ONE STOP SYSTEMS, INC.

For the Years Ended December 31, 2025 and 2024

NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION

Nature of Operations

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

During the year ended December 31, 2015, the Company formed a wholly owned subsidiary in Germany, One Stop Systems, GmbH (“OSS GmbH”). Then, in July 2016, the Company acquired Mission Technologies Group, Inc. (“Magma”) and its operations. Magma designed and manufactured PCIe expansion systems primarily for datacenter and business-to-professional consumer applications, such as the media and entertainment market.

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

On October 31, 2018, OSS GmbH acquired 100% of the outstanding stock of Bressner Technology GmbH, a limited liability company registered under the laws of Germany and located near Munich, Germany (“Bressner”). Bressner is a integrator and distributor of hardware systems and components.

On December 30, 2025, the Company signed and closed a definitive agreement to sell all assets and operations of Bressner Technology GmbH through a sale of all shares of OSS GMbH. 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.

The Company's results of operations for the year ended December 31, 2024 were negatively impacted by the loss of business from a legacy media and entertainment customer. In the second quarter of 2023, the Company completed and fulfilled substantially all of its orders associated with this customer and does not anticipate significant business from this customer in the future.

With the Company's shifted focus on the development and sale of proprietary and differentiated edge computing solutions, we have significantly increased our efforts to penetrate the military and defense sectors in particular. In the years ended December 31, 2025 and 2024, we further increased our emphasis and focus on the pursuit of revenue opportunities with major defense contractors and the military.

Basis of Presentation

The accompanying financial statements have been prepared on an accrual basis of accounting in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation. All operations, assets, and liabilities of the Bressner business, which was divested on December 30, 2025, have been classified as discontinued operations for the years ended December 31, 2025 and 2024.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of OSS, which include the acquisition of CDI. The accounts of OSS GmbH, which include the acquisition of Bressner, have been classified as discontinued operations. Intercompany balances and transactions have been eliminated in consolidation.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions.

On an ongoing basis, our management evaluates these estimates and assumptions, including those related to determination of standalone selling prices of our products and services, allowance for credit losses and sales reserves, income tax valuations, stock-based compensation, goodwill, intangible assets, and inventory valuations and recoverability. We base our estimates on historical data and experience, as well as various other factors that our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities.

We are not aware of any specific event or circumstance that would require an update to our estimates or assumptions or a revision of the carrying value of our assets or liabilities that has not been properly reflected in the consolidated financial statements. These estimates and assumptions may change as new events occur and additional information is obtained. As a result, actual results could differ materially from these estimates and assumptions.

Concentration Risks

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.

In the year ended December 31, 2025, our topthree customers comprised 22%,22%, and 17% of revenue, respectively. No other customers exceeded 10% of revenue in 2025. In the year ended December 31, 2024, our top customer comprised 20% of revenue. No other customer exceeded 10% of revenue in 2024. Customer concentration figures represent continuing operations and exclude customer activity within discontinued operations.

As of December 31, 2025, three customers comprised 40%,26%, and 11%, respectively, of our accounts receivable balance. No other customers exceeded 10% of our accounts receivable balance as of December 31, 2025. As of December 31, 2024, three customers comprised 22%,20%, and 20%, respectively, of our accounts receivable balance. No other customer exceeded 10% of our accounts receivable balance as of December 31, 2024. Accounts receivable concentration figures represent balances from continuing operations and exclude balances within discontinued operations.

In the year ended December 31, 2025, the Company made purchases fromtwo suppliers which represented 23% and 11%, respectively, of the Company's vendor purchases in the year. No other suppliers represented more than 10% of our vendor purchases in 2025. In the year ended December 31, 2024, the Company made purchases from three suppliers which represented 39%,17%, and 13%, respectively, of the Company's vendor purchases in the year. No other suppliers represented more than 10% of our vendor purchases in 2024. Vendor concentration figures represent continuing operations and exclude vendor purchases within discontinued operations.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on deposit and money market accounts. The Company considers all highly liquid temporary cash investments with an initial maturity of three months or less when acquired to be cash equivalents. Management believes that the carrying amounts of cash equivalents approximate their fair value because of the short maturity period.

Restricted Cash

Restricted cash consists of cash and cash equivalents that are legally or contractually restricted as to withdrawal or use for general operating purposes. Restricted cash on the Company's balance sheet as of December 31, 2025 consists of a portion of the consideration received for the sale of Bressner that is held in an escrow account. Funds are held by an escrow agent, with release upon confirmation between the Company and the buyer of the final closing amount. The escrow deposit was based on an estimated closing amount, including estimated closing balances for Net Working Capital, Cash, and Indebtedness.

Short-term Investments

Short-term investments consist predominantly of commercial paper, corporate debt securities, U.S. Treasury securities, and asset-backed securities. The Company classifies short-term investments based on the facts and circumstances surrounding the investments at the time of purchase and evaluates such classification as of each balance sheet date. The Company didnot have any short-term investment on December 31, 2025. On December 31, 2024, all short-term investments were classified as available-for-sale.

Short-term investments are recorded at fair value with unrealized gains and losses included in accumulated other comprehensive income - a component of stockholders’ equity. Realized gains and losses are determined using the specific identification method and are included in other income (expense) in the consolidated statement of operations. The Company evaluates its investments to determine whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered to be other than temporary if they are related to deterioration in credit risk or if it is likely that the Company will sell the securities before recovery of their cost basis.

