ONE STOP SYSTEMS, INC.

Previous wording

The global increase in load on cloud infrastructure and increase in AI applications are the primary factors driving the growth of the edge computing market. We market our products to manufacturers of automated equipment used for medical, industrial, and military applications. Our customer applications often require connection to a wide array of data sources and sensors, ultra-fast processing power, and the ability to quickly access and store large and ever-growing data sets at their physical location (rather than in the cloud). This equipment requires datacenter class performance optimized for deployment at the edge in challenging environments. Many of these edge applications have unique requirements, including special and compact form factors ruggedized for harsh conditions, which cannot be accommodated by traditional controlled air-conditioned datacenters.

Current wording

The global increase in load on cloud infrastructure and increase in AI applications are the primary factors driving the growth of the edge computing market. We market our products to manufacturers of automated equipment used for medical, industrial, and military applications. Our customer applications often require connection to a wide array of data sources and sensors, ultra-fast processing power, and the ability to quickly access and store large and ever-growing data sets at their physical location (rather than in the cloud). This equipment requires datacenter class performance optimized for deployment at the edge in challenging environments. Many of these edge applications have unique requirements, including special and compact form factors ruggedized for harsh conditions, which cannot be accommodated by traditional products designed for controlled air-conditioned datacenters.

Previous wording

Research and development expense consists primarily of employee compensation and related expenses for research and development functions, certain prototype expenses, depreciation associated with assets acquired for research and development, third-party engineering and contractor support costs, as well as certain overhead expenses which are allocated to research and development expense. We expect our research and development expenses to increase in absolute dollars as we continue to invest in new and existing products.

Current wording

Research and development expense consists primarily of employee compensation and related expenses for research and development functions, certain prototype expenses, depreciation associated with assets acquired for research and development, third-party engineering and contractor support costs, as well as certain overhead expenses which are allocated to research and development expense. We expect variability in our research and development expenses due to the timing of new product development and introductions.

Previous wording

The following tables set forth our results of operations for the three and six month periods ended June 30, 2025 and 2024, presented in dollars and as a percentage of revenue, respectively.

Current wording

The following tables set forth our results of operations for the three and nine month periods ended September 30, 2025 and 2024, presented in dollars and as a percentage of revenue, respectively.

Previous wording

Comparison of the Three and Six Month Periods Ended June 30, 2025 and 2024:

Current wording

Comparison of the Three and Nine Month Periods Ended September 30, 2025 and 2024:

Previous wording

For the three months ended June 30, 2025, our total revenue increased $907,255, or 6.9%, as compared to the same period in 2024. The OSS segment saw an increase in revenue of $238,677, or 4.3%, as compared to the same period in 2024. The primary contributors to this increase were higher revenues related to the development and production of custom server products for a defense customer, higher shipments of data storage products to a US government customer, and the initiation of shipments of server products to a medical devices customer, partially offset by lower volume of shipments to a commercial aerospace customer. Bressner experienced an increase of $668,578, or 8.7%, as compared to the same period in 2024, due to higher book-and-ship revenue in the quarter, as well as the impact of foreign exchange rates.

Current wording

For the three months ended September 30, 2025, our total revenue increased $5,055,102, or 36.9%, as compared to the same period in 2024. The OSS segment saw an increase in revenue of $2,802,227, or 43.4%, as compared to the same period in 2024. The primary contributors to this increase were higher revenues related to the development and production of custom server products for a defense customer, higher shipments of data storage products to a defense prime customer, shipments of server products to a medical devices customer, and shipments of compute and server products for an autonomous maritime application to a customer in Asia. Bressner experienced an increase of $2,252,875, or 31.1%, as compared to the same period in 2024, due to higher demand across multiple industrial end markets, as well as the impact of foreign exchange rates.

Previous wording

For the six months ended June 30, 2025, our total revenue increased $514,556, or 2%, as compared to the same period in 2024. The OSS segment saw a decrease in revenue of $88,385, or 0.8%. This decrease was primarily driven by lower volume of revenue to a commercial aerospace customer, partially offset by higher volume of revenue to a defense customer and a medical devices customer. Bressner experienced an increase in revenue of $602,941, or 4.1%, as compared to the same period in 2024, due to higher book-and-ship revenue in the period, as well as the impact of foreign exchange rates.

