ONE STOP SYSTEMS, INC.
For the period ended Dec 31, 2025. Filed Mar 18, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 18, 2026
OSS$4.31+9.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-19.
0000950170-25-041974
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-18.
0001193125-26-114051
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 155 previous paragraphs and 157 current paragraphs.
81 unchanged; 27 reworded; 49 added; 47 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (49)
Current report
Sale of Bressner Technology GmbH
Current report
On December 30, 2025, the Company signed and closed a Shares Purchsase Agreement (“SPA”) pursuant to which the Company sold 100% of the issued and outstanding limited liability company interests of OSS GmbH, the sole owner of Bressner GmbH, to Hiper Euro GmbH (“Buyer”). The consummation of this transaction represented a strategic shift and prioritization of the Company's core business developing and manufacturing deployable edge computing systems for mission critical applications. At closing, the Company recognized a gain of $6,707,021.This gain is net of transaction costs that were determined to be directly attributable to the sale transaction. The base purchase price and associated gain is subject to adjustment for (i) a comparison of actual closing net working capital to a target amount, (ii) closing cash relative to a minimum cash amount (iii) closing indebtedness and (iv) seller transaction expenses. The Buyer is required to deliver a closing statement within 90 days following the closing. Any disputes regarding the adjustment are subject to resolution by an independent accounting firm. Any amounts payable to the Buyer will be satisfied first from the escrow account, with any remaining escrow balance released to the Company following final determination of the adjustment. All operations, assets, and liabilities of the divested business - including the gain recognized on the sale - have been classified as discontinued operations.
Current report
Registered Direct Offering of Common Stock
Current report
On September 29, 2025, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with institutional investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors in a registered direct offering (the “Offering”) 2,500,000 shares of the Company’s Common Stock (the “Common Stock”), par value $0.0001 per share. The Common Stock was sold pursuant to a prospectus supplement, filed on October 1, 2025 to the Registration Statement on Form S-3, originally filed on August 18, 2023 with the SEC (File No. 333-274073), and declared effective by the SEC on August 25, 2023. Net proceeds of the offering were $11,565,146, which is comprised of gross proceeds of $12,500,000 less Offering expenses of $934,854. The Offering closed on October 1, 2025.
Current report
During 2025, the composition of the Company's Board of Directors changed. On April 12, 2025, Ms. Gioia Messinger notified the board of directors of her resignation from and decision to not stand for re-election for the board of directors, effective as of the date of the Annual Meeting on May 14, 2025 ("2025 Annual Meeting"). Her decision to resign from the board of directors was not related to any disagreement with the Company on any matter relating to its operations, policies, or practices.
Current report
On April 16, 2025, Mr. Joe Manko submitted a letter to the board of directors, resigning from the board of directors, effective April 16, 2025. In the resignation letter, Mr. Manko cited certain disagreements with the Company's governance practices and the composition and leadership of the board.
Current report
On May 7, 2025, Mr. Ken Potashner notified the board of directors of his intent to not stand for re-election to the board of directors. He continued to serve until the end of his term at the 2025 Annual Meeting. Mr. Potashner's decision to not stand for re-election was not the result of any disagreement with the Company on any matter relating to the Company's operations, policies, or practices.
Current report
At the 2025 Annual Meeting, the Company's stockholders elected Mitch Herbets, Mike Dumont, Greg Matz, David Bassett, and Mike Knowles to serve on the board of directors.
Current report
Following these changes, the Board continues to focus on governance practices, strategic oversight, and alignment with stockholder interests.
Current report
On March 13, 2025, the board of directors adopted the Second Amended and Restated Bylaws of the Company (the "Amended and Restated Bylaws"). The Amended and Restate Bylaws (1) consolidate the amendments to the first amended and restate bylaws (the "Previous Bylaws") dated April 7, 2023 and August 9, 2024; and (ii) the first sentence of Section 2.8 was amended and restated to read:
Current report
"Unless otherwise provided by law, the certificate of incorporation or these bylaws, the holders of the majority of the voting power of the capital stock issued and outstanding and entitled to vote, present in person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders."
Current report
A copy of the Amended and Restated Bylaws is filed as Exhibit 3.1, which is incorporated by reference.
Current report
Income from discontinued operations
Current report
Income from discontinued operations consists of income from our Bressner Technologies subsidiary, which was sold on December 30, 2025. Income from discontinued operations also includes the gain recognized on the sale.
Current report
For the year ended December 31, 2025, our revenue increased $7,656,691, or 31.2%, as compared to the same period in 2024. This increase is primarily attributable to: 1) higher sales to the US Navy and a defense prime customer of data storage products to support the P-8A Poseidon Reconnaissance Aircraft; 2) higher sales to a defense end customer of custom server products, PCIe accelerators, and expansion products for a classified mobile intelligence platform; and 3) higher sales to a medical imaging OEM of liquid-cooled server products to support a breast cancer screening application. These increases were partially offset by lower sales to commercial aerospace customers as compared to the prior year.
