Financial Data and Key Metrics - Q3 revenue reached a record $18.8 million, up 18% YoY, with year-to-date revenue at $54.2 million, also a record, up 23% YoY [4] - Gross profit decreased by $439,000 to $5.1 million, with gross margin at 27%, down 7.5 percentage points due to lower margin revenue from Bressner and media/entertainment business, and delayed military shipments [13] - Core OSS revenue increased 15% to $10.7 million, driven by AI Transportable and media/entertainment businesses [11] - Bressner revenue increased 21% to a record $8.1 million, despite a 14% YoY euro devaluation [12] - Operating expenses increased by $424,000 to $4.9 million, but as a percentage of revenue, decreased to 26.1% from 28.1% YoY [16] - Net income on a GAAP basis was $133,000 or $0.01 per diluted share, down from $981,000 or $0.05 per diluted share YoY [17] - Non-GAAP net income was $691,000 or $0.03 per diluted share, down from $1.5 million or $0.08 per diluted share YoY [18] - Adjusted EBITDA was $955,000 or 5.1% of revenue, compared to $1.8 million or 11.3% of revenue YoY [18] Business Line Performance - AI Transportable business saw solid growth, particularly in autonomous trucking, with two autonomous trucking customers now in the top 10 customer list [5] - Media and entertainment business contributed to revenue growth but faced margin pressure, with margins under 20% [28] - Military business experienced deferred shipments due to a transition to a new storage product version, but shipments have resumed [13] - Bressner's gross margin decreased by 3.4 percentage points to 22.2% due to increased material and transportation costs, as well as higher sales of lower margin products [15] Market Performance - European market saw strong performance through Bressner, with increased market share and strategic inventory buys driving growth [12] - Autonomous trucking market continues to progress, with hundreds of thousands of miles driven using the company's products, but a driverless solution is still needed to realize full economic potential [6] - Military market is expected to rebound, with new relationships being built with prime contractors and the Department of Defense, aiming for higher margins and less seasonality [38] Strategic Direction and Industry Competition - The company is focusing on higher margin products, particularly in the AI Transportable and military markets, to offset potential declines in media and entertainment revenue [31] - Six new program wins were added in Q3, including two in autonomous trucks, two in medical designs, and two in mobile 5G AI applications [32] - The company is developing a superior roadmap for autonomous trucking compute storage needs, leveraging PCIe, NVLink, ruggedization, and cooling technologies [8] - Military engagements have progressed, with the introduction of the Rigel platform, which is recognized as the fastest, most compact supercomputer available for military applications [40] Management Commentary on Operating Environment and Future Outlook - Management expects Q4 revenue to be approximately $19.2 million, which would result in a record annual revenue of $73.4 million, up more than 18% YoY [48] - Gross margins are expected to improve in Q4 with the resumption of military product shipments [14] - The company anticipates a technology transition in the media and entertainment market, potentially impacting revenues by the second half of 2023 as customers move to lower-cost, cloud-based solutions [30] - The company is confident in its ability to backfill potential revenue declines in media and entertainment with higher margin business from AI Transportable and military markets [37] Other Important Information - Cash and cash equivalents totaled $3.2 million, with short-term investments at $9.5 million, totaling $12.7 million in capital resources, a decrease of $1.7 million from the previous quarter due to increased working capital requirements [25] - The company showcased its latest products at the AUSA military trade show and will be attending the Supercomputer 22 Conference, expecting to announce more information in a press release [47] Q&A Session Summary Question: Autonomous Trucking Testing Progress - Testing with autonomous trucking companies is progressing well, with trucks driving hundreds of thousands of miles with minimal human intervention, but full driverless operation is still a year or two away [51][52] Question: Military Revenue Timeline - Military revenue is expected to start impacting significantly in late 2023 and beyond, with initial funding for projects potentially ranging from $0.5 million to $1.5 million [53] Question: Bridging Revenue Gaps - The company plans to bridge potential revenue gaps through AI Transportable wins, a rebound in military business, and aggressive pursuit of other deals [63][64] Question: Gross Margin Trends - Gross margins are expected to improve starting in Q4, driven by the resumption of military shipments and a shift towards higher margin products [66][67] Question: Supply Chain and Inflation - Supply chain issues are improving slightly, but the company continues to secure necessary inventory, with plans to reduce inventory levels over time [70] Question: Mobile 5G AI Opportunity - The mobile 5G AI opportunity is expected to yield over $10 million in revenue over several years, with deployments planned in over 100 cities [75] Question: Gross Margin Outlook for Next Year - Gross margins are expected to snap back to previous levels and improve further, with a steady cadence of improvement anticipated [78][80] Question: Impact of China Restrictions - The company does not expect China restrictions to impact its business, as current autonomous trucking customers are U.S.-based [82] Question: Military Advisory Board Impact - The military advisory board has been instrumental in opening doors to new opportunities, particularly with the Department of Defense [87] Question: Quantifying Deferred Military Shipments - Military shipments deferred to Q4 are expected to double or triple compared to Q3, with a strong recovery anticipated in 2023 [89][90]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ________________ Commission File Number: 001-38371 One Stop Systems, Inc. (Exact Name of Registrant as Specified in its Charter) (State or oth ...