Current wording

For the nine months ended September 30, 2025, our total revenue increased $5,569,658, or 14.1%, as compared to the same period in 2024. The OSS segment saw an increase in revenue of $2,713,842, or 15.5%. This increase was primarily driven by higher revenues related to development and production of custom server products for a defense customer, higher shipments of data storage products to a defense prime customer and to a US government customer, and the initiation of shipments of server products to a medical devices customer. This increase was partially offset by lower volume of revenue to a commercial aerospace customer. Bressner experienced an increase in revenue of $2,855,816, or 13%, due to higher book-and-ship revenue in the period, higher demand across multiple industrial end markets, as well as the impact of foreign exchange rates.

Previous wording

Cost of revenue decreased $838,157, or 4.5%, for the six months ended June 30, 2025, as compared to the same period in 2024. The OSS segment saw a decrease in cost of revenue of $1,570,623, or 20.2%, as compared to the same period in 2024. This decrease in cost of revenue was mainly due to a more profitable mix of products shipped in the period, as well as the non-recurrence of $566,608 of inventory charges recognized in the prior year period. Bressner's cost of revenue increased $732,466, or 6.7%, as compared to the same period in 2024 due to higher revenue volume, a less profitable mix of products shipped in the quarter, and the impact of foreign exchange rates.

Current wording

Cost of revenue decreased by $3,355,008, or 21.8%, for the three months ended September 30, 2025, as compared to the same period in 2024. The OSS segment saw a decrease in cost of revenue of $4,729,505, or 48.4%, as compared to the same period in 2024. This decrease in cost of revenue was due to the non-recurrence of a $6,099,259 inventory charge recognized in the prior year quarter and a more profitable mix of products shipped in the quarter, partially offset by higher revenue volume. Bressner’s cost of revenue increased $1,374,497, or 24.3%, as compared to the same period in 2024, due primarily to higher revenue volume and the impact of foreign exchange rates, partially offset by a more profitable mix of products shipped in the quarter.

Previous wording

The overall gross margin percentage was 31.3% for the three months ended June 30, 2025, an increase of 6.1 percentage points as compared to the prior year period in 2024 of 25.2%. OSS segment gross margin percentage for the three months ended June 30, 2025, was 41.3%, an increase of 16.4 percentage points as compared to the prior year period in 2024 of 24.9%. This increase was due to the non-recurrence of an inventory charge recognized in the prior year quarter, as well as a more profitable mix of products shipped in the quarter. Bressner contributed gross margin at a rate of 24.3%, as compared to the same period in 2024 of 25.5%, a decrease of 1.2 percentage points, due primarily to product mix.

Current wording

The overall gross margin percentage was 35.7% for the three months ended September 30, 2025, compared to a gross margin percentage of -12.5% in the prior year period. OSS segment gross margin percentage for the three months ended September 30, 2025, was 45.6%, compared to a gross margin percentage of -51.2% in the prior year period. This increase was due to the non-recurrence of an inventory charge recognized in the prior year quarter, as well as a more profitable mix of products shipped in the quarter. Bressner contributed gross margin at a rate of 26%, as compared to the same period in 2024 of 22%, due primarily to product mix.

Previous wording

Cost of revenue decreased by $171,760, or 1.7%, for the three months ended June 30, 2025, as compared to the same period in 2024. The OSS segment saw a decrease in cost of revenue of $767,128, or 18.5%, as compared to the same period in 2024. This decrease in cost of revenue was due to the non-recurrence of a $428,270 inventory charge recognized in the prior year quarter, as well as a more profitable mix of products shipped in the quarter. Bressner’s cost of revenue increased $595,368, or 10.4%, as compared to the same period in 2024, due primarily to higher revenue volume and the impact of foreign exchange rates.

Current wording

Cost of revenue decreased $4,193,166, or 12.3%, for the nine months ended September 30, 2025, as compared to the same period in 2024. The OSS segment saw a decrease in cost of revenue of $6,300,130, or 35.9%, as compared to the same period in 2024. This decrease in cost of revenue was mainly due to the non-recurrence of $6,665,867 of inventory charges recognized in the prior year period and a more profitable mix of products shipped in the period, partially offset by higher revenue volume. Bressner's cost of revenue increased $2,106,964, or 12.6%, as compared to the same period in 2024 due primarily to higher revenue volume and the impact of foreign exchange rates.