Current report
Gross Profit and Gross Margin
Current report
Gross profit increased $15,359,559 for the year ended December 31, 2025 as compared to the same period in 2024. Gross margin percentage was 49.6% for 2025, compared to 2.5% for 2024. The improvement in gross margin was driven by 1) a more favorable mix of products shipped within 2025 and favorable pricing on new contracts entered into during 2025; 2) the non-recurrence of $7,088,114 of inventory adjustments and allowances recognized in 2024; 3) the non-recurrence of a $1,222,085 contract loss provision recognized in 2024 related to a customer-funded development contract entered into in 2022; and 3) more favorable manufacturing absorption within 2025 due to both production headcount reductions and a higher volume of production revenue.
Current report
General and administrative expense increased $153,729, or 2.1%, for the year ended December 31, 2025, as compared to the same period in 2024. This increase was primarily attributable to higher incentive compensation expense, partially offset by a reduction in board compensation associated with the reduction in the size of the board. General and administrative expense decreased as a percentage of revenue to 22.8% in 2025, as compared to 29.3% in 2024.
Current report
Marketing and selling expense increased $949,997, or 16.9%, for the year ended December 31, 2025, as compared to the same period in 2024. The increase was primarily attributable to higher incentive compensation expense, as well as higher salary and contract labor expenses. Marketing and selling expense decreased as a percentage of revenue to 20.4% in 2025, as compared to 22.9% in 2024.
Current report
Research and development expense increased $1,971,460, or 56.9%, for the year ended December 31, 2025, as compared to the same period in 2024. The increase was primarily attributable to higher engineering labor costs to support targeted investments in new product development, including costs associated with the development of our PCIe Gen 6.0 offerings, the expansion and enhancement of our U-BMC offerings, and the development of other proprietary products. Research and development expense as a percentage of revenue increased to 16.9% for the year ended December 31, 2025, as compared to 14.1% for the same period in 2024.
Current report
Interest expense decreased $1,504 for the year ended December 31, 2025, as compared to the same period in 2024. This was primarily due to interest expense related to taxes due in 2024 that did not recur in 2025, partially offset by interest expense incurred from borrowings on the domestic line of credit in 2025.
Current report
Other income (expense), for the year ended December 31, 2025, resulted in net other income of $16,309, as compared to net other income of $24,040 in the same period in 2024, for a net decrease of $7,731. The decrease was primarily driven by lower credit card rebates associated with certain rewards programs.
Current report
Income from discontinued operations, net of income taxes
Current report
Income from discontinued operations, net of income taxes, was $8,185,542 for the year ended December 31, 2025, compared to $1,533,954 for the same period in 2024. The increase of $6,651,588 was primarily due to a $6,707,021 pre-tax gain on sale associated with the divestiture of the Bressner business.
Current report
On September 29, 2025, the Company entered into a Securities Purchase Agreement with certain institutional investors, pursuant to which the Company agreed to issue and sell to the investors in a registered direct offering 2,500,000 shares of the Company's common stock, par value $0.0001 per share. The common stock was sold pursuant to a prospectus supplement, filed October 1, 2025, supplementing the Registration Statement on Form S-3. Net proceeds of the offering were $11,565,146, which is comprised of gross proceeds of $12,500,000 less Offering expenses of $934,854. The offering closed on October 1, 2025.
Current report
Cash from Continuing Operating Activities
Current report
During the year ended December 31, 2025, we used $6,551,087 in cash from continuing operating activities, compared to $2,596,232 in cash used in continuing operating activities in the year ended December 31, 2024.
Current report
Net cashed used in continuing operating activities for the year ended December 31, 2025 was the result of three components: i) net loss from continuing operations of $3,097,848, ii) net adjustments to net loss from continuing operations for non-cash items of $2,505,081, of which the largest components were stock based compensation expense of $1,820,705 and depreciation of $771,552, and iii) a net increase in working capital associated with continuing operations of $5,958,321.
Current report
Cash used from net changes in working capital associated with continuing operations for the year ended December 31, 2025 was $5,958,321, compared to cash provided by net changes in working capital associated with continuing operations of $2,489,623 in 2024. The change in cash from 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.
Current report
Cash from Continuing Investing Activities
Current report
Cash from Continuing Financing Activities
Current report
During the year ended December 31, 2025, the Company generated $11,933,200 of cash from continuing financing activities, as compared to a cash usage of $229,013 from continuing financing activities in 2024. This change was due to i) $11,565,146 of proceeds net of transaction costs from a registered direct offering of common stock completed on October 1, 2025, ii) higher proceeds from the exercise of stock options, due to a higher number of options exercised in 2025, partially offset by iii) higher payments of withholding taxes on stock-based awards.
Current report
Cash from Discontinued Operations
Current report
Cash provided by discontinued operations was $17,866,932 for the year ended December 31, 2025. This was driven by:
Current report
Cash provided by discontinued operating activities was $260,706 in 2025, compared to cash provided by discontinued operating activities of $2,488,134 in 2024. The change from 2024 was primarily driven by increases in inventory and accounts receivable in 2025, compared to decreases in 2024.
Current report
Cash provided by discontinued investing activities was $17,470,077 in 2025, compared to cash used in discontinued investing activities of $134,491 in 2024. The change from 2024 was primarily driven by cash proceeds from the divestiture of Bressner, partially offset by transaction costs paid in cash and higher capital expenditures.