Accounts Receivable

Accounts receivables are presented at net realizable value. This value includes an appropriate allowance for credit losses to reflect any loss anticipated on the trade accounts receivable and unbilled receivables. Unbilled receivables include cost and gross profit earned in excess of billings. The allowance for credit losses is an estimate to cover the losses resulting from the inability of customers to make payments on their outstanding balances and unbilled receivables. In estimating the required allowance, management considers the overall collectability, customer creditworthiness, historical levels of credit losses and future expectations and aging of the accounts receivable, specific customer circumstances, current economic trends, and historical experience with collections. On December 31, 2025 and 2024, the allowance for credit losses arising from continuing operations was $78,918 and $79,018, respectively.

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, which sets out the principles for the recognition and measurement of credit losses on financial instruments. This standard provides guidance on the impairment of financial instruments that is based on expected losses rather than probable or incurred losses. Under this guidance, the Company recognizes, as an allowance, our estimate of expected credit losses based upon historical and current information, and reasonable and supportable forecasts of future events and circumstances, as well as estimates of prepayments. Under this model, we are required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset.

Accounts receivable have been reduced for credit by an allowance for credit losses. The allowance represents the current estimate of lifetime expected credit losses over the remaining duration of existing accounts receivable after considering current market conditions and supportable forecasts when appropriate. This estimate is a result of management's evaluation of collectability, customer creditworthiness, historical levels of credit losses, and future expectations.

The Company shall recognize an allowance for credit losses rather than a reduction to the carrying value of the asset for debt securities. To determine credit losses, we employ a systematic methodology that considers available quantitative and qualitative evidence. In addition, we consider specific adverse conditions related to the financial health of, and business outlook for, the investee.

On an ongoing basis, the Company will contemplate forward-looking economic conditions in recording lifetime expected credit losses for the Company’s financial assets measured at cost, such as the Company’s trade receivables and certain short-term investments.

The following table represents the changes in the allowance for credit losses associated with our trade receivables for the year ended December 31, 2025 and 2024:

Inventories

Inventories are valued at the lower of cost or net realizable value. The Company uses the average cost method for purposes of determining cost, which approximates the first-in, first-out method.

The Company establishes reserves on its inventories to write-down the carrying value of its estimated obsolete or excess inventories to estimated net realizable value based upon observations of historical usage and assumptions about future demand and market conditions. In addition, the Company considers changes in the market value of components in determining the net realizable value of its inventory. Inventory reserves are not typically reversed until the specific inventories are sold or otherwise disposed.

Actual demand, product mix and alternative usage may be lower than those that we project, and this difference could have a material adverse effect on our gross margin if inventory write-downs beyond those initially recorded become necessary. Alternatively, if actual demand, product mix and alternative usage are more favorable than those we estimated at the time of such a write-down, our gross margin could be favorably impacted in future periods.

Property and Equipment

Property and equipment, other than leasehold improvements, are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, generally fromtwo toseven years. Leasehold improvements are recorded at cost and are amortized using the straight-line method over the shorter of the remaining lease term or the estimated useful life of the related asset. Tooling and test equipment includes capitalized labor costs associated with the development of the related tooling and test equipment. Costs incurred for maintenance and repairs are expensed as incurred, and expenditures for major replacements and improvements are capitalized. Upon retirement or sale, the cost and related accumulated depreciation and amortization of disposed assets are removed from the accounts and any resulting gain or loss is included in other (expense) income, net.

Leases

In February 2016, the FASB issued ASU No. 2016-02, “Leases” which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases. A lease must be classified as a finance lease if any of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria. The Company determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

Right-of-use assets and liabilities are initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right of use assets are reviewed for impairment. The lease liability is initially measured at the present value of future minimum lease payments over the expected lease term at the commencement date of each lease. The Company measures and records a right-of-use asset and lease liability based on the discount rate implicit in the lease, if known. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor's estimated residual value or the amount of the lessor's deferred initial direct costs.

In these cases where the discount rate implicit in the lease is not known, the Company measures the right-of-use assets and lease liabilities using a discount rate equal to the Company's incremental borrowing rate it pays on current debt instruments or would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

The Company does not have any leases classified as finance leases. The Company currently leases plant, office facilities and equipment under operating leases expiring through August 2030.

The Company’s lease agreements may include options to extend the lease following the initial term. On a case-by-case basis, the Company’s management determines if it is reasonably certain to exercise the renewal option; such renewal options were included in determining the initial lease term.

For all asset classes, we elected to (i) not recognize a right-of-use asset and lease liability for leases with a term of 12 months or less and (ii) not separate non-lease components from lease components, and we have accounted for combined lease and non-lease components as a single lease component. Variable lease payments associated with the Company’s leases are recognized upon occurrence of the event, activity, or circumstance in the lease agreement on which those payments are assessed. For those leases that are subsequently modified for terms, such changes may require a remeasurement of the lease liability.

Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Lease expense for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.

Goodwill

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 and when we deem that a triggering event has occurred. The Company reviews goodwill for impairment annually on December 31 st. and conducts interim impairment test of goodwill each quarter. With the sale of OSS GmbH and the Bressner subsidiary, the Company doesnot have any goodwill as of December 31, 2025. No impairments of goodwill were required in the years ended December 31, 2025 and 2024.

Intangible Assets and Long-lived Assets

We evaluate our intangible and long-lived assets for impairment when events or circumstances arise that indicate our intangible and long-lived assets may be impaired. Indicators of impairment include, but are not limited to, a significant deterioration in overall economic conditions, a decline in our market capitalization, the loss of significant business, significant decreases in funding for our contracts, or other significant adverse changes in industry or market conditions.

In the year ended December 31, 2025, the Company recognized intangible assets related to patents. As of December 31, 2025, the unamortized balance of intangible assets was $73,908. There isno impairment as of December 31, 2025. As of December 31, 2024, the Company had fully amortized recorded intangible assets and as such there wasno impairment as of December 31, 2024.