Previous wording

The overall gross margin percentage was 31.9% for the six months ended June 30, 2025, an increase of 4.6 percentage points as compared to the prior year period in 2024 of 27.3%. OSS segment gross margin percentage for the six months ended June 30, 2025, was 43.3%, an increase of 13.7 percentage points, as compared to the prior year period in 2024 of 29.6%. This increase was primarily due to a more profitable mix of products shipped in the period, as well as the non-recurrence of an inventory charge recognized in the prior year period. Bressner contributed gross margin at a rate of 23.8%, as compared to the same period in 2024 of 25.6%, a decrease of 1.8 percentage points, due primarily to product mix.

Current wording

The overall gross margin percentage was 33.5% for the nine months ended September 30, 2025, compared to a gross margin percentage of 13.5% in the same period in 2024. OSS segment gross margin percentage for the nine months ended September 30, 2025, was 44.4%, compared to a gross margin percentage of -0.2% in the same period in 2024. This increase was primarily due to the non-recurrence of inventory charges recognized in the prior year period and a more profitable mix of products shipped in the period. Bressner contributed gross margin at a rate of 24.6%, as compared to the same period in 2024 of 24.4%, an increase of 0.2 percentage points, due primarily to product mix.

Previous wording

General and administrative expense decreased $21,197, or 0.9%, for the three months ended June 30, 2025, as compared to the same period in 2024. The OSS segment experienced a decrease of $101,864, or 5.1%. This decrease in general and administrative expense is primarily attributable to a reduction in corporate general expenses, including board compensation. Bressner had an increase of $80,667, or 20.3%, as a result of higher salary and personnel costs, higher insurance costs, higher lease costs due to overlapping lease periods during the transition to a new facility, and the impact of foreign exchange rates. Overall, total general and administrative expense decreased as a percentage of revenue to 16.9% for the three months ended June 30, 2025, as compared to 18.2% during the same period in 2024.

Current wording

General and administrative expense increased $287,684, or 14%, for the three months ended September 30, 2025, as compared to the same period in 2024. The OSS segment experienced an increase of $103,969, or 6.4%. This increase in general and administrative expense is primarily attributable to higher salary and personnel expenses due to annual escalation and the impact of severence expenses. Bressner had an increase of $183,715, or 42.4%, as a result of higher salary and personnel costs, higher insurance costs, higher lease costs due to overlapping lease periods during the transition to a new facility, and the impact of foreign exchange rates. Overall, total general and administrative expense decreased as a percentage of revenue to 12.5% for the three months ended September 30, 2025, as compared to 15% during the same period in 2024.

Previous wording

General and administrative expense increased $250,856, or 5.6%, for the six months ended June 30, 2025, as compared to the same period in 2025. OSS segment general and administrative expense increased $110,130, or 3%, due primarily to increased stock compensation expense due to a higher grant date fair value of employee restricted stock units recognized as expense in the period, partially offset by a reduction in general corporate expenses. Bressner segment general and administrative expense increased $140,726, or 17.7%, primarily due to higher salary and personnel costs and higher lease cost due to overlapping lease periods during the transition to a new facility, as well as the impact of foreign exchange rates. Overall, total general and administrative expense increased as a percentage of revenue to 18% for the six months ended June 30, 2025, as compared to 17.4% during the same period in 2024.

Current wording

General and administrative expense increased $538,539, or 8.2%, for the nine months ended September 30, 2025, as compared to the same period in 2024. OSS segment general and administrative expense increased $214,098, or 4%, due primarily to higher salary and personnel expenses due to annual escalation and the impact of severence expenses and increased stock compensation expense due to a higher grant date fair value of employee restricted stock units recognized as expense in the period, partially offset by a reduction in general corporate expenses, including board compensation. Bressner segment general and administrative expense increased $324,441, or 26.4%, primarily due to higher salary and personnel costs and higher lease cost due to overlapping lease periods during the transition to a new facility, as well as the impact of foreign exchange rates. Overall, total general and administrative expense decreased as a percentage of revenue to 15.7% for the nine months ended September 30, 2025, as compared to 16.6% during the same period in 2024.

