged applications. Although a fragmented market, there are a number of categories of potential competitors of our products.

Customer in-house design resources

Many of our larger target OEM customers have in-house engineering design resources, which could be used as an alternative to engaging with us. Examples of current OSS customers who have significant in-house resources include National Instruments, Raytheon, and Lockheed Martin. This potential competition is mitigated by the technical specialization that we have, especially in high-end and large-scale PCI Express switch fabrics and PCI Express acceleration capabilities where the option to “buy” provides a better return to “make” in an internal make/buy decision. OEMs can invest their in-house resources on value-add capabilities within their specific vertical market and outsource these horizontal technology capabilities to us. We have also developed a trusted partner relationship with many of these OEMs and have established a market reputation for technical expertise and a responsive and cost-effective engagement model. We win when our customers realize that together we can produce better products faster, and more cost-effectively than they can by themselves. This has proven to be particularly evident when customers require state-of-the-art products that are constructed of commercially available parts but need to be deployed in harsh mobile environments. This has resulted in several program wins that demonstrate our flexibility and how we can work closely with large OEM and government customers. Interestingly, it appears that when these large companies cut back on their workforce or have limited funding, such events tend to bolster our position, as we may become these companies’ only option to get their desired product or service deployed within a reasonable period.

Major Tier 1 & 2 Mainstream Computer, GPU and Storage Vendors

These vendors offer mainstream high-performance computing platforms, including servers and storage systems that can address some applications at the edge in our target markets. Typically, they do not, however, offer the enhanced value platforms or customization capabilities that we specialize in to meet unique form factor, power, ruggedization or scale out requirements sought by OEM customers. Generally, these vendors focus on the large, air-conditioned datacenters and compete with such vendors based on price/volume, as differentiation is challenging. Our strategy is specifically designed to avoid head-to-head competition in this part of the market with this class of vendors. In some scenarios, we can provide a complementary specialized component or building block, which interfaces with one of these vendors’ mainstream products. Examples of companies in this space include NVIDIA, HP, Dell/EMC, IBM, SuperMicro, Pure Storage, and NetApp.

Vertical High Performance Compute Vendors – Military/Aerospace

In certain vertical markets, there are competitors who focus primarily on the HPC military and aerospace markets. These vendors often provide complete solutions, including both hardware and software, and some specialization in terms of form factor and ruggedization. In these markets, we provide unique capability in terms of scaling of PCI Express components over cable (copper and fiber) that can address unique requirements of specific military or government programs. Many of these competitors use older technologies or low power processors and components in these more challenging environments. We are able to differentiate ourselves from such competitors due to the fact that we deploy the latest high-performance technology, which enables us to provide superior products to potential customers in this space. We have also established good relationships with prime contractors and governmental agencies (Raytheon, Sierra Nevada, Lockheed, Boeing, NASA, ONR, L3 and others), which can be important influencers or decision makers on technology selection. Competitors in this space include companies such as Mercury, Crystal, Curtiss Wright, Kontron, Trenton, Core Systems and Systel. In the past, we have been able to offer the latest and differentiated technology to the rugged edge, which is normally only deployed in commercial applications, well before our competitors.

Manufacturing and Operations

Currently, OSS is certified under AS9100, and Bressner is certified under ISO 9001-2015 for “design, manufacture, and supply of industrial computers.” This means we have demonstrated our ability to consistently provide products that meet both customer requirements and applicable government regulations or statutory requirements. AS9100 is the pinnacle of quality management systems recognized by government and aerospace companies world-wide. It also indicates that we have programs and processes in place to ensure a high level of customer satisfaction, as well as continuous improvement and risk mitigation programs that ensure we get better over time.

While OSS primarily utilizes lean principles to drive our manufacturing and assembly process, we recognize the importance of smooth builds and strategic inventory in this current climate of sustained supply chain shortages. One of the key aspects of utilizing lean principles is our application of just-in-time principles to ensure effective ordering and utilization of inventory. This also helps optimize cash flow throughout the manufacturing cycle. Within the manufacturing process, our operations encompass three categories of “builds”:

•

Standard Builds – These are builds of standard products that are sold with little or no customization or non-standard features. These are products that are ready to be installed or integrated by the customer upon receipt.