Fair Value Measurements

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. These tiers include:

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Level 1, defined as quoted market prices in active markets for identical assets or liabilities;

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Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

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Level 3, defined as unobservable inputs that are not corroborated by market data.

The carrying value of financial instruments including cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses, and other liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of the Company’s short-term investments, notes payable, and lines of credit approximate their fair values at the stated interest rates and are reflective of the prevailing market rates.

Revenue Recognition

The Company’s revenues are recognized in accordance with ASC 606, Revenue from Contracts with Customers for which the Company’s performance obligations are satisfied over time as work is performed or at a point in time. The majority of the Company’s revenue is recognized at a point in time when products ship and control is transferred to the customer. The Company determines revenue recognition through the following steps: (i) identification of the contract with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when, or as, a performance obligation is satisfied.

The Company’s contracts are executed through a combination of written agreements along with purchase orders with all customers including certain general terms and conditions. Generally, purchase orders entail products, quantities and prices, which define the performance obligations of each party and are approved and accepted by the Company. The Company’s contracts with customers typically do not include extended payment terms. Payment terms vary by contract type and type of customer and generally range from 30 to 60 days from invoice. Additionally, taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer and deposited with the relevant government authority, are excluded from revenue.

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.

In the normal course of business, the Company does not accept product returns unless the items are defective as manufactured. The Company establishes provisions for estimated returns and warranties. In addition, the Company does not typically provide customers with the right to a refund and does not transact for noncash consideration.

Revenues on certain fixed-price contracts where we provide engineering services, prototypes and completed products are recognized over time as the Company progresses toward fulfilling its performance obligations. These services require that we perform significant, extensive, and complex design, development, modification or implementation of our customers’ systems. Performance will often extend over long periods of time, and our right to receive future payment depends on our future performance in accordance with the agreement. If changes occur in delivery, productivity or other factors used in developing the estimates of costs or revenues, we revise our cost and revenue estimates, which may result in increases or decreases in revenues and costs, and such revisions are reflected in earnings in the period in which the revision becomes known.

The Company's continuing operations comprise a single reportable segment, which provides edge computing products, including customized computers and flash arrays. The Company’s revenues, disaggregated by primary geographic market, which is determined based on a customer’s geographic location, for the years ended December 31, 2025 and 2024, are as follows:

Gross versus net revenue

ASC 606 provides guidance on proper recognition of principal versus agent considerations which is used to determine gross versus net revenue recognition. Under ASC 606, the core objective of the guidance on gross versus net revenue recognition is to help determine whether the Company is a principal or an agent in a transaction. In general, the primary difference between these two is the performance obligation being satisfied by the company recognizing revenue. The principal has a performance obligation to provide the desired goods or services to the end customer, whereas the agent arranges for the principal to provide the desired goods or services. Additionally, a fundamental characteristic of a principal in a transaction is control. A principal substantively controls the goods and services before they are transferred to the customer as well as controls the price of the good or service being provided.

The Company is an agent if the Company's performance obligation is to arrange for the delivery of the specified good or service by another party. An entity that is an agent does not control the specified good or service provided by another party before that good or service is transferred to the customer. During the years ended December 31, 2025 and 2024, the Company recorded net agent consideration as revenue of $0 and $412,411, respectively.

Warranty Reserve

The Company offers product warranties that extend for one or two years from the date of sale. Such warranties are considered assurance-type warranties; therefore, they would not be deemed to be a separate performance obligation under ASC 606. Such warranties require the Company to repair or replace defective product returned to the Company during the warranty period at no cost to the customer. The Company records an estimate for warranty‑related costs based on its historical and estimated future product return rates and expected repair or replacement costs.

While such costs have historically been within management’s expectations and the provisions established, unexpected changes in failure rates could have a material adverse impact on the Company, requiring additional warranty reserves and could adversely affect the Company’s gross profit and gross margins.

The Company offers customers extended warranties beyond the standard one-year warranty on the product. The extended warranties are considered service-type warranties and would be considered as a separate performance obligation under ASC 606. The Company is the primary obligor and revenue is recognized on a gross basis ratably over the term of the extended warranty. The customer can purchase extended warranties fromone tofive years, in the bronze, silver or gold categories. This entails hardware repair or replacement, shipping methods on how the warranties will be returned/delivered, response times and hours of operations to receive support. The value of warranties sold for years ended December 31, 2025 and 2024, were $93,382 and $82,597, respectively.

The revenue that was recognized for the warranties sold for the years ended December 31, 2025 and 2024, were $61,914 and $158,313, respectively. The Company does have recourse with some of its suppliers that offer more than a one-year guarantee on parts, but this is not standard. For the few that offer greater than a year warranty, the Company may be able to recover the cost of the part from the manufacturer for the failed part. The amounts of these costs vary in a wide range, but are not material, due to the infrequency of failure.

Shipping and Handling Costs

The Company's shipping and handling costs are included in cost of goods sold for all periods presented.

Foreign Currency

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 are 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.

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.

Stock-Based Compensation

The Company accounts for employee and director share-based compensation in accordance with the provisions of ASC Topic 718“Compensation – Stock Compensation”. Under ASC 718, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).

All transactions in which goods or services are the consideration received for the issuance of equity instruments to non-employees are accounted for based on the equivalent fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable on the grant date. The measurement date used to determine the estimated fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur.

Compensation cost for stock awards, which include restricted stock units (“RSUs”), is measured at the fair value on the grant date and recognized as expense over the related service period. The fair value of stock awards is based on the quoted price of our common stock on the grant date.