Previous wording

Marketing and selling expense increased $70,002, or 3.1%, for the three months ended June 30, 2025, as compared to the same period in 2024. OSS had an increase of $32,167, or 2%, due to an increase in personnel costs. Bressner had an increase of $37,835, or 6%, due primarily to higher personnel costs and the impact of foreign exchange rates. Overall, total marketing and selling expense decreased as a percentage of revenue to 16.5% during the three months ended June 30, 2025, as compared to 17.1% during the same period in 2024.

Current wording

Marketing and selling expense increased $320,149, or 15.9%, for the three months ended September 30, 2025, as compared to the same period in 2024. OSS had an increase of $188,073, or 13%, due primarily to an increase in personnel costs. Bressner had an increase of $132,076, or 23.4%, due primarily to higher personnel costs and the impact of foreign exchange rates. Overall, total marketing and selling expense decreased as a percentage of revenue to 12.4% during the three months ended September 30, 2025, as compared to 14.7% during the same period in 2024.

Previous wording

Marketing and selling expense increased $368,078, or 8.8%, for the six months ended June 30, 2025, as compared to the same period in 2024. OSS segment marketing and selling expense increased $312,719, or 10.6%, due to an increase in personnel costs resulting from additions in headcount made during the course of 2024. Bressner segment marketing and selling expense increased $55,359, or 4.5%, due primarily to higher personnel costs and the impact of foreign exchange rates. Overall, total marketing and selling expense increased as a percentage of revenue to 17.2% for the six months ended June 30, 2025, as compared to 16.1% during the same period in 2024.

Current wording

Marketing and selling expense increased $688,228, or 11.1%, for the nine months ended September 30, 2025, as compared to the same period in 2024. OSS segment marketing and selling expense increased $500,794, or 11.4%, due to an increase in personnel costs resulting from additions in headcount made during the course of 2024. Bressner segment marketing and selling expense increased $187,434, or 10.5%, due primarily to higher personnel costs and the impact of foreign exchange rates. Overall, total marketing and selling expense decreased as a percentage of revenue to 15.2% for the nine months ended September 30, 2025, as compared to 15.6% during the same period in 2024.

Previous wording

Research and development expense increased $599,298, or 64.7%, for the three months ended June 30, 2025, as compared to the same period in 2024. OSS segment research and development expense increased $591,528, or 76.8%, due to higher engineering costs to support targeted investments in new product development. Bressner segment research and development expense increased $7,770, or 5%. Overall, total research and development expense as a percentage of revenue increased to 10.8% for the three months ended June 30, 2025, as compared to 7% during the same period in 2024.

Current wording

Research and development expense increased $498,148, or 52.4%, for the three months ended September 30, 2025, as compared to the same period in 2024. OSS segment research and development expense increased $478,829, or 60.4%, due to higher engineering costs to support targeted investments in new product development. Bressner segment research and development expense increased $19,319, or 12.3%, due primarily to the impact of foreign exchange rates. Overall, total research and development expense as a percentage of revenue increased to 7.7% for the three months ended September 30, 2025, as compared to 6.9% during the same period in 2024.

Previous wording

Research and development expense increased $985,713, or 52%, for the six months ended June 30, 2025, as compared to the same period in 2024. OSS segment research and development expense increased $972,114, or 60.9%, due to higher engineering costs to support targeted investments in new product development. Bressner segment research and development expense increased $13,599, or 4.5%. Overall, total research and development expense as a percentage of revenue increased to 10.9% for the three months ended June 30, 2025, as compared to 7.3% during the same period in 2024.

Current wording

Research and development expense increased $1,483,861 or 52.1%, for the nine months ended September 30, 2025, as compared to the same period in 2024. OSS segment research and development expense increased $1,450,944, or 60.8%, due to higher engineering costs to support targeted investments in new product development. Bressner segment research and development expense increased $32,917, or 7.2%, due primarily to the impact of foreign exchange rates. Overall, total research and development expense as a percentage of revenue increased to 9.6% for the nine months ended September 30, 2025, as compared to 7.2% during the same period in 2024.

Previous wording

Interest income decreased $137,537 for the six months ended June 30, 2025, as compared to the same period in 2024. The decrease is primarily attributable to lower investment balances due to the company's usage of cash for operations and debt repayment.

Current wording

Interest income decreased $80,163 for the three months ended September 30, 2025, as compared to the same period in 2024. The decrease is primarily attributable to lower investment balances due to the company's usage of cash for operations.