•

Custom Builds – Custom builds involve a product built to a customer specification at our facilities. Upon receipt, the customer has a unique product that performs all the functions and has the physical dimensions that match their specifications.

•

Engineering Project Builds – We support the product development process by building models and prototypes of products. Developed by our engineering group, the prototypes can be of standard or custom products. We build these products with the intent of shipping in volume later.

We are dedicated to quality and customer satisfaction. Our continuous improvement efforts require us to review products, services, and processes with the idea that minor changes can lead to greater outcomes for our customers. Although we serve the high-end of the rugged edge computing space, we are constantly leveraging lean principles to become more efficient and drive down costs while driving up margins and quality.

Research and Development

Our ability to compete successfully in our industry is heavily dependent upon our ability to ensure a continuous and timely flow of competitive products, services, and technologies to the marketplace. We continue to develop new products and technologies and to enhance existing products that will further drive commercialization. We may also expand the range of our product offerings and intellectual property through licensing and/or acquisitions of third-party businesses and technologies.

Our intellectual property research and development is focused on the exploitation of key technologies as they evolve in the marketplace. Our product roadmap reflects new technologies for CPUs, GPUs, flash storage, and advanced PCIe switches. We design first-to-market, unique implementations targeted at the AI Transportable market utilizing market leading component technologies. Accordingly, our focus lies not in the capital-intensive development of silicon implementations of technologies (i.e., chips, processors, GPUs, or storage devices), but rather leverages leading-edge technologies and building first-to-market products that fully exploit those technologies to solve customer problems in challenging environments.

Our research and development strategy can be summarized as follows: We drive customer program wins by utilizing new key technologies to develop products that are leading edge and first-to-market and that are designed to solve challenging problems in harsh environments, while working closely with our customers to understand and address their needs.

Intellectual Property

Our primary intellectual property value emanates from the more than 600 individual design projects that we have undertaken over the decades since our founding, experience, and know how, in addition to trade secrets and copyrights.

These designs are archived and cataloged; we rarely begin a new design from scratch, but rather, use our archived and cataloged designs as a starting point to efficiently provide products to our customers. In general, we maintain intellectual property rights with respect to the components of the products we design and sell so that we may continue to use them for future sales and development efforts.

Over the years, our team has developed and maintained expertise in high-speed signal design and analysis, electronic and mechanical packaging, PCIe-over-cable, fiber optics transmission, high-speed/density flash arrays, and integration and deployment of GPUs in compute accelerators and servers. This extensive expertise positions us to expand and rationalize our product line to meet the growing and ever-changing high-performance computing market. We believe that the expertise of our staff is a considerable asset closely related to intellectual property, and attracting and retaining highly qualified employees is essential to our business.

Markets, Seasonality, and Major Customers

Our products and services serve a global clientele consisting of multinational companies, governmental agencies, military contractors, and leading technology providers. Based on market experience, it appears there are seasonality factors with deliveries decreasing from December through February each year. For Bressner, this is likely a result of Asia’s holiday season, whereas for OSS in the US, we believe that this is the result of varied government and commercial customer appropriation cycles and the timing of budgets.

For the years ended December 31, 2023 and 2022, an aggregate of 25.4% and 37.4% of our total consolidated revenues, respectively, were attributable to three customers (disguise, Raytheon and the Navy). As discussed elsewhere in this Annual Report, the Company has terminated its relationship with disguise as a result of their investment in cloud technology and drive towards less intelligent ruggedized compute, and they will not be a significant customer of the Company going forward. A loss or decline in the business with either of the other two customers would likely have an adverse impact on our business, financial condition, and results of operation.

For the years ended December 31, 2023 and 2022, Bressner did not have any customers that accounted for 10% or more of our total consolidated revenues.