The estimated fair value of common stock option awards is calculated using the Black-Scholes option pricing model. The Black-Scholes model requires subjective assumptions regarding future stock price volatility and expected time to exercise, along with assumptions about the risk-free interest rate and expected dividends, all of which affect the estimated fair values of the Company’s common stock option awards. Given a lack of historical stock option exercises, the expected term of options granted is calculated as the average of the weighted vesting period and the contractual expiration date of the option. This calculation is based on a method permitted by the Securities and Exchange Commission in instances where the vesting and exercise terms of options granted meet certain conditions and where limited historical exercise data is available. The expected volatility is based on the historical volatility of the common stock of comparable public companies that operate in similar industries as the Company.

The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate that corresponds to the expected term of the grant effective as of the date of the grant. The expected dividend assumption is based on the Company’s history and management’s expectation regarding dividend payouts. Compensation expense for common stock option awards with graded vesting schedules is recognized on a straight-line basis over the requisite service period for the last separately vesting portion of the award, provided that the accumulated cost recognized as of any date at least equals the value of the vested portion of the award.

Ifthere are any modifications or cancellations of the underlying vested or unvested stock-based awards, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense, or record additional expense for vested stock-based awards. Future stock-based compensation expense and unearned stock- based compensation may increase to the extent that the Company grants additional common stock options or other stock-based awards.

Business Combinations

We utilize the acquisition method of accounting for business combinations and allocate the purchase price of an acquisition to the various tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. We primarily establish fair value using the income approach based upon a discounted cash flow model. The income approach requires the use of many assumptions and estimates including future revenues and expenses, as well as discount factors and income tax rates. Other estimates include:

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estimated step-ups or write-downs for fixed assets and inventory;

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estimated fair values of intangible assets; and

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estimated income tax assets and liabilities assumed from the target.

While we use our best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business acquisition date, our estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the purchase price allocation period, which is generallyone year from the business acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

For changes in the valuation of intangible assets between preliminary and final purchase price allocation, the related amortization is adjusted in the period it occurs. Subsequent to the purchase price allocation period any adjustment to assets acquired or liabilities assumed is included in operating results in the period in which the adjustment is determined. Should we issue shares of our common stock in an acquisition, we will be required to estimate the fair value of the shares issued.

Advertising Costs

Advertising costs are expensed as incurred and included in marketing and selling expense in the accompanying consolidated statements of operations. Advertising costs within continuing operations for the years ended December 31, 2025 and 2024, were $46,702 and $25,922, respectively.

Research and Development Expenses

Research and development expenditures are expensed in the period incurred. Research and development expenses primarily consist of salaries, benefits and stock-based compensation, as well as consulting expenses and allocated facilities and other overhead costs. Research and development activities include the development of new technologies, features, and functionality in support of the Company’s products and customer needs.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Under ASC Topic 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC Topic 740 provides requirements for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

The Company files income tax returns in the U.S. federal jurisdiction, California and various other state jurisdictions, and, for discontinued operations, Germany. The Company has elected to treat the tax effect of Global Intangible Low Tax Income (“GILTI”) as a current-period expense when occurred. The Company does not foresee material changes to its gross liability of uncertain tax positions within the next twelve months.

Interest Expense

Interest expense consists primarily of interest associated with the Company’s issued debt including the amortization of debt discounts. The Company recognizes the amortization of debt discounts and the amortization of interest costs using a straight-line method which approximates the effective interest method.

Discontinued Operations

On December 30, 2025, the Company divested its OSS GmbH subsidiary, the sole owner of Bressner Technology GmbH, meeting the requirements for reporting OSS GmbH and its operating entity, Bressner, as a discontinued operation. Accordingly, Bressner's results, including the gain on divestiture, are presented as discontinued operations in the consolidated statements of operations and excluded from continuing operations for all periods presented. Further, the assets and liabilities of Bressner have been reclassified as assets and liabilities of discontinued operations in the consolidated balance sheets as of December 31, 2025 and 2024. In the consolidated statements of cash flows, cash flows attributable to Bressner have been segregated and presented separately as net cash flow provided by discontinued operating activities, net cash flow used in discontinued investing activities, and net cash flow provided by discontinued financing activities for all periods presented. Unless otherwise noted, amounts and disclosures in these Notes to Consolidated Financial Statements pertain to the Company's continuing operations. See Note 18, Discontinued Operations, for further details on the transaction.

Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average common shares outstanding during the period. Diluted net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average shares and dilutive potential common shares outstanding during the period. Dilutive potential shares consist of dilutive shares issuable and the exercise or vesting of outstanding stock options, restricted stock units and warrants, respectively, computed using the treasury stock method. During a period where a net loss is incurred, dilutive potential shares are excluded from the computation of dilutive net loss per share, as inclusion is anti-dilutive.

Recently Issued Accounting Pronouncements

Adopted

On December 14, 2023, the FASB issued ASU 2023-09, "Improvement to Income Tax Disclosure (Topic 740)" which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation. The Company must also further disaggregate income taxes paid. The objective of these disclosure requirements is for an entity, particularly an entity operating in multiple jurisdictions, to disclose sufficient information to enable users of financial statements to understand the nature and magnitude of factors contributing to the difference between the effective tax rate and the statutory tax rate. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. This guidance applies to annual periods beginning after December 15, 2024. Adoption of this guidance did not have any material impact to our results of operations or consolidated financial statements.

Issued

On November 4, 2024, the FASB issued ASU 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" which requires disaggregated disclosure of certain income statement expenses. This amendment introduces enhanced guidance regarding presentation of certain income statement expense items and requires disclosure of certain types of expenses in the footnotes to the financial statements. This guidance applies to annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company does not expect adoption to have any material impact to our results of operations or consolidated financial statements.

NOTE 3 - SHORT-TERM INVESTMENTS

The Company didnot have any short-term investments as of December 31, 2025.