Previous wording

Interest income decreased $68,323 for the three months ended June 30, 2025, as compared to the same period in 2024. The decrease is primarily attributable to lower investment balances due to the company's usage of cash for operations and debt repayment.

Current wording

Interest income decreased $217,700 for the nine months ended September 30, 2025, as compared to the same period in 2024. The decrease is primarily attributable to lower investment balances due to the company's usage of cash for operations and debt repayment.

Previous wording

Interest expense decreased $26,569 for the six months ended June 30, 2025, as compared to the same period in 2024. The decrease is attributable to declining borrowing balances due to the repayment of debt, as well as lower interest rates on outstanding notes payable.

Current wording

Interest expense decreased $1,400 for the three months ended September 30, 2025, as compared to the same period in 2024. The decrease is primarily attributable to as lower interest rates on outstanding notes payable.

Previous wording

Interest expense decreased $5,413 for the three months ended June 30, 2025, as compared to the same period in 2024. The decrease is attributable to declining borrowing balances due to the repayment of debt, as well as lower interest rates on outstanding notes payable.

Current wording

Interest expense decreased $27,969 for the nine months ended September 30, 2025, as compared to the same period in 2024. The decrease is attributable to declining borrowing balances due to the repayment of debt, as well as lower interest rates on outstanding notes payable.

Previous wording

Other income (expense), for the three months ended June 30, 2025, resulted in net other expense of $9,195, as compared to net other income of $21,831 in the same period in 2024, for a net decrease in other income of $31,026, attributable primarily to changes in foreign currency gain and losses.

Current wording

Other income (expense), for the three months ended September 30, 2025, resulted in net other expense of $61,102, as compared to net other expense of $14,402 in the same period in 2024, for an increase in net other expense of $46,700, attributable primarily to changes in foreign currency gain and losses.

Previous wording

Other income (expense), for the six months ended June 30, 2025, resulted in net other expenses of $30,828, as compared to net other income of $29,109 in the same period in 2024, for a a net decrease in other income of $59,937, attributable primarily to changes in foreign currency gain and losses.

Current wording

Other income (expense), for the nine months ended September 30, 2025, resulted in net other expenses of $91,930, as compared to net other income of $14,707 in the same period in 2024, for a a net decrease in other income of $106,637, attributable primarily to changes in foreign currency gain and losses.

Previous wording

We have recorded an income tax provision of $224,188 and $211,027 for the three months ended June 30, 2025 and 2024, respectively, and $333,654 and $402,296 for the six months ended June 30, 2025 and 2024, respectively. The effective tax rate for the six months ended June 30, 2025 and 2024 differed from the statutory rate mainly due to permanent non-deductible goodwill amortization for Bressner, change in valuation allowance, deductions related to expenses of OSS stock options, research and development credits, and changes in reserves for uncertain tax positions, as well as projecting foreign and state tax liabilities for the year. The tax provision is predominately attributable to profit on operations in Germany.

Current wording

We have recorded an income tax provision of $266,881 and $167,086 for the three months ended September 30, 2025 and 2024, respectively, and $600,535 and $569,382 for the nine months ended September 30, 2025 and 2024, respectively. The effective tax rate for the nine months ended September 30, 2025 and 2024 differed from the statutory rate mainly due to permanent non-deductible goodwill amortization for Bressner, change in valuation allowance, deductions related to expenses of OSS stock options, research and development credits, and changes in reserves for uncertain tax positions, as well as projecting foreign and state tax liabilities for the year. The tax provision is predominately attributable to profit on operations in Germany.

Previous wording

Historically, our primary sources of liquidity have been provided by public and private offerings of our securities and revenues generated from our business operations. As of June 30, 2025, we had total cash and cash equivalents of $8,458,920, with short-term investments of $1,030,416, and total net working capital of $23,171,142. Cash and cash equivalents held by Bressner totaled $4,354,279 on June 30, 2025. Bressner’s debt covenants limit the use of those funds by its parent company.

Current wording

Historically, our primary sources of liquidity have been provided by public and private offerings of our securities and revenues generated from our business operations. As of September 30, 2025, we had total cash and cash equivalents of $6,508,020 and total net working capital of $23,132,853. Cash and cash equivalents held by Bressner totaled $3,765,771 on September 30, 2025. Bressner’s debt covenants limit the use of those funds by its parent company.