We typically sell our products pursuant to contract supply agreements or purchase orders.

Materials and Suppliers

Although most components essential to our business are generally available from multiple sources, we believe that a loss or limited availability of certain component suppliers and manufacturing vendors could have a material adverse effect upon our business and financial condition.

Prior to 2021, we did not experience significant delays in the supply or availability of our key materials or components provided by our suppliers, nor did we experience a significant price increase for materials or components. However, in 2021, the worldwide supply shortage created many challenges, resulting in the need for our team to implement different strategies and analyze how we allocate resources. In 2022 and 2023, we continued to experience unavailability of certain critical products and some limited supplies, protracted delivery dates for components, increasing product costs, and changes in minimum order quantities, which creates limitations on our ability to secure product. Shortages have ranged from semiconductors to packing materials for shipping. Additionally, products that are in the “work-in-process” stage and the inventory of finished goods have increased due to timing and availability of certain componentry necessary to complete our products. We have worked with suppliers and customers to provide multiple options, including the alternative sourcing of similar products. We use our best efforts to manage the business carefully to minimize any material impact to financial performance. For more information, see the section titled, “Risk Factors” found in Part I, Item1A, of this Annual Report.

Human Capital Resources, Employees, and Personnel

We believe that our future success will depend, in part, on our ability to continue to attract, hire, and retain qualified personnel. To achieve this objective, we strive to provide competitive compensation, benefits, equity participation, and a success driven work environment.

As of December 31, 2023, we had approximately 106 employees, of which 96 were full-time and 10 were part-time employees; 70 of our employees were domestic and 36 were international. Our employees include highly skilled engineers, technicians, assemblers, and support staff. Despite recent staffing challenges that have plagued the industry that we operate in, which have generally resulted in greater turnover throughout the industry, we are proud of the low voluntary turnover rate of our personnel to date, as we endeavor to continue to challenge our team and encourage input and creative thinking by all. Our management team strives to provide transparency to our employees through regular meetings designed to update employees on current metric driven results and future expectations. None of our employees are covered by a collective bargaining agreement or represented by a labor union. We consider our relationship with our employees to be strong.

Environmental Matters

No significant pollution or other types of hazardous emission result from our operations and it is not anticipated that our operations will be materially affected by federal, state, or local provisions concerning environmental controls. Our costs of complying with environmental, health and safety requirements have not been material.

Furthermore, we do not believe that compliance with existing or pending climate change legislation, regulation, or international treaties or accords are reasonably likely to have a material effect in the foreseeable future on our business or markets that we serve, nor on our results of operations, capital expenditures, earnings, competitive position, financial position, or any of our operations. However, we will continue to monitor emerging developments in this area.

Government Approval and Effect of Government Regulations

Because our core business is to provide specialized high-performance edge computing building blocks and platforms to OEMs who incorporate these products into their complete solutions, which they sell to end users in specific vertical markets, we do not believe that any government agency approval is required for the products and services that we provide to our customers.

We believe that our operations are in compliance with all material applicable laws and regulations and that we hold all necessary permits to operate our business in each jurisdiction in which our facilities are located. Our worldwide business activities are subject to various laws, rules, and regulations of the United States as well as of foreign governments.

Compliance with these laws, rules, and regulations has not historically had a material effect upon our capital expenditures, results of operations, or competitive position. However, governmental regulations, including but not limited to import and export law, privacy laws, customer, and trade regulations, are subject to change and interpretation and may affect our business in the future. For more information, see the section titled, “Risk Factors” found in Part I, Item1A, of this Annual Report.

Recent Developments

Management and Board Changes

In the first quarter of 2023, we implemented certain internal organizational changes to align our US-based operations with, and to further support and accelerate, our strategy to focus on the AI Transportables industry and our defense business in particular. In furtherance of this strategy and our goals, during 2023 we took various steps to strengthen our management team and board of directors with individuals who have deep experience and high-level contacts in the defense sector, as discussed below.