The Company’s short-term investments by significant investment category as of December 31, 2024, were as follows:

(1)

Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities.

Cash alternatives represents cash balances in savings accounts which are temporarily on-hand that are immediately available for investments in accordance with the Company’s investment policy.

The Company typically invests in highly rated securities and its investment policy limits the amount of credit exposure to anyone issuer. The policy requires investments in fixed income instruments denominated and payable in U.S. dollars only and requires investments to be investment grade, with a primary objective of minimizing the potential risk of principal loss.

NOTE 4 – ACCOUNTS RECEIVABLE

Accounts receivable, net consisted of the following on December 31, 2025 and 2024:

The provision for credit losses related to accounts receivable was $0 and $40,000 for the years ended December 31, 2025 and 2024, respectively.

NOTE 5 – INVENTORIES

Inventories, net consisted of the following on December 31, 2025 and 2024:

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment, net consisted of the following December 31, 2025 and 2024:

During the years ended December 31, 2025 and 2024, the Company incurred $771,552 and $927,282 of depreciation expense within continuing operations related to property and equipment, respectively.

NOTE 7 – LONG LIVED INTANGIBLE ASSETS

Intangible assets on the Company's balance sheet as of December 31, 2025 consist of patents for internally developed technology. In 2025, the Company capitalized costs of $73,908 related to patent applications and filing fees. Finite-lived intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the economic benefits are consumed. The estimated useful lives for the patents filed in 2025 is 10 years. No amortization expense related to long-lived intangible assets was recognized in the years ended December 31, 2025 or 2024.

The balance outstanding for long-lived intangible assets for the years ending December 31, 2025 and 2024 was $73,908 and $0, respectively.

NOTE 8 – ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following on December 31:

The tables below present the deferred revenue and deposit balances associated with continuing operations along with the significant activity affecting balances during the years ended December 31, 2025 and 2024:

As of December 31, 2025, the Company had approximately $970,678 of remaining performance obligations under fully funded contracts for customer funded development. The Company currently expects to recognize the remaining performance obligations as revenue in fiscal 2026. Customer funded development is revenue from customers for which the Company's performance obligations are satisfied over time and for which the customer receives benefits as the Company performs. Products revenue performance obligations are typically satisfied at a point in time, predominantly upon shipment.

NOTE 9 – DEBT

The Company didnot have any outstanding debt obligations as of December 31, 2025.

As of December 31, 2024, the Company's Bressner subsidiary had outstanding debt obligations of $1,035,050 ontwo lines of credit. These obligations are included within discontinued operations on the Company's consolidated financial statements for the year ended December 31, 2024.

Upon completion of the sale of the Bressner business on December 30, 2025, the buyer assumed all debt obligations of Bressner.

Bank Lines of Credit

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.

On September 16, 2025, the Company borrowed $500,000 on this line of credit, and on September 22, 2025, the Company borrowed an additional $500,000. Interest was accrued at a rate of 7.5% through September 17, 2025 and at a rate of 7.25% beginning on September 18, 2025. On October 1, 2025, the Company repaid all outstanding principal and accrued interest on the line of credit. The maximum balance outstanding on this line of credit during the years ended December 31, 2025 and December 31, 2024 was $1,000,000. Total interest paid related to borrowings on the Torrey Pines line of credit was $2,424.

No balance was outstanding on December 31, 2025 or December 31, 2024.

As of the date of divestiture, Bressner hadthree revolving lines of credit with German institutions, including Uni Credit Bank AG, Commerzbank AG, and VR Bank, with total availability of up to €3,200,000 (US $3,767,283) as of December 30, 2025. Borrowings under the lines of credit bear interest at a variable rate of Euribor plus a stated rate. The rates as of December 30, 2025, for the lines of credit ranged from 3.75% to 6.55%, with the balances remaining open indefinitely or until occurrence of a defined change of control event. Bressner hadno outstanding lines of credit balances as of December 30, 2025 or December 31, 2024.

Foreign Debt Obligations

As of the divestiture date of December 30, 2025, Bressner hadtwo term loans outstanding, with an aggregate balance outstanding of €1,000,000 (US$1,177,276) as follows:

•

As of December 31, 2023, Bressner had an outstanding note payable with UniCredit Bank for €500,000 with a maturity date of June 19, 2024 at an interest rate of 5.8%. On June 19, 2024, this note was extended through December 19, 2024, with accrued interest having been paid as current as of June 19, 2024 and the interest rate was reduced to 5.55%. The note was extended again to June 20, 2025 at an interest rate of 4.40%, with accrued interest having been paid current as of June 19, 2024. On June 19, 2025, the note was extended to December 22, 2025 at an interest rate of 3.75%, with accrued interest having been paid as current. On December 22, 2025, the note was further extended to March 23, 2026 at an interest rate of 3.8%, with accrued interest having been paid as current. The balance outstanding on the note as of the date of the divestiture on December 30, 2025 was €500,000 ($588,638). The balance outstanding on the note as of December 31, 2024 was €500,000 ($517,525).

•

As of December 31, 2023, Bressner had an outstanding note payable with Commerzbank AG for €500,000 with a maturity date of March 28, 2024 and an interest rate of 5.75%. On March 28, 2024, this note was extended through September 30, 2024, and the interest rate was reduced to 5.50%, with accrued interest having been paid current as of March 28, 2024. On September 30, 2024, the note was extended to March 31, 2025 at a rate of 4.75%, with the accrued interest having been paid through September 30, 2024. On March 31, 2025, the note was extended through September 30, 2025 and the interest rate was reduced to 3.9%, with accrued interest having been paid as current as of March 31, 2025. On September 30, 2025, the note was further extended through March 31, 2026 and the interest rate was further reduced to 3.5%, with accrued interest having been paid as current. The balance outstanding on the note as of the date of divestiture on December 30, 2025 was€500,000 ($588,638). The balance outstanding on the note as of December 31, 2024 was €500,000 ($517,525).

