ONE STOP SYSTEMS, INC.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

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 input/output 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

The Company recognizes revenue under accounting standard ASC 606. Revenue is primarily generated from the sale of computer hardware and engineering services, and, to a minimal extent, revenue is also generated from the sale of software and sales of software maintenance and support contracts. The Company’s performance obligations are satisfied over time as work is performed or at a specific point in time. The majority of the Company’s revenue is recognized at that point in time when products ship and control is deemed to be transferred to the customer. The Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, a performance obligation is satisfied.

Current wording

The Company's revenues are recognized in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is primarily generated from the sale of computer hardware and engineering services. The Company's performance obligations are satisfied over time as work is performed or at a point in time. 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. The majority of the Company’s revenue is recognized at that point in time when products ship and control is deemed to be transferred to the customer. The Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, a performance obligation is satisfied.

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 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 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.

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 shared 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 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.

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 shared 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 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.

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 shared 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, 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

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

Current wording

The following tables set forth our results of operations for the three month periods ended March 31, 2026 and 2025, presented in dollars and as a percentage of revenue, respectively.

Previous wording

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

Current wording

Comparison of the Three Month Periods Ended March 31, 2026 and 2025 from Continuing Operations:

Previous wording

Registered Direct Offering of Common Stock

Current wording

Interest income increased $223,072 for the three months ended March 31, 2026, as compared to the same period in 2025. The increase is primarily attributable to higher investment and cash balances as a result of: 1) the sale of Bressner completed on December 30, 2025; 2) the proceeds from the registered direct offering of common stock completed on October 1, 2025; and 3) cash generated from operations in the three months ended March 31, 2026.

Previous wording

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

Current wording

Other income (expense), for the three months ended March 31, 2026, resulted in net other income of $12,461, as compared to net other expense of $1,267 in the same period in 2025, for an increase in net other income of $13,728. This increase was primarily attributable to changes in foreign currency gains and losses, as well as higher rebates.

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 September 30, 2025, we had total cash and cash equivalents of $6,508,020 and total net working capital of $23,132,853. Cash and cash equivalents held by Bressner totaled $3,765,771 on September 30, 2025. Bressner’s debt covenants limit the use of those funds by its parent company.

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 December 2025, we also received cash from the sale of our Bressner subsidiary. As of March 31, 2026, we had total cash, cash equivalents, and restricted cash of $26,544,041; short-term investments of $10,033,654; and total working capital of $44,740,475.

Previous wording

Our sources of liquidity and cash flows are used to fund ongoing operations, to fund research and development projects for new products and technologies, and to 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 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 at any required time 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

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

Current wording

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

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

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 Line of Credit matures on September 11, 2026 and is subject to renewal thereafter. No balance was outstanding on either March 31, 2026 or December 31, 2025.

Previous wording

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

Current wording

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

Previous wording

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 on October 1, 2025, supplementing the Registration Statement on Form S-3. The Company received aggregate gross proceeds from the Offering of $12,500,000 before deducting the placement agents’ fees and the Company’s Offering expenses. The Offering closed on October 1, 2025; as such, the proceeds of this offering are not reflected on the Company's consolidated balance sheets as of September 30, 2025.

Current wording

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.

Previous wording

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

Current wording

The following table summarizes our cash flows for the three month periods ended March 31, 2026 and 2025:

Previous wording

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

Current wording

During the three month period ended March 31, 2026, we generated $4,041,908 in cash from continuing operating activities, compared to cash used in continuing operating activities of $1,505,184 for the same period in 2025.

Previous wording

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

Current wording

Net cash provided by continuing operating activities during the three month period ended March 31, 2026 was the result of three components: 1) net loss from continuing operations of $362,588; 2) net adjustments to net loss from continuing operations for non-cash items of $1,022,815, of which the largest components were stock-based compensation expense of $655,128 and depreciation expense of $184,151; and 3) a decrease in net operating assets associated with continuing operations of $3,381,681.