Financial Data and Key Metrics Changes - Q2 2022 revenue reached a record $18.3 million, up 7% sequentially and 23% year-over-year [4][12] - Gross profit for Q2 was $5.2 million, a 12% increase from the previous year, resulting in a gross margin of 28.4%, down from 31.2% year-over-year [5][14] - GAAP net income was $323,000 or $0.02 per diluted share, down from $1.7 million or $0.09 per diluted share in the same period last year [16] - Non-GAAP net income was $871,000 or $0.04 per diluted share, up from $812,000 or $0.04 per diluted share year-over-year [17] Business Line Data and Key Metrics Changes - Core OSS business revenue increased 18% to $10.7 million, representing 59% of total revenue [12] - Revenue from Bressner, the European subsidiary, increased 31% to $7.6 million, accounting for 41% of total revenue [13] - Gross margin for the core OSS business decreased to 33%, primarily due to lower-margin media and entertainment revenue [13][14] Market Data and Key Metrics Changes - The media and entertainment sector saw a revenue increase of 135% to a record $6.4 million [4] - Supply chain constraints continue to impact product availability, with lead times extending to 52 weeks or more for key components [8][10] Company Strategy and Development Direction - The company aims for leadership in the AI Transportable market, focusing on high-performance platforms for commercial, military, and industrial applications [39][32] - Investments in R&D and marketing for higher-margin businesses, particularly AI Transportables, are ongoing [6][15] - The formation of a Strategic Advisory Board aims to enhance navigation within military markets and improve product and market strategies [38][70] Management's Comments on Operating Environment and Future Outlook - Management expects supply chain challenges to persist through the remainder of the year and into the first half of next year [8][10] - The revenue outlook for Q3 2022 is projected at $18.5 million, representing a 16% growth year-over-year [39] - Management remains optimistic about military program engagements, anticipating stronger revenue in the second half of the year [44][54] Other Important Information - The company has approximately $20.4 million in inventory, with $11.6 million designated for the core OSS business and $8.8 million for Bressner [10] - Operating expenses as a percentage of revenue improved to 26.2% from 27.7% year-over-year, despite a 16% increase in total operating expenses [15] Q&A Session Summary Question: Inventory availability for Bressner vs. other products - Management explained that Bressner's status as a value-added reseller allows it to gain market share, which contributes to its strong inventory availability [42][43] Question: Military customer sales activity - Management noted increased military design activity but indicated that revenue from military customers is expected to be stronger in the second half of the year [44] Question: Production line efficiencies - The company is moving some manufacturing to Mexico to improve delivery amidst shipping constraints [45][46] Question: Updates on agricultural and mining verticals - Management stated that while these verticals are potential future opportunities, current focus remains on more immediate prospects in the autonomous truck space [47] Question: Revenue from autonomous vehicle customers - Management refrained from disclosing specific revenue figures but indicated that revenue from autonomous vehicle customers is expected to increase [50][51] Question: Pricing strategies with lower-margin customers - Management confirmed that pricing adjustments are possible under existing contracts, and they are focusing on strategic business opportunities [52][53] Question: Delays in government projects - Management clarified that delays are not solely due to budget issues, and they expect significant business from a key military customer in the future [54][56] Question: Strength of media and entertainment customer - Management anticipates continued strength from this customer but expects revenue to normalize after an exceptionally large quarter [58][59] Question: Growth drivers for Bressner - Management highlighted strategic investments and a talented team as key factors driving Bressner's growth [60][61]

Revenue and Income - Revenue for Q2 2022 was $18,303,343, an increase of 22.5% compared to $14,905,009 in Q2 2021[151] - Net income for Q2 2022 was $322,822, a significant decrease from $1,697,122 in Q2 2021[151] - Total revenue for the three months ended June 30, 2022, increased by $3,398,334, or 22.8%, compared to the same period in 2021, with OSS revenue up by $1,612,926 (17.7%) and Bressner revenue up by $1,785,408 (30.8%) due to improved shipments and economic conditions in Europe[154][155] - For the six months ended June 30, 2022, total revenue increased by $7,135,259, or 25.3%, with OSS revenue up by $3,592,997 (20.3%) and Bressner revenue up by $3,542,262 (33.7%) attributed to increased shipments and strategic product availability[155] - For the three months ended June 30, 2022, the net income was $322,822, compared to $1,697,122 for the same period in 2021[215] - Non-GAAP net income for the three months ended June 