NOTE 10 – STOCKHOLDERS’ EQUITY

The Company’s amended and restated certificate of incorporation, filed with the Delaware Secretary of State on December 14, 2017, authorizes the Company to issue 10,000,000 shares of preferred stock and 50,000,000 shares of common stock.

Common Stock

The voting, dividend, and liquidation rights of the holders of the common stock are subject to rights of preferred stockholders, if any, as designated by the board of directors. Common stockholders have voting rights at all meetings of stockholders and are entitled toone vote for each share held subject to certain limitations otherwise required by law. Dividends may be declared and paid on the common stock as and when determined by the board of directors subject to any preferential dividend or other rights of preferred stockholders. The Company does not anticipate declaring any dividends in the foreseeable future. Upon the dissolution or liquidation of the Company, common stockholders are entitled to receive all assets of the Company, subject to any preferential or other rights of preferred stockholders.

Preferred Stock

Preferred Stock may be issued from time to time in one or more series, each of these series to have such terms as stated or expressed in resolutions providing for the issue of such series adopted by the board of directors. There isno outstanding preferred stock.

Regarding unissued preferred stock, the board of directors is authorized to determine or alter any or all of the rights, preferences, privileges and restrictions granted to or imposed upon wholly unissued series of preferred stock, and to fix or alter the number of shares comprising any such series and the designation thereof, or any of them, and to provide for rights and terms of redemption or conversion of the shares of any such series.

S-3 Registration Statement

On August 18, 2023, the Company filed with the Securities and Exchange Commission a Registration Statement on Form S-3 in which the Company may offer up to $100,000,000 inaggregate dollar amount of shares 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.

Pursuant to General Instruction I.B.6 of Form S-3, in no event will we sell securities pursuant to this registration statement with a value more than one-third of the aggregate market value of our common stock held by non-affiliates in any 12-month period, so long as the aggregate market value of our common stock held by non-affiliates is less than $75.0 million. In the event that subsequent to the effective date of this registration statement, the aggregate market value of our outstanding common stock held by non-affiliates equals or exceeds $75.0 million, then the one-third limitation on sales shall not apply to additional sales made pursuant to this registration statement.

On October 1, 2025, the Company filed with the Securities and Exchange Commission a Prospectus Supplement to the Prospectus dated August 18, 2023. Pursuant to this Prospectus Supplement, the Company offered an aggregate 2,500,000 shares of Common Stock to certain institutional investors. The Offering closed on October 1, 2025. Net proceeds of the offering were $11,565,146, which was comprised of gross proceeds of $12,500,000 less issuance costs of $934,854.

Stock Options

In December 2011, the Company adopted a stock option plan (“2011 Plan”) under which the Company may issue up to 1,500,000 shares of the Company’s common stock and, as of December 31, 2022, the Company had 240,000 shares of common stock remaining unissued under the 2011 Plan. The 2011 Plan was terminated by the board of directors on October 10, 2017, and accordingly, no shares are available for issuance under the 2011 Plan. The 2011 Plan will continue to govern outstanding awards granted thereunder.

In December 2015, the Company adopted a stock option plan (“2015 Plan”) under which the Company may issue up to 1,500,000 shares of the Company’s common stock and, as of December 31, 2022, the Company had 840,084 shares of common stock remaining unissued under the 2015 Plan. The 2015 Plan was terminated by the board of directors on October 10, 2017, and accordingly, no shares are available for issuance under the 2015 Plan. The 2015 Plan will continue to govern outstanding awards granted thereunder.

The terms of the 2011 Plan and 2015 Plan provided for the grant of incentive options to employees and non-statutory options to employees, directors and consultants of the Company.

The board of directors adopted the 2017 Equity Incentive Plan on October 10, 2017 (the “2017 Plan”). The 2017 Plan allows for the grant of a variety of equity vehicles to provide flexibility in implementing equity awards, including incentive stock options, non-qualified stock options, restricted stock grants, unrestricted stock grants and restricted stock units and stock bonuses and performance-based awards. On December 18, 2017, the Company stockholders approved the 2017 Plan, under which the Company was initially permitted to issue up to 1,500,000 shares of the Company’s common stock.

On June 24, 2020, the Company amended the 2017 Plan to increase the maximum number of shares of common stock with respect to one or more Stock Awards (as defined in the 2017 Plan) that may be granted to any one participant under the 2017 Plan during any calendar year from 500,000 shares to 1,000,000 shares. The amendment did not increase the total number of shares of common stock authorized for issuance under the 2017 Plan, and did not require stockholder approval.

On May 19, 2021, the Company’s stockholders approved the Company’s proposal to increase the number of shares authorized for issuance under the 2017 Plan from 1,500,000 shares to 3,000,000 shares of common stock of the Company pursuant to the terms and conditions of the 2017 Plan.

On May 15, 2024, the Company’s stockholders approved the Company’s proposal to increase the number of shares authorized for issuance under the 2017 Plan from 3,000,000 shares to 5,000,000 shares of common stock of the Company pursuant to the terms and conditions of the 2017 Plan. As of December 31, 2025, the Company had 1,076,386 shares of common stock remaining for issuance under the 2017 Plan.

The exercise price per share for options under the 2011 Plan, 2015 Plan and 2017 Plan is determined by the Company’s board of directors, provided that for incentive stock options the exercise price shall not be less than the fair market value of the Company's common stock on the date of grant, except that for incentive options granted to an owner/employee with a greater than 10% ownership interest in the Company, the exercise price shall not be less than 110% of the fair market value of the Company's common stock on the date of grant.