Current report
Cash provided by discontinued financing activities was $136,149 in 2025, compared to cash used in discontinued financing activities of $954,939 in 2024. The change from 2024 was primarily driven by repayments of outstanding debt in 2024.
Current report
Tariffs and the threat of tariffs, ongoing military conflicts, macroeconomic conditions and policy, inflation and the risk of inflation, and uncertainty about the timing and substance of U.S. government budgets and policy actions have contributed to uncertainty and capital markets volatility overall, which could negatively impact our operations.
Current report
We have received notifications from certain of our suppliers of extended lead times for certain components used in our products. In late 2025, a global shortage of certain memory products resulting from datacenter build-out demand led to significant increases in lead times, pricing volatility, and significant price increases. We have worked with our suppliers to secure availability of supply, including through the negotiation of long-term agreements. While we attempt to pass on component cost increases to our customers, our ability to do so is dependent upon many factors, including market conditions for the Company's products.
Current report
U.S. Government Budget Environment
Showing the first 40 of 49 passages. Open the source sections for the rest.
Removed paragraphs (47)
Previous report
One Stop Systems, Inc. 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.
Previous report
During the year ended December 31, 2015, the Company formed a wholly owned subsidiary in Germany, OSS GmbH. Then, in July 2016, the Company acquired Magma and its operations that complemented OSS' manufacture of custom high-performance compute servers.
Previous report
On August 31, 2018, the Company acquired Concept Development, Inc. ("CDI"), which was 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 OSS as of June 1, 2020.
Previous report
On October 31, 2018, OSS GmbH acquired 100% of the outstanding equity of Bressner Technology GmbH, a Germany limited liability company located near Munich, Germany ("Bressner"). Bressner designs and manufactures standard and customized servers, panel PCs, and PCIe expansion systems. Bressner also provides manufacturing, test, sales, and marketing services for customers throughout the EMEA.
Previous report
The negative impact on the global economy and capital markets resulting from the geopolitical instability caused in part by the ongoing military conflict between Russia and Ukraine and Israel and Hamas, inflation and Federal Reserve and European Central Bank interest rate policy, and the weakness in the European and more specifically the German economy have contributed to economic uncertainty, which has negatively affected our operations. The risk of a recession in the U.S. remains, and volatility and recessionary conditions in Europe, and in Germany in particular, are expected to remain a concern for the near term. Additionally, it is possible that U.S. policy changes and uncertainty about such changes, including changes and uncertainty as a result of the US presidential administration change, could increase market volatility and currency exchange rate fluctuations. As a result of the foregoing, there is continued economic uncertainty and volatility in the capital markets in the near term that could negatively affect our operations.
Previous report
We are continuing to experience increased pricing, long lead-times, unavailability of certain products and limited supplies, protracted delivery dates, changes in minimum order quantities to secure product, and/or shortages of certain parts and supplies that are necessary components for the products and services we offer to our customers. This was particularly true for products and supplies sourced from Taiwan in the most recent year. As a result, the Company is continuing to carry increased inventory balances to ensure availability of necessary products and to secure pricing.
Previous report
These global issues and concerns regarding general economic decline or recession are impacting our business as well as some of our customers, who are continuing to experience downturns or uncertainty in their own business operations and revenue, and as a result, these customers may need to decrease or delay their technology spending, request pricing concessions or payment extensions, or seek to renegotiate their contracts. During the year ended December 31, 2024, the Company experienced delays in orders due to certain customers’ funding or program delays. If such decreases in orders or postponements continue in the future, or we experience cancellations of orders, our operating results will be further impacted, and our revenues may decline in future periods.
Previous report
These global issues and events may also have the effect of heightening many risks associated with our customers and supply chain. We may take further actions that alter our operations from time to time, or which we determine are in our best interests. In addition, we may decide to postpone or abandon planned investments in our business in response to changes in our business, which may impact our ability to attract and retain customers and our rate of innovation, either of which could harm our business.
Previous report
As a result of these global issues, it has been difficult to accurately forecast our revenues or financial results, especially given the near and long-term impacts of the economic and geopolitical issues, inflation, and the potential for continued weakness in the German economy. In addition, while the potential impact and duration of these issues on the economy and our business may be difficult to assess or predict, these world events have resulted in, and may continue to result in, significant disruption of global financial markets, and may reduce our ability to access additional capital, which could negatively affect our liquidity in the future. Our results of operations could be materially below our forecasts as well, which could adversely affect our results of operations, disappoint analysts and investors, or cause our stock price to decline.
Previous report
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 reduction of the size of the board from nine to seven members went into effect upon closing of the polls for voting on the election of directors at the 2024 Annual Meeting, in May 2024.
Previous report
In October 2024 Fabrizio Sardo joined the executive team taking the position of VP of Operations succeeding Victor Hester. Fabrizo joined the Company with over 15 years of experience successfully overseeing operations in aerospace, nuclear, and FCC regulated industries. A highly focused leader with a proven track record of driving lean transformations, developing strategic planning for on-time delivery, and creating empowered positive cultures. His work history includes leadership roles in operations with SeeScan, HM Electronics, Thermo Fisher and RTX.
