ONE STOP SYSTEMS, INC.

For the Three and Nine Month Periods Ended September 30, 2026 and 2025

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”). 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”). On December 30, 2025, the Company entered into and completed a Shares Purchase Agreement with Hiper Euro GmbH, pursuant to which the Company sold 100% of the issued and outstanding equity interests of One Stop Systems, GmbH (“OSS GmbH”), the Company’s German subsidiary and the sole owner of Bressner. The transaction represents a strategic shift in the Company’s operations, as the Company exited its European distribution and integration business and is now focused on its core high-performance edge computing solutions.

Following the transaction, the Company has continued to focus on the development and sale of proprietary and differentiated edge computing solutions and has enhanced its efforts to penetrate the military and defense sectors.

Basis of Presentation

The accompanying consolidated 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 in all periods presented. Unless otherwise noted, amounts and disclosures in these Notes to Unaudited Consolidated Financial Statements pertain to the Company's continuing operations. See Note 13, Discontinued Operations, for further details on Discontinued Operations.

Principles of Consolidation

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

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

There have been no changes to our accounting policies disclosed in our audited consolidated financial statements and the related notes for the year ended December 31, 2025.

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, 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.

Recently Issued Accounting Pronouncements

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 notes 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. Management 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’s short-term investments by significant investment category as of September 30, 2026, were as follows:

(1)

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

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

Cash alternatives represent cash balances in savings accounts and U.S. Treasury Bills that are held temporarily and are immediately available for use in accordance with the Company’s investment policy.

The Company typically invests in low risk 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 have an investment grade credit rating, with a primary objective of minimizing the potential risk of principal loss.

NOTE 4 -ACCOUNTS RECEIVABLE

Accounts receivable, net consisted of the following as-of the dates indicated:

Unbilled receivables include amounts associated with percentage of completion and milestone billing accounting, which includes cost and gross profit earned in excess of billing, not currently billable due to contractual provisions.

The following tables represent the changes in the allowance for credit losses associated with our trade receivables for the nine month periods ended September 30, 2026 and 2025:

NOTE 5 – INVENTORIES

Inventories, net consisted of the following as-of the dates indicated:

NOTE 6 – ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consisted of the following as-of the dates indicated:

The tables below present the deferred revenue and deposit balances along with the significant activity affecting balances during the nine month periods ended September 30, 2026 and 2025:

As of September 30, 2026, the Company had approximately $794,385 of remaining performance obligations under fully funded contracts for which the Company's performance obligations are satisfied over time and for which the customer receives benefits as the Company performs. These performance obligations are expected to be satisfied over the next twelve months.

NOTE 7 - LONG LIVED INTANGIBLE ASSETS

Intangible assets on the Company's consolidated balance sheets as of September 30, 2026 and December 31, 2025 consist of patents pending for internally developed technology. In 2025, the Company capitalized costs of $73,908 related to patent applications and filing fees, and in the nine month period ended September 30, 2026, the Company capitalized additional costs of $11,787 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 pending are 10 years. No amortization expense related to long-lived intangible assets was recognized in the three or nine month periods ended September 30, 2026 or 2025.

The balances outstanding for long-lived intangible assets as of September 30, 2026 and December 31, 2025 were $85,695 and $73,908, respectively.

NOTE 8 – DEBT

The Company didnot have any outstanding debt obligations as of September 30, 2026 or December 31, 2025.

Bank Lines of Credit

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 December 11, 2026 and is subject to renewal thereafter. No balance was outstanding on September 30, 2026 or December 31, 2025.

NOTE 9 – STOCKHOLDERS’ EQUITY

The Company’s amended and restated certificate of incorporation, filed with the Delaware Secretary of State on February 2, 2018, authorizes the Company to issue 10,000,000 shares of preferred stock and 50,000,000 shares of common stock.

2017 Equity Incentive Plan

On October 10, 2017, the Company’s board of directors approved and adopted the Company’s 2017 Equity Incentive Plan (as amended to date, the “2017 Plan”), subject to stockholder approval thereof. On December 18, 2017, the Company’s stockholders approved the 2017 Plan. The 2017 Plan allows for the grant of a variety of equity vehicles to provide flexibility in the grant and issuance of equity awards, including stock options, unrestricted stock grants, restricted stock units (“RSUs”), stock bonuses and performance-based awards. An aggregate of 1,500,000 shares of common stock were initially reserved for issuance under the 2017 Plan. The number of shares authorized for issuance under the 2017 Plan was increased to 3,000,000 shares on May 19, 2021; increased to 5,000,000 shares on May 15, 2024; and further increased to 7,000,000 shares on May 13, 2026.