30, 2022, was $871,265, compared to $812,005 in 2021, indicating a growth of about 7.3%[219] Costs and Expenses - Gross profit for Q2 2022 was $5,200,318, representing a gross margin of 28.4%, down from 31.2% in Q2 2021[151] - Operating expenses for Q2 2022 totaled $4,798,395, which is 26.2% of revenue, compared to 27.7% in Q2 2021[151] - Cost of revenue for Q2 2022 was $13,103,025, which is 71.6% of revenue, up from 68.8% in Q2 2021[151] - General and administrative expenses increased by $172,660, or 10.5%, for the three months ended June 30, 2022, with OSS up by $278,357 (25.0%) and Bressner down by $105,697 (19.7%), while the expense as a percentage of revenue decreased to 10.0% from 11.1%[161] - Selling and marketing expenses increased by $245,621, or 16.6%, for the three months ended June 30, 2022, with OSS up by $187,382 (16.3%) and Bressner up by $58,239 (17.8%), while the expense as a percentage of revenue decreased to 9.4% from 9.9%[163][165] - Research and development expenses increased by $244,020, or 24.2%, for the three months ended June 30, 2022, with OSS up by $237,857 (26.2%), while the expense as a percentage of revenue remained flat at 6.8%[166] - Interest expense for the three months ended June 30, 2022, was $44,949, a decrease from $169,031 in 2021, indicating a reduction of approximately 73.5%[215] - Stock-based compensation expense for the three months ended June 30, 2022, was $532,636, compared to $465,336 in 2021, representing an increase of approximately 14.4%[219] Cash Flow and Liquidity - As of June 30, 2022, the company had total cash and cash equivalents of $2,874,831 and short-term investments of $11,514,047, resulting in total working capital of $32,914,013[176] - For the six months ended June 30, 2022, the company used $7,576,355 in cash for operating activities, a decrease of $10,364,718 compared to the cash provided by operating activities of $2,788,363 in the same period of 2021[188] - The net cash provided by investing activities during the six months ended June 30, 2022, was $2,878,600, compared to $14,723,446 used in the prior year, resulting in a net change of $17,602,046[192] - The company generated $2,614,463 in cash from financing activities for the six months ended June 30, 2022, compared to $9,628,718 in the same period of 2021[193] - The company anticipates using liquidity and cash flows from operations to fund growth and may evaluate potential acquisitions, which could require additional financing[178] - Net working capital requirements for the six months ended June 30, 2022, were $10,071,443, an increase of $10,360,900 compared to the prior year[191] - The company obtained a domestic revolving line of credit of $2 million in April 2022, which requires maintaining cash and investments balances of at least $4 million[183] - Management believes that sufficient liquidity exists to meet anticipated working capital requirements for at least the next twelve months, although there are no assurances regarding the effectiveness of cost reduction efforts[185] Economic and Market Conditions - The company is experiencing increased pricing and longer lead times, leading to higher inventory balances[136] - The geopolitical instability and inflation are contributing to economic uncertainty, impacting customer spending and operations[135] - The company experienced increased product pricing due to semiconductor shortages and rising transportation costs, which are being actively managed[198] - The company is subject to interest rate risk due to recent increases in Federal Reserve interest rates, which may impact borrowing costs[206] Tax and Other Income - The effective tax rate for the period ended June 30, 2022, is anticipated to be approximately 20.86%, with recorded provisions of $85,490 for Q2 2022 and $235,293 for Q2 2021[174] - Other income for the three months ended June 30, 2022, resulted in a net expense of ($4,169), a decrease of $1,527,167 compared to the prior year, primarily due to the prior year's gain on the forgiveness of a PPP loan[171][172] - Interest income decreased by $6,291 for the three months ended June 30, 2022, due to lower investments in marketable securities, while it increased by $39,414 for the six months ended June 30, 2022, due to interest on newly purchased securities[168] Future Outlook - Management plans to control costs and conserve cash in response to economic uncertainties[140] - Research and development expenses are expected to increase as the company invests in new and existing products[147] - The company expects to continue incurring expenses similar to the adjusted income from continuing operations and adjusted EPS financial adjustments[217] - The company employs derivatives to manage market risks, specifically using foreign exchange forward contracts as cash flow hedges[210]