Previous wording

During the six month period ended June 30, 2024, we had a loss from operations of $3,516,879, with cash provided by operating activities of $1,226,742.

Current wording

During the nine month period ended September 30, 2024, we had a loss from operations of $10,250,905, with cash provided by operating activities of $2,143,545.

Previous wording

As of June 30, 2025, there remains an elevated level of uncertainty regarding the economic outlook. We intend to continue to monitor the effects of trade and tariff policy, inflation, global supply chain disruptions, and economic conditions, and, if appropriate, we may alter our plans to address such concerns as they may arise.

Current wording

As of September 30, 2025, there remains an elevated level of uncertainty regarding the economic outlook. We intend to continue to monitor the effects of trade and tariff policy, inflation, global supply chain disruptions, and economic conditions, and, if appropriate, we may alter our plans to address such concerns as they may arise. On September 30, 2025, the continuing resolution that funded U.S. government operations expired, and the federal government began shutdown procedures. A prolonged shutdown could delay the timing of new contract awards, funding on existing defense programs, and payments from U.S. government or prime contractor customers. Any such delays could temporarily increase our working capital requirements and reduce near-term liquidity. Management is monitoring the situation and evaluating potential mitigation measures, including managing expenditures and maintaining access to available borrowing capacity under our revolving credit facility.

Previous wording

In April 2022, the Company obtained a domestic revolving line of credit of $2,000,000 at Torrey Pines Bank. To access this line of credit, the Company must maintain a minimum cash balance of $2,500,000 with the bank and maintain a maximum debt to tangible net worth of ratio of 1.00. The line of credit is also collateralized by the assets of the Company. No balance was outstanding on June 30, 2025 or December 31, 2024.

Current wording

In April 2022, the Company obtained a domestic revolving line of credit of $2,000,000 at Torrey Pines Bank. To access this line of credit, the Company must maintain a minimum cash balance of $2,500,000 with the bank and maintain a maximum debt to tangible net worth of ratio of 1.00. The line of credit is also collateralized by the assets of the Company. The balance outstanding on this line of credit was $1,000,000 and $0 on September 30, 2025 and December 31, 2024, respectively.

Previous wording

Additionally, in August 2023, we filed a new registration statement on Form S-3 (Registration No. 333-274073) with the SEC, which became effective on August 25, 2023, and allows us to offer and sell up to an aggregate of $100,000,000 of our common stock, preferred stock, debt securities, warrants to purchase our common stock, preferred stock or debt securities, subscription rights to purchase our common stock, preferred stock or debt securities and/or units consisting of some or all of these securities, in any combination, together or separately, in one or more offerings, in amounts, at prices and on the terms that we will determine at the time of the offering and which will be set forth in a prospectus supplement and any related free writing prospectus. In the event that we need additional financing, we may choose to consummate an offering of our securities under the registration statement on S-3 in order to raise capital.

Current wording

Additionally, in August 2023, we filed a new registration statement on Form S-3 (Registration No. 333-274073) with the SEC, which became effective on August 25, 2023 ("the Form S-3"), and allows us to offer and sell up to an aggregate of $100,000,000 of our common stock, preferred stock, debt securities, warrants to purchase our common stock, preferred stock or debt securities, subscription rights to purchase our common stock, preferred stock or debt securities and/or units consisting of some or all of these securities, in any combination, together or separately, in one or more offerings, in amounts, at prices and on the terms that we will determine at the time of the offering and which will be set forth in a prospectus supplement and any related free writing prospectus. In the event that we need additional financing, we may choose to consummate an offering of our securities under the Form S-3 in order to raise capital.

Previous wording

If cash generated from operations is insufficient to satisfy our capital requirements, we may borrow up to $2,000,000 from our revolving line of credit with our bank (subject to satisfaction of certain borrowing conditions), may have to sell additional equity or debt securities, or may obtain expanded credit facilities to fund our operating expenses, pay our obligations, diversify our geographical reach, and grow the Company. In the event such financing is needed in the future, there can be no assurance that such financing will be available to us, or, if available, that it will be in amounts and on terms acceptable to us. If we cannot raise additional funds when we need or want them, our operations and prospects could be negatively affected. However, if cash flows from operations become insufficient to continue operations at the current level, and if no additional financing were obtained, then management would consider restructuring the Company in a way to preserve its business while maintaining expenses within operating cash flows.