Previous wording

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

Current wording

Cash provided from net changes in operating assets and liabilities for the three month period ended March 31, 2026 was $3,381,681, compared to cash provided by net changes in operating assets and liabilities of $90,285 in the same period of 2025. The change in cash from net changes in operating assets and liabilities was primarily driven by reductions in accounts receivable in the first three months of 2026 due to collections of billings from 2025.

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. Our pipeline reflects the procurement habits and timing of the military and defense sector.

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 generally affected by the procurement habits and timing of the military and defense sector.

Previous wording

Impacts resulting in part from tariffs and the threat of tariffs, ongoing military conflicts in Europe and Middle East, Federal Reserve and European Central Bank interest rate 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 economic uncertainty and capital markets volatility in the near term that could negatively affect our operations. Weakness in the European and more specifically the German economy negatively affected our Bressner segment in 2024. Economic uncertainty, volatility, and the risk of recessionary conditions in Europe and North America remain elevated.

Current wording

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.

Previous wording

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

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

On September 30, 2025, the Continuing Resolution (CR) allowing government agencies and departments to operate expired without the passage of an extended CR or an Appropriations Act. As a result, the U.S. government began shutdown procedures, to include furlough of certain government employees. The duration of the shutdown is unknown at this time. Our business and results of operations may be impacted by disruptions to U.S. government operations, and these impacts may include delays in contract awards and new program starts. A prolonged shutdown could delay new awards, funding on existing defense-related projects involving U.S. government agencies and prime contractor customers. These delays may temporarily affect the timing of our revenue recognition, increase our working capital requirements, or reduce near-term liquidity. Management is monitoring the situation and evaluation potential mitigation measures, including managing expenditures and maintaining access to available borrowing capacity under our revolving credit facility.

Current wording

In recent years, U.S. government appropriations have been affected by larger U.S. government budgetary issues and related legislation, and the U.S. government has been unable to complete its budget process before the end of its fiscal year, resulting in both governmental shutdowns and continuing resolutions providing only enough funds for U.S. government agencies to continue operating at prior-year levels. Our business and results of operations could be impacted by future disruptions to U.S. government operations, and these impacts could include delays in contract awards and new program starts. A prolonged shutdown could delay new awards and funding for defense-related projects involving U.S. government agencies and prime contractor customers. These delays could temporarily affect the timing of our revenue recognition, increase our working capital requirements, or reduce near-term liquidity.

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 denominated in U.S. dollars. We are exposed to the impact of interest rate changes primarily through our borrowing activities for our variable rate borrowings. We did not have any outstanding balances on our line of credit as of March 31, 2026 or December 31, 2025.

Previous wording

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

Current wording

At times, deposits held with financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation (“FDIC”) and Securities Investor Protection Corporation (“SIPC”), both of which provide basic deposit coverage with limits up to $250,000 per owner. As of March 31, 2026, the Company had $5,018,562 in cash in our accounts that exceeded the insurance limits. The Company has not experienced any losses in these accounts and believes that the financial institutions at which such amounts are held are stable; however, no assurances can be provided as to such.

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 previously conducted business outside the United States, primarily through Bressner, our former 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 in October 2018. The functional currency of OSS GmbH is the Euro. Transactions denominated in currencies other than the functional currency are remeasured in 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 employ derivatives on a periodic basis to manage certain market risks through the use of foreign exchange forward contracts. We do not use derivatives for trading or speculative purposes. Our derivatives are designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). We hedge a portion of the exchange risk involved in anticipation of highly probable foreign currency-denominated transactions. In anticipation of these transactions, we may enter into foreign exchange contracts to provide currency at a fixed rate. The Company is currently not a party to any of these types of transactions.

Current wording

We may employ derivatives to manage certain currency market risks through the use of foreign exchange forward contracts. We do not use derivatives for trading or speculative purposes. Our derivatives are designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). We may hedge a portion of the exchange risk involved in anticipation of highly probable foreign currency-denominated transactions. In anticipation of these transactions, we may enter into foreign exchange contracts to provide currency at a fixed rate.

Previous wording

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 or used in operating activities, the most directly comparable GAAP financial measure, to free cash flow:

Current wording

Investors should not infer from our presentation of this non-GAAP financial measure that these expenditures reflect all of our obligations which require cash.