Previous report
In November of 2024 Daniel Gabel joined the executive team as the Chief Financial Officer succeeding John Morrison. Daniel brings over 14 years of accounting, financial, and strategic leadership within the defense industry to OSS. Most recently, Gabel served as the CFO of CAES' Defense System Division, a division of Honeywell that provides advanced electronic solutions to the U.S. aerospace and defense industry. Prior to this, Gabel spent over 10 years at RTX Corporation (Raytheon) across various finance and accounting roles, and within several different divisions, including serving as CFO from 2021 - 2023 of SEAKR Engineering, a Raytheon subsidiary. Gabel has a Master of Business Administration from Southern Methodist University and a Bachelor of Science in Business Administration from the University of Southern California.
Previous report
Impairment of Goodwill
Previous report
Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually; when we deem that a triggering event has occurred that has impaired the value of goodwill, a write-down in value is recorded.
Previous report
For the year ended December 31, 2023, the Company received a government provided Employee Retention Credit ("ERC") for the retention of employees during the COVID-19 pandemic during the years of 2020 and 2021, in the amount of $2,004,382 less commission of $287,655.
Previous report
For the year ended December 31, 2024, our total revenue decreased $6,202,440, or 10.2%, as compared to the same period in 2023. OSS saw a decrease in revenue of $4,251,079, or 14.8%, as compared to the same period in 2023. This decrease is primarily attributable to a reduction of approximately $4.8M in sales to a former media and entertainment customer, for whom shipments ceased in the second quarter of the prior year. This decrease was partially offset by higher sales to customers in the military and defense end markets. Bressner experienced a decrease of $1,951,360, or 6.1%, as compared to the same period in 2023, due primarily to a slowdown in the German economy.
Previous report
Cost of revenue and gross profit
Previous report
Cost of revenue increased $4,033,876, or 9.4%, for the year ended December 31, 2024, as compared to the prior year. OSS saw an increase in cost of revenue of $5,390,984, or 29.1%, as compared to the prior year. This increase in cost of revenue was primarily attributable to allowances for inventory obsolescence. In 2024, OSS segment inventory adjustments and allowances increased cost of revenue by $7,088,114, which included an accrual of $1,102,995 to provision for future inventory receipts on non-cancellable purchase order commitments. The inventory adjustments and allowances resulted from a shift in the Company's focus to the military and defense sector, deviations from management's expectations with respect to product sales, and advances in technology that rendered certain inventory obsolete. Cost of revenue was also impacted by increased labor expenditures related to fulfilling performance obligations on a customer-funded development contract that was entered into in 2022, as well as an accrual for anticipated future costs on the same contract in excess of the contract value. The Company recognizes anticipated contract losses as soon as they become known and estimable. Bressner’s cost of revenue decreased $1,357,108, or 5.6%, as compared to the prior year, due to the reduction in revenue volume.
Previous report
The overall gross margin percentage was 14.1% for the 2024 period as compared to 29.5% in the same period in 2023. OSS’ segment gross margin percentage for the year ended December 31, 2024, was 2.5% as compared to 35.6% for the year ended December 31, 2023. The decline in OSS segment gross margin percentage was due to allowances for inventory obsolescence of $7,088,114, including an accrual of $1,102,995 to provision for future inventory receipts on non-cancellable purchase order commitment, and the contract losses of $1,222,085 recognized in the fourth quarter of 2024 for incurred and anticipated costs to satisfy performance obligations on a customer-funded development contract that was entered into in 2022. Excluding these three items, the OSS segment gross margin would have been 36.4%. Bressner contributed gross margin at a rate of 23.5% in 2024, as compared to 24.0% in 2023.
Previous report
General and administrative expense decreased $292,538, or 3.2%, for the year ended December 31, 2024, as compared to the same period in 2023. OSS experienced a decrease of $107,570, or 1.5%, which was primarily due to the non-recurrence of certain costs related to organizational restructuring and outside professional services in 2023. Bressner had a decrease of $184,968, or 9.5% as a result of an organizational realignment. Overall, total general and administrative expense increased as a percentage of revenue to 16.4% for the year ended December 31, 2024, as compared to 15.2% during the same period in 2023.
Previous report
Impairment of goodwill
Previous report
During the year 2023, the Company took a write-down of goodwill of $5,630,788 as a result of the overall financial performance of OSS as compared to plan, the transition of our product strategy to focus on AI applications at the edge, and the deferment of certain orders in our military and defense end markets. There was no such impairment charge in 2024.
Previous report
Marketing and selling expense increased $1,354,466, or 20.4%, for the year ended December 31, 2024, as compared to the same period in 2023. OSS had an increase of $630,129, or 12.6%, which was primarily due to increased costs for personnel and for tradeshow participation. Bressner had an increase of $724,337, or 43.5%, primarily resulting from the addition of new marketing personnel and sales collateral material. Overall, total marketing and selling expense increased as a percentage of revenue to 14.6% during the year ended December 31, 2024, as compared to 10.9% during the same period in 2023.
Previous report
Research and development expense decreased $233,794, or 5.4%, for the year ended December 31, 2024, as compared to the same period in 2023. OSS saw a decrease of $347,383, or 9.1%. The decrease was driven by the timing of certain new product introduction activities and the deployment of engineering resources onto customer funded development efforts, which costs as classified as a component of cost of sales. Bressner experienced an increase of $113,588, or 21.9% due to increased personnel and overhead costs. Overall, total research and development expense as a percentage of revenue increased to 7.5% during the year ended December 31, 2024, as compared to 7.1% during the same period in 2023.