Current wording

If cash generated from operations is insufficient to satisfy our capital requirements, we may borrow from our revolving line of credit with our bank (subject to satisfaction of certain borrowing conditions), may have to sell additional equity or debt securities, or may obtain expanded credit facilities to fund our operating expenses, pay our obligations, diversify our geographical reach, and grow the Company. In the event such financing is needed in the future, there can be no assurance that such financing will be available to us, or, if available, that it will be in amounts and on terms acceptable to us. If we cannot raise additional funds when we need or want them, our operations and prospects could be negatively affected. However, if cash flows from operations become insufficient to continue operations at the current level, and if no additional financing were obtained, then management would consider restructuring the Company in a way to preserve its business while maintaining expenses within operating cash flows.

Previous wording

The following table summarizes our cash flows for the six month periods ended June 30, 2025 and 2024:

Current wording

The following table summarizes our cash flows for the nine month periods ended September 30, 2025 and 2024:

Previous wording

During the six month period ended June 30, 2025, we used $1,504,300 in cash from operating activities, compared to cash generated from operating activities of $1,226,742 in the same period in 2024.

Current wording

During the nine month period ended September 30, 2025, we used $4,925,615 in cash from operating activities, compared to cash generated from operating activities of $2,143,545 in the same period in 2024.

Previous wording

Net cash used in operating activities during the six month period ended June 30, 2025 was the result of three components: (i) net loss of $4,038,364; (ii) net adjustments to net loss for non-cash items of $1,094,477, of which the largest component was stock based compensation expense of $1,128,335; and (iii) cash provided by net changes in operating assets and liabilities of $1,439,587.

Current wording

Net cash used in operating activities during the nine month period ended September 30, 2025 was the result of three components: (i) net loss of $3,774,876; (ii) net adjustments to net loss for non-cash items of $1,394,321, of which the largest component was stock based compensation expense of $1,572,956; and (iii) cash used from net changes in operating assets and liabilities of $2,545,060.

Previous wording

Cash provided by net changes in operating assets and liabilities for the six month period ended June 30, 2025 was $1,439,587, compared to $2,647,568 for the same period in 2024. The change in cash provided by net changes in working capital from the prior year period was primarily due to cash disbursements in 2025 related to accrued expenses for a contract loss and for accrued losses related to supplier material received on non-cancellable purchase orders.

Current wording

Cash used from net changes in operating assets and liabilities for the nine month period ended September 30, 2025 was $2,545,060, compared to cash provided by net changes in operating assets and liabilities of $3,296,266 for the same period in 2024. The change in cash due to net changes in working capital was primarily due to an increase in accounts receivable associated with ramping revenue, as well as cash disbursements in 2025 related to accrued expenses for a contract loss and for accrued losses related to supplier material received on non-cancellable purchase orders.

Previous wording

During the six month period ended June 30, 2025, the Company generated cash of $2,010,973 from investing activities, as compared to $2,541,086 provided by investing activities during the prior year period in 2024, a net reduction of $530,113. This change is attributable to a decrease in the number of short-term investments redeemed in the current year period as compared to the prior year period, partially offset by lower capital expenditures.

Current wording

During the nine month period ended September 30, 2025, the Company generated cash of $2,744,613 from investing activities, as compared to $4,293,263 provided by investing activities during the prior year period in 2024, a net reduction of $1,548,650. This change is attributable to a decrease in the number of short-term investments redeemed in the current year period as compared to the prior year period, as well as higher capital expenditures primarily associated with facility-related investments at Bressner.

Previous wording

During the six month period ended June 30, 2025, the Company generated $697,303 in cash from the exercise of options, net of payments of payroll taxes on the net issuance of employee stock. During the same period in 2024, cash used in financing activities was $1,014,840, which was driven by a usage of $884,892 for the repayment of debt and a usage of $349,296 for payment of tax on the net exercise of vested RSUs and employee stock options, partially offset by $219,348 of cash generated from the exercise of options.