Options under the plans expire no more thanten years after the date of grant, or within five years after the date of the grant for incentive options granted to an owner/employee with a greater than 10% ownership interest in the Company.

A summary of stock option activity under the plans during the years ended December 31, 2025 and 2024, are as follows:

The following table summarizes information about common stock options outstanding as of December 31, 2025:

The Company didnot grant any common stock options in the years ended December 31, 2025 or 2024. The following table presents grant date fair value of options vested and intrinsic value of options exercised for the years ended December 31, 2025 and 2024:

As of December 31, 2025, the amount of unearned stock-based compensation estimated to be expensed through 2027 related to unvested common stock options is $283,962, net of estimated forfeitures. The weighted-average period over which the unearned stock-based compensation expense related to common stock options is expected to be recognized is 0.72 years.

If there are any modifications or cancellations of the underlying unvested awards, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense or calculate and record additional expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that the Company grants additional common stock options or other stock-based awards.

Exercise of Stock Options

During the year ended December 31, 2025, the Company issued 493,011 shares of common stock upon exercise of outstanding stock options for proceeds of $1,022,979 in cash.

During the year ended December 31, 2024, the Company issued 83,426 shares of common stock upon exercise of outstanding stock options for proceeds of 146,850 in cash.

Restricted Stock Units

Restricted stock units may be granted at the discretion of the compensation committee of the board of directors under the 2017 Plan in connection with the hiring and retention of personnel and are subject to certain conditions. Restricted stock units generally vest quarterly over a period ofthree years and are typically forfeited if employment is terminated before the restricted stock unit vest. The compensation expense related to the restricted stock units is calculated as the fair value of the common stock on the grant date and is amortized to expense over the vesting period and is adjusted for estimated forfeitures.

The Company’s restricted stock unit activity for the years ended December 31, 2025 and 2024, was as follows:

As of December 31, 2025, there was $2,498,495 of unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted average period of 0.89 years.

Stock-based compensation expense associated with continuing operations for the years ended December 31, 2025 and 2024, was comprised of the following:

Stock based compensation expense associated with discontinued operations was $132,331 and $131,709 for the years ended December 31, 2025 and 2024, respectively.

Warrants

The Company didnot have any warrants outstanding as of December 31, 2025 or 2024 and did not have any warrant activity in the year ended December 31, 2025. The following table summarizes the Company’s warrant activity during the year ended December 31, 2024.

NOTE 11 – EMPLOYEE BENEFIT PLAN

The Company has a 401(k) retirement plan. Under the terms of the plan, eligible employees may defer up to 20% of their pre-tax earnings, subject to the Internal Revenue Service annual contribution limit. Additionally, the plan allows for discretionary matching contributions by the Company. Typically, the matching contributions are 100% of the employee's contribution up to a maximum of 5% of the employee’s annual compensation. During the years ended December 31, 2025 and 2024, the Company contributed $394,858 and $371,052, respectively, to the 401(k) Plan.

Bressner has an occupational retirement provision for their employees in Germany, which supplements the statutory pension insurance. Currently, this program allows employees to contribute at a maximum 564 Euros per month with the employer match of up to 50% to the employees’ insurance retirement fund. During the years ended December 31, 2025 and 2024, the Company contributed $109,414 and $108,094, respectively. The financial impact of these contributions is reflected within discontinued operations on the Company's consolidated financial statements for the years ended December 31, 2025 and 2024.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Legal

We are subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of our business. When applicable, we record accruals for contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in our opinion, individually or in the aggregate, no such lawsuits are expected to have a material effect on our consolidated financial position or results of operations.

Guarantees and Indemnities

The Company has made certain indemnities, under which it may be required to make payments to an indemnified party, in relation to certain transactions. The Company indemnifies its directors, officers, employees and agents to the maximum extent permitted under the laws of the State of Delaware. In connection with its facility lease, the Company has indemnified its lessor for certain claims arising from the use of the facilities. The duration of the indemnities varies, and in many cases are indefinite. These indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these indemnities in the accompanying consolidated balance sheets.

Purchase Commitments

In the normal course of business, the Company may enter into purchase commitments for inventory components to be delivered based upon non-cancellable, pre-established, delivery schedules that are over a period that may exceed one year. Total non-cancellable open purchase orders as of December 31, 2025, were approximately $3,168,828, of which $1,799,327 are expected to be delivered within one year.

N0TE 13 - LEASES

Leases

The Company leases its offices, manufacturing, and warehouse facility in San Diego County under a non-cancelable operating lease. Our corporate headquarters are in a leased space comprising approximately 29,342 square feet in Escondido, California under a lease that was last modified and extended in September 2023 and expires in August 2030. The Company also leases a facility in Salt Lake City, Utah that houses our Ion software development team. This lease expired on June 30, 2025, and the Company extended the lease for an additional 12 months, with the lease commencing in July 2025 and expiring in June 2026. In the lease extension, the leased space was reduced from 3,208 square feet to 925 square feet. Additionally, we leased a 1,632 square foot facility located in Anaheim, California. This lease expired on July 31, 2025, and the Company extended the lease through January 31, 2026. Upon expiration of the lease on January 31, 2026, the Company did not renew the lease and exited the facility. For the years ended December 31, 2025 and 2024, rent expense associated with continuing operations was $602,518 and $581,780, respectively.

In addition to leases for physical facilities the Company also leases certain office equipment. For the years ended December 31, 2025 and 2024, lease expenses associated with continuing operations, excluding office leases, was $0 and $3,794, respectively.