Previous report
Interest expense decreased $43,658 for the year ended December 31, 2024, as compared to the same period in 2023, as a result of the paydown of outstanding debt.
Previous report
For the year December 31, 2023, the Company received a government provided Employee Retention Credit ("ERC") for the retention of employees during the COVID-19 pandemic during the years of 2020 and 2021, in the amount of $2,004,382 less commission of $287,656, respectively.
Previous report
Other income (expense), for the year ended December 31, 2024, resulted in net other income of $45,353, as compared to net other expense of $9,807 in the same period in 2023, for a net change of $55,160. This change was primarily due to a net foreign currency translation gain of $17,276 in the year ended December 31, 2024, as compared to a net foreign current translation loss of $40,933 in the comparable period of 2023.
Previous report
Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2023. The mandatory capitalization requirement increases our deferred tax assets and the related valuation allowance and may have an impact on payment of tax liabilities. The effective tax rate for the year ended December 31, 2024, is (5.6%), as compared to (16.0%) in the prior year 2023. The change in the effective tax rate is primarily related to the effect of the valuation allowance for deferred tax assets initially recorded in 2024.
Previous report
As discussed elsewhere in this Annual Report, risks to the U.S. and German economies could result in further economic uncertainty and volatility in the capital markets in the near term and could negatively affect our operations.
Previous report
Operating Activities
Previous report
During the year ended December 31, 2024, we used $108,098 in cash from operating activities, a reduction of $331,581 when compared to the cash used by operating activities of $439,679 during the same period in 2023.
Previous report
Cash used in operating activities in the year ended December 31, 2024 was the result of three components: i) a net loss of $13,634,333, ii) adjustments to net loss of $10,789,479 for non-cash items, and iii) a net reduction of working capital of $2,736,756. Cash provided by net changes in working capital for the year ended December 31, 2024 was $2,736,756, as compared to cash usage of $3,184,851 from net changes in working capital in the prior year. In 2024, the working capital reduction was due to changes in inventory levels, accounts payable, and accrued expenses and other liabilities. This was partially offset by increases in working capital due to accounts receivable, prepaid expenses and other current assets, and operating lease liabilities.
Previous report
Investing Activities
Previous report
Financing Activities
Previous report
During the twelve month period ended December 31, 2024, the Company used $1,421,701 in cash for debt payments on Bressner borrowings and payment of tax on the net exercise of vested RSUs, while generating $237,749 from the exercise of options. During the same period in 2023, the Company used $1,888,071 for comparable items and also benefited from Employee Retention Credits of $1,716,727 related to retention of employees during the COV-19 pandemic. For the year ended December 31, 2024, net cash used in financing activities increased $1,012,608 as compared to the same period in 2023.
Previous report
Although we have not seen any significant reduction in revenues to date due to consolidations, we have seen some consolidation in our industry during economic downturns. These consolidations have not had a negative effect on our total sales; however, should consolidations and downsizing in the industry continue to occur, those events could adversely impact our revenues and earnings going forward.
Previous report
During 2023, the Company implemented certain internal organizational changes to align our US-based operations with, and to further support and accelerate our strategy to focus on, the edge computing industry and our military business. In furtherance of this strategy and our goals, on June 5, 2023, David Raun, then the Company’s president and chief executive officer, stepped down from such roles and Michael Knowles was appointed to serve in such roles. Mr. Raun continued to serve as a member of the Company’s board of directors until May 2024. Additionally, on July 17, 2023, we hired a new vice president of sales with significant relevant experience. Furthermore, we added two new members with extensive defense experience to our board of directors during the year. We believe that these changes will allow us to further penetrate the defense sector and enhance our business strategies with respect to this target market.
Previous report
The world continues to be affected by the ongoing conflicts between Russia and Ukraine and Israel and Hamas, and economic uncertainty, amongst other things. Germany was in a recession for most of 2024, largely due to persistent high inflation and falling household spending. Volatility and recessionary conditions in Europe, and in particular in Germany, are expected to remain a concern for the near term. These factors, amongst other things, could result in further economic uncertainty and volatility in the capital markets in the near term, and could negatively affect our operations.
Previous report
Customer agreements include one vendor managed inventory program, which was discontinued in 2023. The Company recognizes revenue under this arrangement when all of the following criteria are met: (i) the goods have been identified separately as belonging to the customer; (ii) the goods are ready for physical shipment to the customer; (iii) the Company does not have the ability to direct the goods to another customer; and (iv) the arrangement was requested by the customer and that the customer has sufficiently explained a substantial business purpose for the arrangement. Management also considers whether the customer's custodial risks are insured and whether modifications to the Company's normal billing and credit terms were required.
Previous report
Measurement of Credit Losses on Financial Instruments
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Reworded paragraphs (27)
Previous wording
We believe that we are uniquely positioned as a specialized provider to address the needs of this market, providing custom servers, data acquisition platforms, compute accelerators, solid-state storage arrays, system I/O expansion systems, as well as edge optimized industrial and panel PCs, tablets, and handheld compute devices. Our systems also offer industry leading capabilities that occupy less physical space and require less power consumption. We deliver this high-end technology to our customers through the sale of equipment and embedded software.