Current wording

During the nine month period ended September 30, 2025, the Company generated $1,513,011 in cash from financing activities, compared to a usage of $1,144,189 of cash from financing activities in the same period of 2024. The change was due to proceeds from borrowings on bank lines of credit of $1,000,000 in the current year period, compared to repayments on bank lines of credit of $959,373 in the period year period. Additionally, proceeds from the exercise of employee stock options net of payment of tax on the net exercise of vested RSUs and employee stock options provided cash of $513,011 in the current year period, compared to a net usage of $184,816 in the prior year period.

Previous wording

We are experiencing delays in funding for customer projects, delays in delivery schedules based upon customer requirements, and an extended sales cycle. Such delays could negatively impact the Company’s results of operations for the year ending December 31, 2025. If such delays in orders continue in the future, our operating results will be further impacted, and our revenues may decline in future periods.

Current wording

We have experienced delays in funding for customer projects, delays in delivery schedules based upon customer requirements, and an extended sales cycle. Such delays could negatively impact the Company’s results of operations for the year ending December 31, 2025. If such delays in orders continue in the future, our operating results will be further impacted, and our revenues may decline in future periods.

Previous wording

We have recently experienced some and, continue to feel, the effects due to inflation in both the U.S. and Europe. Although the Company attempts to pass on increases in raw material, labor, energy and fuel-related costs to our customers, the Company’s ability to do so is dependent upon the rate and magnitude of any increase, competitive pressures, and market conditions for the Company’s products. There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be fully recovered. These increasing costs are being aggressively managed by the Company and actions are being taken to minimize the impact to the Company. Inflation affects the Company’s manufacturing costs, distribution costs and operating expenses.

Current wording

We have recently experienced and continue to experience effects due to inflation in both the U.S. and Europe. Although the Company attempts to pass on increases in raw material, labor, energy and fuel-related costs to our customers, the Company’s ability to do so is dependent upon the rate and magnitude of any increase, competitive pressures, and market conditions for the Company’s products. There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be fully recovered. These increasing costs are being aggressively managed by the Company and actions are being taken to minimize the impact to the Company. Inflation affects the Company’s manufacturing costs, distribution costs and operating expenses.

Previous wording

Tariffs and the threat of tariffs, including both United States sanctioned tariffs and the potential for retaliatory tariffs, have contributed to uncertainty and supply chain disruptions that could impact our operations. The Company's OSS segment conducts final assembly and test of products at our facility in California. However, we source components and subassemblies from both within and outside of the United States. While we attempt to pass on the cost of tariffs to our customers, our ability to do so is dependent upon the many factors, including the predictability of tariff rates and market conditions for the Company's products. Management is closely monitoring and managing impacts and potential impacts to our business from ongoing trade policy developments.

Current wording

Company's OSS segment conducts final assembly and test of products at our facility in California. However, we source components and subassemblies from both within and outside of the United States. While we attempt to pass on the cost of tariffs to our customers, our ability to do so is dependent upon many factors, including the predictability of tariff rates and market conditions for the Company's products. Management is closely monitoring and managing impacts and potential impacts to our business from ongoing trade policy developments.

Previous wording

At times, deposits held with financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation (“FDIC”) and Securities Investor Protection Corporation (“SIPC”), both of which provide basic deposit coverage with limits up to $250,000 per owner. As of June 30, 2025, the Company had $2,782,190 in cash in our accounts that exceeded the insurance limits. The Company has not experienced any losses in these accounts and believes that the financial institutions at which such amounts are held are stable; however, no assurances can be provided as to such. In Germany, the deposit insurance is €100,000 per bank, per customer. Bressner has funds on deposit in both Euro and U.S. dollar denominations of €3,328,868 (US$3,918,290) with banks in excess of the insurance limits.

Current wording

At times, deposits held with financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation (“FDIC”) and Securities Investor Protection Corporation (“SIPC”), both of which provide basic deposit coverage with limits up to $250,000 per owner. As of September 30, 2025, the Company had $2,492,250 in cash in our accounts that exceeded the insurance limits. The Company has not experienced any losses in these accounts and believes that the financial institutions at which such amounts are held are stable; however, no assurances can be provided as to such. In Germany, the deposit insurance is €100,000 per bank, per customer. Bressner has funds on deposit in both Euro and U.S. dollar denominations of €2,733,842 (US$3,254,038) with banks in excess of the insurance limits.