In June 2023, David Raun stepped down as the Company’s president and chief executive officer, and we hired Michael Knowles to fill such roles. Mr. Knowles has significant defense industry experience, as well as strong connections within the military space. In addition, in July 2023, we hired Robert Kalebaugh, who also has significant defense industry experience, as vice president of sales. Their combined experience and market reach has been leveraged to increase our global pipeline and to establish OSS as a formidable player in the defense market.

In addition, we made significant changes to the profile of our board of directors in 2023. Effective September 30, 2023, Jack Harrison and Sita Lowman tendered their resignations from our board of directors and the relevant committees thereof, and Michael Knowles, our chief executive officer and president, and retired Vice Admiral Michael Dumont, a former member of our strategic advisory board, were appointed as directors of the Company, to fill the two vacant board seats created by the resignations. These changes were part of the first phase of our plan to reprofile our board of directors to further align with our focus on AI Transportables and our military business.

In November 2023, our board of directors unanimously adopted resolutions to temporarily increase the size of the board from seven members to nine members, and to subsequently decrease the size of the board back down to seven members, effective as of the Company’s 2024 annual meeting of stockholders (the “2024 Annual Meeting”). The board also appointed Joseph Manko and Mitchell Herbets as directors of the Company, to fill the vacancies created by the board expansions implemented in November 2023. Mr. Manko serves as a managing member and senior principal at Horton Capital Management, LLC, a significant shareholder of the Company, and has significant public company board and corporate governance experience. Mr. Herbets has extensive strategic and technical experience as an executive serving the technology and defense industries, as well as public and private company board experience. These combined efforts to reprofile the board in 2023 have advanced the Company's strategic efforts to grow our business in the rugged edge computing market and in supporting our overall focus on governance, capital markets and organizational growth and execution.

As noted above, the size of our board of directors will be decreased back down to seven members in connection with our 2024 Annual Meeting. The seven person slate to be presented to our shareholders for election at the 2024 Annual Meeting will be determined by the full board prior to filing our proxy statement for the 2024 Annual Meeting with the SEC.

Other Changes and Developments

On April 7, 2023, we amended our Amended and Restated Bylaws (the “Bylaws”) to (i) revise Article II, Section 2.5 of the Bylaws to incorporate those requirements set forth in Rule 14a-19 of the Securities Exchange Act of 1934, as amended, as recently implemented by the SEC; and (ii) revise Article II, Section 2.8 of the Bylaws to decrease the quorum threshold necessary to conduct business at shareholder meetings of the Company to one-third of the voting power of the Company’s capital stock issued and outstanding as of the relevant record date. Pursuant to Article X of the Bylaws, stockholder approval was not required to amend the Bylaws.

Additionally, as discussed elsewhere in this Annual Report, in 2023 we completed and fulfilled our orders associated with our previous long-term media and entertainment customer, and do not anticipate business from them in the future. This resulted from an acceleration in such customer’s investment in cloud technology and a drive towards less intelligent compute capability at the edge to reduce the costs of their componentry. This is particularly true of their virtual products, which do not require the same level of ruggedization, as this system is not typically operated in harsh environments and for which software is being developed to provide a real-time cloud solution. This customer’s transition to cloud solutions had a negative impact on our results of operations for the year ended December 31, 2023.

With our shifted focus to the development and sale of AI Transportables, we have significantly increased our efforts to penetrate the military and defense sectors in particular. With the recent hiring of a new president and chief executive officer and new vice president of sales, both with extensive experience in contracting in the defense industry, we have further increased our emphasis and focus on the pursuit of revenue opportunities with major defense contractors and the military.

Company Website

We maintain a corporate Internet website at: http://www.onestopsystems.com.

The contents of our website are not incorporated in or otherwise to be regarded as part of this Annual Report. We file reports with the SEC which are available on our website free of charge. These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, “Section 16” filings on Form 3, Form 4, and Form 5, and other related filings, each of which is provided on our website as soon as reasonably practical after we electronically file such materials with or furnish them to the SEC. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company.