Current wording
We believe that we are uniquely positioned as a specialized provider to address the needs of this market, providing custom servers, data acquisition platforms, compute accelerators, solid-state storage arrays, and system I/O expansion systems. Our systems also offer industry leading capabilities that occupy less physical space and require less power consumption. We deliver this high-end technology to our customers through the sale of equipment and embedded software.
Previous wording
Cost of revenue primarily consists of costs of materials, costs paid to third-party contract manufacturers (which may include the costs of components), and personnel costs associated with manufacturing and support operations. Personnel costs consist of wages, bonuses, benefits, and stock-based compensation expenses. Cost of revenue also includes freight, allocated overhead costs and inventory write-offs and changes to our inventory and warranty reserves. Allocated overhead costs consist of certain facilities and utility costs. We expect cost of revenue to increase in absolute dollars with an improvement in margin, as product revenue increases.
Current wording
Cost of revenue primarily consists of costs of materials, costs paid to third-party contract manufacturers (which may include the costs of components), and personnel costs associated with manufacturing and support operations. Personnel costs consist of wages, bonuses, benefits, and stock-based compensation expenses. Cost of revenue also includes freight, allocated overhead costs and inventory write-offs and changes to our inventory and warranty reserves. Allocated overhead costs consist of certain facilities and utility costs.
Previous wording
General and administrative expense consists primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, and fees for third-party professional services, as well as allocated overhead. We expect our general and administrative expense to increase in absolute dollars as we continue to invest in growing the business.
Current wording
General and administrative expense consists primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, and fees for third-party professional services, as well as certain overhead expenses which are allocated to general and administrative expense. We expect our general and administrative expense to increase in absolute dollars as we continue to invest in growing the business.
Previous wording
Marketing and Selling expense consists primarily of employee compensation and related expenses, sales commissions, marketing programs, travel, and entertainment expenses as well as allocated overhead. Marketing programs consist of advertising, tradeshows, events, corporate communications, and brand-building activities. We expect marketing and selling expenses to increase in absolute dollars as we expand our sales force, increase marketing resources, and further develop sales channels.
Current wording
Marketing and Selling expense consists primarily of employee compensation and related expenses for marketing and sales functions, sales commissions, marketing programs, travel, and entertainment expenses, as well as certain overhead expenses which are allocated to marketing and selling expense. Marketing programs consist of advertising, tradeshows, events, corporate communications, and brand-building activities. We expect marketing and selling expenses to increase in absolute dollars as we expand our sales force, increase marketing resources, and further develop sales channels.
Previous wording
Research and development expense consists primarily of employee compensation and related expenses, prototype expenses, depreciation associated with assets acquired for research and development, third-party engineering and contractor support costs, as well as allocated overhead. 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
Provision for income taxes consists of estimated income taxes due to the United States and German governments, as well as state tax authorities in jurisdictions in which we conduct business, along with the change in our deferred income tax assets and liabilities.
Current wording
Provision for income taxes consists of estimated income taxes due to the United States and foreign governments, as well as state tax authorities in jurisdictions in which we conduct business, along with the change in our deferred income tax assets and liabilities.
Previous wording
Comparison of the Years Ended December 31, 2024 and 2023:
Current wording
Comparison of the Years Ended December 31, 2025 and 2024 from Continuing Operations:
Previous wording
Interest income decreased $67,213 for the year ended December 31, 2024, as compared to the same period in 2023. The decrease is attributable to lower investment balances, partially offset by higher interest rates.
Current wording
Interest income decreased $198,957 for the year ended December 31, 2025, as compared to the same period in 2024. The decrease is primarily attributable to lower investment balances throughout the year.
Previous wording
We have recorded an income tax provision of $726,502 and $927,128, respectively, for the years ended December 31, 2024 and 2023. The effective tax rate for the years ended December 31, 2024 and 2023 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 federal, foreign and state tax liabilities for the year. Additionally, during 2023, the Company recorded an impairment of goodwill attributable to OSS that impacted the effective tax rate.
Current wording
The tax provision for the year ended December 31, 2025 associated with continuing operations was $11,310, compared to $2,560 for the same period in the prior year. The effective tax rate for the years ended December 31, 2025 and 2024 differed from the statutory rate mainly due to changes in the 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 federal and state tax liabilities.
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 December 31, 2024, we had total cash and cash equivalents of $6,794,093, with short-term investments of $3,217,065, and total working capital of $23,528,638. Cash and cash equivalents held by Bressner totaled $2,751,092 on December 31, 2024. 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. In 2025, we also received cash from the sale of our Bressner subsidiary. As of December 31, 2025, we had total cash, cash equivalents, and restricted cash of $33,374,976 and total working capital $45,252,401.
Previous wording
During the year ended December 31, 2024, we had loss from operations of $13,356,813, with cash used in operating activities of $108,098.
Current wording
During the year ended December 31, 2025, we had loss from operations related to continuing operations of $3,379,112, with cash used in continuing operating activities of $6,551,087.
Previous wording
During the year ended December 31, 2023, we had a loss from operations of $7,923,152, with cash used in operating activities of $439,679.