As of September 30, 2026,2,619,541 shares remain available for future issuance under the 2017 Plan.

Executive Employment Agreements

On June 5, 2023, in connection with, and as a material inducement to, the appointment of Michael Knowles as the Company’s new chief executive officer and president, Mr. Knowles was granted (i) non-qualified stock options to purchase 400,000 shares of Company common stock (the “Inducement Options”), which Inducement Options have an exercise price equal to $2.95 per share and will expire ten years from the date of the grant; and (ii)400,000 restricted stock units (together with the Inducement Options, the “Inducement Grants”).

Both of the Inducement Grants shall vest over a four-year period as follows:25% on the one-year anniversary of the date of the grant, and the remaining 75%will vest in six equal installments, commencing six months after the one-year anniversary of the date of grant and every six months thereafter until fully vested, subject to Mr. Knowles’ continued employment by the Company.

The Inducement Grants were granted outside of the Company’s 2017 Plan and any other equity incentive plans, and in reliance on the employment inducement exemption provided under the Nasdaq Listing Rule 5635(c)(4).

Stock Options

A summary of stock option activity under the Company’s current equity incentive plans during the nine month period ended September 30, 2026, was as follows:

As of September 30, 2026, there was $135,258 of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 0.35 years.

There wereno options granted during the three or nine month periods ended September 30, 2026 or 2025. The following table presents the grant date fair value of options vested and the intrinsic value of options exercised:

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.

Restricted Stock Units

RSUs may be granted at the discretion of the compensation committee of the Company's board of directors under the 2017 Plan in connection with the hiring and retention of personnel and are subject to certain conditions. RSUs generally vest quarterly or semi-annually over a period ofone tothree years and are typically forfeited if employment is terminated before the RSUs vest. The compensation expense related to the RSUs 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 forfeitures.

The Company’s RSU activity for the nine months ended September 30, 2026, was as follows:

As of September 30, 2026, there was $5,030,829 of unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted average period of 0.96 years.

Stock-based compensation expense associated with continuing operations for the three and nine month periods ended September 30, 2026 and 2025, was comprised of the following:

Stock-based compensation expense associated with discontinued operations for the three month periods ended September 30, 2026 and 2025 was $0 and $32,934, respectively. Stock-based compensation expense associated with discontinued operations for the nine month periods ended September 30, 2026 and 2025 was $0 and $99,514, respectively.

Warrants

The Company didnot have any outstanding warrants as of September 30, 2026 or December 31, 2025.

NOTE 10 – 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 material effect on our consolidated financial position or results of operations, except as disclosed below.

Amediation was held on July 30, 2026 with Disguise Systems Limited, a United Kingdom company, and Disguise Technologies Limited, a United Kingdom company (collectively, “Disguise”) to resolve Disguise Systems Limited and Disguise Technologies Limited v. One Stop Systems, Inc. in the United States District Court for the District of Delaware, C.A. No. 24-536-JHS, initiated by Disguise in 2024. As a result of the mediation the Company reacheda definitive settlement agreement whereby the Company, without any admission of wrongdoing or liability, paid to Disguise a net monetary payment of $6,250,000. The settlement agreement also included a mutual release of claims. The Company recognized the $6,250,000 liability and recorded the settlement in the operational results of the fiscal quarter ended June 30, 2026. In the fiscal quarter ended September 30, 2026, the Company fulfilled its payment obligations under the settlement agreement.

Management had previously characterized this matter as a customer dispute arising in the ordinary course of business and, prior to the mediation on July 30, 2026, did not believe the matter was material to the Company's financial condition, results of operations, or cash flows. Management is including this description of the litigation in this Quarterly Report because it has determined that the amount of the settlement renders the matter material to the Company for purposes of this disclosure, notwithstanding the management's prior assessment that the underlying dispute, standing alone, was in the Company’s ordinary course of business and not material prior to the mediation on July 30, 2026.

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 is 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.

Leases

The Company leases its corporate headquarters, manufacturing, and warehouse facility in San Diego County, under a non-cancelable operating lease. The facility is approximately 29,342 square feet in Escondido, California with a lease that expires in August 2030. The Company also leases a 925 square foot facility in Salt Lake City, Utah, which houses its Ion software development team, under a lease that was last modified and extended in June 2026 and expires in June 2027. Additionally, the Company 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.