Other information related to leases associated with continuing operations as of the years ended December 31, 2025 and 2024 are as follows:

The following table presents maturity of the Company's operating lease liabilities as of December 31, 2025:

NOTE 14 – RELATED PARTY TRANSACTIONS

The Company has appointed certain stockholders to the Board of Directors. Director fees paid by the Company, including stock-based compensation, for the years ended December 31, 2025 and 2024, totaled $438,023 and $572,033, respectively, and are included in general and administrative expenses in the accompanying consolidated statements of operations.

NOTE 15 – INCOME TAXES

For the years ended December 31, 2025 and 2024, pre-tax (loss) income was attributed to the following jurisdictions:

The components of the tax provision for income taxes are as follows:

For the year ended December 31, 2025, the provisions for income tax allocated to continuing and discontinued operations were $11,310 and $651,658, respectively. For the year ended December 31, 2024, the provisions for income tax allocated to continuing and discontinued operations were $2,560 and $723,942, respectively.

Taxes on income vary from the statuatory federal income tax rate applied to earnings before tax on income as follows:

(1) State tax in California made up the majority (greater than 50%) of the tax effect in this category.

Deferred income tax assets and liabilities arising from differences accounting for financial statement purposes and tax purposes, less valuation reserves at year end are as follows:

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of the year ending December 31, 2025, Management believes that it is not more likely than not that the Company will realize the benefits of the net deferred tax assets.

The Company files income tax returns in the U.S. federal jurisdiction, Arizona, Arkansas, California, Florida, Idaho, Massachusetts, Texas and Utah and plans to file a first year return in DC for 2025. The Company has sold its German subsidiary in 2025 and the gain on sale is reflected within the financials. The Company has open tax statutes for U.S. federal taxes for the years ended December 31, 2022 through 2025. For California, the open tax statues are for the years December 31, 2021 through 2025, and for Germany, the open years include December 31, 2023 through 2025.

The Company has federal net operating loss (“NOL”) carryforwards as of December 31, 2025, of approximately $21,619,000. The Company may use these NOL carryforwards indefinitely to offset 80% of Federal taxable income in future years. In addition, the Company has state NOL carryforwards of $12,795,000. State NOLs will carry forward through at least 2042 and may be used to offset future state taxable income.

As of December 31, 2025, the unrecognized tax benefits associated with uncertain tax positions was $1,030,612, of which $20,200 is included in other accrued expenses and liabilities, while $915,514 is included as a direct reduction on the net deferred tax assets on the accompanying consolidated balance sheets. If recognized, this would affect the Company’s effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

NOTE 16 –NET LOSS PER SHARE

Basic and diluted net loss per share was calculated as follows for the years ended December 31, 2025 and 2024:

NOTE 17 – SEGMENT AND GEOGRAPHIC INFORMATION

The Company's continuing operations comprise asingle reportable segment. Operating segments are identified based on the manner in which the Chief Operating Decision Maker ("CODM") evaluates financial performance and allocates resources.

The Company's Chief Executive Officer has been identified as the CODM. The CODM reviews financial information for purposes of assessing performance and making decisions regarding resource allocation. The CODM evaluates performance using gross profit and operating profit.

Although the Company generates revenue from multiple products and serves customers across various geographical regions, its products are designed and manufactured using similar processes and supported by centralized functions, including sales, marketing, finance, and human resources. Additionally, the Company's long-lived assets and capital expenditures related to continuing operations are deployed and managed on a consolidated basis.

The Company, through its single reportable segment, designs, manufactures, and markets specialized enterprise class high-performance compute, high speed switch fabrics, and storage hardware and software to target edge applications.

Segment detail for the years ended December 31, 2025 and 2024, is as follows:

Revenue from customers with non-U.S. billing addresses represented approximately 6.8% and 7.1% of the Company’s revenue for the years ended December 31, 2025 and 2024, respectively.

As of December 31, 2025, substantially all the Company’s long-lived assets were located in the United States of America.

NOTE 18 – DISCONTINUED OPERATIONS

Divestiture

On December 30, 2025, the Company completed the strategic divestiture of its OSS GmbH subsidiary, the sole owner of Bressner Technology GmbH ("Bressner"), to Hiper Euro GmbH (the "Transaction"). These entities represented the entirety of our Bressner segment. The divestiture qualified for held-for-sale classification on December 30, 2025 and represented a strategic shift with a major effect on the Company's operations and financial results. Following the divestiture, the Company will not have any significant continuing involvement in the operations of Bressner. As a result, OSS GmbH met the criteria for reporting as a discontinued operation on the date of divestiture.

Under the terms of the transaction, OSS sold Bressner for a target value of $22,000,000 million subject to adjustment for final closing working capital balances. Based on estimated working capital balances on the date of the transaction, total purchase consideration received was $22,417,422.

Gain on Disposal

The Transaction resulted in a pre-tax gain of approximately $6,707,021, which is net of transaction expenses. The gain calculation is as follows:

Financial Results of Discontinued Operations

Bressner's financial results are presented as income from discontinued operations, net of tax in the consolidated statements of operations. For the year ended December 31, 2025, these results include the period from the beginning of the year through the date of the Transaction. The following table presents the major components of Bressner's financial results for the periods presented.

Assets and Liabilities of Discontinued Operations

The following table represents the aggregate carrying amounts of assets and liabilities classes classified as discontinued operations in the consolidated balance sheets for the period presented.

NOTE 19 – SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events after the consolidated balance sheet dated as of December 31, 2025, through the date of filing of this Annual Report. Based upon the evaluation, management has determined that, other than as disclosed in the accompanying notes, no subsequent events have occurred that would require recognition in the accompanying consolidated financial statements or disclosure in the notes thereto.

Exhibit Index

• Furnished herewith.

** The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

• Indicates management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.