Current wording
During the year ended December 31, 2024, we had a loss from operations related to continuing operations of $15,663,485, with cash used in continuing operating activities of $2,596,232.
Previous wording
Our sources of liquidity and cash flows are used to fund ongoing operations, fund research and development projects for new products technologies, and provide ongoing support services for our customers. Over the next year, we anticipate that we will use our liquidity and cash flows from our operations to fund our business. In addition, as part of our business strategy, we occasionally evaluate potential acquisitions of businesses, products and technologies. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products or businesses. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, successfully integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot provide assurances that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all.
Current wording
Our sources of liquidity and cash flows are used to fund ongoing operations, fund research and development projects for new products technologies, and provide ongoing support services for our customers. Over the next year, we anticipate that we will use our liquidity and cash flows from our operations to fund our business. In addition, as part of our business strategy, we are evaluating potential acquisitions of businesses, products and technologies or other strategic acquisitions. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products or businesses. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, successfully integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot provide assurances that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all.
Previous wording
We intend to continue to monitor the effects of inflation, global supply chain shortages, and general economic conditions, and, if appropriate, we may alter our plans to address such concerns as they may arise.
Current wording
As discussed elsewhere in this Annual Report, there are multiple risks that could result in economic uncertainty and volatility in the capital markets in the near term and could negatively affect our operations. We intend to continue to monitor the effects of inflation, global supply chain shortages, and general economic conditions, and, if appropriate, we may alter our plans to address such concerns as they may arise.
Previous wording
Management’s plans are to focus on acquiring new customer orders to replace lost revenue attributable to our previous media customer, to further grow and expand our business in both commercial and military markets, and to respond to the changing economic landscape by continuing to control hiring and operating costs, conserve cash, and focus on growth and margin expansion.Our results of operations for the years ended December 31, 2024 and 2023, partially benefited from such actions, particularly those resulting from a reduction in force in April 2023. Management is also committed to conserving cash and securing debt and/or equity financing, as required, for liquidity to meet our near-term cash requirements.
Current wording
Management’s plans are to focus on acquiring new customer orders, to further grow and expand our business in both commercial and military markets, and to respond to the changing economic landscape by continuing to contlrol hiring and operating costs, conserve cash, and focus on growth and margin expansion. Management is committed to conserving cash and securing debt and/or equity financing, as required, for liquidity to meet our near-term cash requirements.
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 December 31, 2024 and 2023, respectively.
Current wording
In April 2022, the Company obtained a domestic revolving line of credit of $2,000,000 at Torrey Pines Bank (the "Line of Credit"). To access the 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 maturity and renewal date for the Line of Credit is September 11, 2026. No balance was outstanding on December 31, 2025 or 2024.
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 up to $2,000,000 from the Line of Credit (subject to satisfaction of certain borrowing conditions). Additionally, we 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
During the year ended December 31, 2024, the Company generated cash of $4,190,787 from investing activities, as compared to $1,520,799 provided by investing activities during the prior year period in 2023, a net increase of $2,669,988. This change is basically attributable to an increase in the number of short-term investments redeemed in the current period as compared to the prior period as well as by a year over year reduction in capital expenditures due to lower expenditures for ERP enhancements and for test equipment.
Current wording
During the year ended December 31, 2025, the Company generated cash of $3,028,561 from continuing investing activities, as compared to $4,325,278 provided by continuing investing activities during 2024, a net decrease of $1,296,717. This change is attributable to a decrease in the number of short-term investments redeemed in the current year as compared to the prior year and to cash expenditures related to patent filing costs, partially offset by lower capital expenditures for demonstration assets and test equipment.
Previous wording
We are experiencing delays in funding for customer projects, delays in delivery schedules based upon customer requirements and an extended sales cycle. Additionally, certain of our customers are experiencing downturns or uncertainty in their own business operations and revenue, including one customer that declared bankruptcy in 2024, and as a result there is an increased risk that these customers may need to decrease or delay their technology spending, request pricing concessions or payment extensions, or seek to renegotiate their contracts. During the year ended December 31, 2024, the Company experienced delays and postponements of committed purchases and orders due to certain customers’ funding or program delays. We have also experienced cancellations of orders due to disruptions in our customers’ businesses or changes in their business plans. Such delays, postponements and cancellations negatively impacted the Company’s results of operations for the year ended December 31, 2024. If such decreases in orders, postponements or cancellations continue in the future, our operating results will be further impacted, and our revenues may decline in future periods.
Current wording
During fiscal year 2024, we experienced delays in funding for customer projects, delays in delivery schedules based upon customer requirements, and an extended sales cycle. If such delays recur in the future, our operating results could be impacted.
Previous wording
With the Company's shifted focus to the development and sale of edge computing, we have significantly increased our efforts to penetrate the military and defense sectors in particular, which typically have protracted sales cycles, significant contracting requirements, and multi-year deliverables. With the hiring of a new president and chief executive officer and new vice president of sales, each of whom has 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. We have reviewed our existing pipeline and have made adjustments to reflect the procurement habits and timing of the military and defense sector. As discussed elsewhere in this Annual Report, we have also added relevant defense market experience to our board of directors through the appointment of Mr. Knowles, Vice Admiral Dumont, and Mitch Herbets as directors.