Other information related to leases for the three and nine month periods ended September 30, 2026 and 2025 was as follows:

The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2026:

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 purchase orders as of September 30, 2026 were $4,961,467.

Customer Concentration

During the three month periods ended September 30, 2026 and 2025, the Company hadtwo customers, in each period, that accounted for (in the aggregate) approximately 49% and 75% of revenue, respectively. No other customers represented greater than 10% of our revenue in these periods. During the nine month periods ended September 30, 2026 and 2025, the Company hadtwo customers, in each period, that accounted for (in the aggregate) approximately 42% and 55% of revenue, respectively. No other customers represented greater than 10% of our revenue in these periods.

As of September 30, 2026 and December 31, 2025, the Company hadtwo andthree customers, respectively, that accounted for (in the aggregate) approximately 72% and 77%, respectively, of trade accounts receivables for which each of such customer’s balances represented 10% or greater of our consolidated trade accounts receivable balance.

During the three month periods ended September 30, 2026 and 2025, the Company had approximately 49% and 64%, respectively, of aggregate purchases from four suppliers, in each period, for which each represents greater than 10% of our consolidated purchases. During the nine month periods ended September 30, 2026 and 2025, the Company had approximately 48% and 32%, respectively, of aggregate purchases from three and two suppliers, respectively, for which each represents greater than 10% of our consolidated purchases.

NOTE 11 – NET LOSS PER SHARE

Basic and diluted net loss per share were calculated as follows for the three and nine month periods ended September 30, 2026 and 2025:

NOTE 12 – 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 Officerhas 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 details for the Company's single reportable segment are the same as those for the Company's continuing operations, as reported in the consolidated financial statements.

Revenue from customers with non-U.S. billing addresses represented approximately 12% and 5% of the Company’s revenue during the three month periods ended September 30, 2026 and 2025, respectively; and 12% and 8%of the Company's revenue during the nine month periods ended September 30, 2026 and 2025, respectively.

As of September 30, 2026, all the Company’s long-lived assets are in the United States of America.

NOTE 13 - DISCONTINUED OPERATIONS

Divestiture

On December 30, 2025, the Company entered into and completed a Shares Purchase Agreement (the “SPA”) with Hiper Euro GmbH (the “Buyer”), pursuant to which the Buyer acquired 100% of the issued and outstanding equity interests of One Stop Systems, GmbH (“OSS GmbH”), the Company’s German subsidiary and the sole owner of Bressner Technology GmbH (“Bressner”) (the “Transaction”). These entities represented the entirety of the Company’s former European distribution and integration operations. The Transaction represented a strategic shift in the Company’s operations, as the Company exited its European distribution and integration business and is now focused on its core high-performance edge computing solutions. As a result, OSS GmbH met the criteria for classification as discontinued operations as of the date of divestiture, and the historical results of OSS GmbH and Bressner have been classified as discontinued operations in the Company’s consolidated financial statements. The Company does not have any significant continuing involvement in the operations of OSS GmbH or Bressner following the divestiture.

Pursuant to the SPA, the Company sold OSS GmbH for a base purchase price of $22,000,000, subject to customary post-closing adjustments for net working capital, cash, indebtedness, and transaction expenses. At closing, the Company received total estimated purchase consideration of $22,417,422 based on preliminary working capital and other closing estimates. Post-closing adjustments for final working capital, cash, indebtedness, and transaction-related items resulted in a reduction to the purchase price of $157,274. As a result of these adjustments, total purchase consideration was $22,260,148. The adjustment to the purchase price was recorded during the nine months ended September 30, 2026 as a reduction to the gain on sale and is reflected within discontinued operations in the consolidated statements of operations.

Financial Results of Discontinued Operations

For the nine month period ended September 30, 2026, loss from discontinued operations, net of tax on the consolidated statements of operations is comprised of the post-transaction adjustments to the purchase consideration. For the three and nine month periods ended September 30, 2025, income from discontinued operations, net of tax on the consolidated statements of operations reflects Bressner's financial results for the period.

The following table presents the major components of Bressner's financial results for the periods presented:

Assets and Liabilities of Discontinued Operations

There wereno assets or liabilities associated with discontinued operations as of September 30, 2026 or December 31, 2025.

NOTE 14 – SUBSEQUENT EVENTS

The Company's management has evaluated subsequent events after the consolidated balance sheet dated as of September 30, 2026 through the date of filing of this Quarterly Report. Based upon the evaluation, management has determined that no subsequent events have occurred that would require recognition in the accompanying consolidated financial statements or disclosure in the notes thereto.