Current wording
With our shifted focus to the development and sale of edge computing products, we have significantly increased our efforts to penetrate the military and defense sectors in particular. These sectors typically have protracted sales cycles, significant contracting requirements, and multi-year deliverables. Our pipeline is effected by the procurement habits and timing of the military and defense sector.
Previous wording
We experienced some effects due to inflation in both the U.S. and Europe during the most recent period, including increased product pricing due to semiconductor product shortages, increased transportation costs due to increases in the cost of energy and general price increases due to inflation in the economy. 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, particularly in the purchase of inventories to minimize price increases. Inflation affects the Company’s manufacturing costs, distribution costs and operating expenses.
Current wording
We have recently experienced and continue to experience effects from inflation. 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
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer adjusted for estimated variable consideration, if any. Variable consideration may include discounts, rights of return, refunds, and other similar obligations. The Company allocates the transaction price to each distinct product and service based on its relative standalone selling price. The standalone selling price for products primarily involves the cost to produce the deliverable plus the anticipated margin and for services is estimated based on the Company’s approved list price.
Current wording
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer adjusted for estimated variable consideration, if any. Variable consideration may include discounts, rights of return, refunds, and other similar obligations. The Company allocates the transaction price to each distinct product and service based on its relative standalone selling price. The standalone selling price for products and services primarily involves the cost to produce the deliverable plus the anticipated margin and is estimated based on the Company’s approved list price.
Previous wording
Our exposure to interest rate risk is primarily associated with borrowing on revolving lines of credit denominated in both U.S. dollars and Euros. We are exposed to the impact of interest rate changes primarily through our borrowing activities for our variable rate borrowings.
Current wording
Our exposure to interest rate risk is primarily associated with borrowing on revolving lines of credit. We are exposed to the impact of interest rate changes primarily through our borrowing activities for our variable rate borrowings.
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”), of which both provide basic deposit coverage with limits up to $250,000 per owner. As of December 31, 2024, the Company had $2,815,399 of cash in our accounts that exceeded the insurance limits. The Company has not experienced any such losses in these accounts, and believes that the financial institutions at which such amounts are held are stable; however, no assurances can be provided. 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 €2,215,188 ($2,292,831) 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”), of which both provide basic deposit coverage with limits up to $250,000 per owner. As of December 31, 2025, the Company had $33,124,976 of cash in our accounts that exceeded the insurance limits. The Company has not experienced any such losses in these accounts, and believes that the financial institutions at which such amounts are held are stable; however, no assurances can be provided.
Previous wording
We operate in the United States and Germany. Our primary reporting currency is the United States dollar. Foreign sales of products and services are primarily denominated in U.S. dollars. We also conduct business outside the United States through Bressner, our foreign subsidiary in Germany, where business is largely transacted in non-U.S. dollar currencies, particularly the Euro, which is subject to fluctuations due to changes in foreign currency exchange rates. Accordingly, we are subject to exposure from changes in the exchange rates of local currencies. Foreign currency transaction gains and losses are recorded in other income (expense), net in the consolidated statements of operations.
Current wording
We operate primarily in the United States. Foreign sales of products and services are primarily denominated in U.S. dollars. We have also conducted business outside the United States, primarily through Bressner, our foreign subsidiary in Germany, which was sold on December 30, 2025 and is classified as discontinued operations. Bressner's business was largely transacted in non-U.S. dollar currencies, particularly the Euro, which is subject to fluctuations due to changes in foreign currency exchange rates. Accordingly, we have been subject to exposure from changes in the exchange rates of local currencies. Foreign currency transaction gains and losses associated with continuing operations are recorded in other income (expense), net in the consolidated statements of operations. Foreign currency transaction gains and losses associated with discontinued operations are recorded in income from discontinued operations, net of income taxes in the consolidated statements of operations.
Previous wording
OSS GmbH operates as an extension of OSS’ domestic operations and acquired Bressner Technology GmbH in October 2018. The functional currency of OSS GmbH is the Euro. Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, monetary assets and liabilities are translated using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Consequently, changes in the exchange rates of the currencies may impact the translation of the foreign subsidiaries’ statements of operations into U.S. dollars, which may in turn affect our consolidated statement of operations. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income in the consolidated statement of comprehensive income.
Current wording
The functional currency for the Bressner business was the Euro. Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, monetary assets and liabilities are remeasured using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Consequently, changes in the exchange rates of the currencies may impact the translation of the foreign subsidiaries’ statements of operations into U.S. dollars, which may in turn affect our consolidated statement of operations. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in the consolidated balance sheets. With the divestiture of the Bressner business in 2025, cumulative currency translation adjustments associated with our Bressner business were released from accumulated other comprehensive income (loss) and recorded within income from discontinued operations, net of income taxes.
Previous wording
We expect to continue to incur expenditures similar to the free cash flow adjustments described above, and investors should not infer from our presentation of this non-GAAP financial measure that these expenditures reflect all of our obligations which require cash. The following table reconciles cash provided by operating activities, the most directly comparable GAAP financial measure, to free cash flow:
Current wording
We expect to continue to incur expenditures similar to the free cash flow adjustments described above, and investors should not infer from our presentation of this non-GAAP financial measure that these expenditures reflect all of our obligations which require cash.