Financial Data and Key Metrics - Revenue grew 28% YoY to a record $17.1 million in Q1 2022, with minimal seasonality impact (4% drop from Q4 to Q1 compared to 30%+ in prior years) [5] - Gross profit increased to $5.1 million from $4.4 million, with gross margins exceeding 30% [6] - Operating expenses increased by only 8% despite a 28% revenue growth, leading to improved operating leverage [6] - GAAP net income rose to $579,000, non-GAAP net income to nearly $1 million, and adjusted EBITDA to $1.4 million, all significant improvements over the previous year [6] - Cash and cash equivalents totaled $2.2 million, with short-term investments of $13.6 million, combining for $15.8 million as of March 31, 2022 [18] Business Line Performance - Core OSS revenue increased 23% YoY to $10.6 million, representing 62% of total revenue [12] - Bressner, the European subsidiary, saw a 37% revenue increase to $6.5 million, contributing 38% of total revenue [12] - Media and entertainment customer revenue exceeded pre-COVID levels, with expectations for continued growth throughout the year [5] - Autonomous trucking market saw four confirmed program wins in Q1, bringing the total to five, with products being shipped to three market leaders [10] Market Performance - The media and entertainment sector showed strong recovery, with revenues now greater than pre-COVID levels [5] - Bressner's performance in Europe was exceptional, with 37% revenue growth [6] - The AI transportable market, particularly in autonomous trucking, is accelerating, with significant interest in products like Rigel and Centauri [8][9] Strategic Direction and Industry Competition - The company is focusing on the AI transportable market, leveraging its technology to address high-growth verticals like autonomous trucks, military, and maritime applications [8][9] - Introduction of scalable standard products like Rigel and Centauri has been well-received, with Centauri specifically designed for autonomous trucking needs [9][10] - The company is investing in next-generation PCI Express Gen 5 technology, which will double the bandwidth of current Gen 4 products [23][24] Management Commentary on Operating Environment and Future Outlook - Supply chain disruptions, including long lead times, price increases, and higher shipping costs, continue to pose challenges, but the company is leveraging its strong cash position to mitigate these issues [7] - Management is optimistic about the growth potential in the AI transportable market, particularly in autonomous trucking, where the company has secured multiple program wins [10][29] - The company expects Q2 2022 revenue to be $17.3 million, representing 15% growth over Q2 2021 [38] Other Important Information - The company has a strong pipeline of pending major programs, with 34 opportunities, 20 of which involve AI transportable applications [19] - The company is actively participating in industry events and panels to position itself as a thought leader in the AI transportable market [26] - Management is focused on improving margins through price increases, manufacturing efficiencies, and the introduction of higher-value standard products [15] Q&A Session Summary Question: Performance of business segments outside media and entertainment and Bressner - All business segments are strong, with no decreases, but military shipments are expected to pick up in Q3 and Q4 [42] Question: Updates on military contracts - The company is working on several military projects, with additional shipments to Raytheon programs [44] Question: Pricing and differences in systems for autonomous trucks - The company is shipping to three customers with multiple products, and expects revenue from additional customers later this year [47] Question: Growth outlook for the media and entertainment customer - Steady growth is expected, driven by both virtual product lines and the return of large gatherings [49] Question: Margin improvement opportunities in media and entertainment - Margins in this segment are not expected to improve significantly, but the business remains profitable [53][56] Question: Integration opportunities with sensor platforms in autonomous vehicles - The company is already exploring deeper integration and potential partnerships in this area [58] Question: Replacement cycle for autonomous truck systems - Replacement cycles could be around three years, depending on technological advancements and application needs [59] Question: Development cycle for autonomous truck customers - The company is already shipping to three customers and expects to see revenue from additional customers later this year [63] Question: Contribution from autonomous trucking wins - Some autonomous trucking customers are expected to be in the top 10 by the end of 2022, with significant growth potential in 2023 and beyond [88] Question: Headcount growth plans - The company plans to add 2-3 employees per quarter, with flexibility to accelerate hiring if needed [92]

Revenue Performance - Total revenue for the three months ended March 31, 2022, increased by $3,736,925, or 28%, compared to the same period in 2021[154] - OSS's revenue increased by $1,980,071, or 23%, primarily due to increased shipments to media and entertainment customers[154] - Bressner's revenue improved by $1,756,854, or 37.3%, attributed to economic recovery in Europe as the impact of COVID-19 diminished[154] Cost of Revenue - Cost of revenue for the three months ended March 31, 2022, increased by $3,029,054, or 34.1%, compared to the prior year[155] - OSS's cost of revenue rose by $1,460,349, or 27.3%, mainly due to improved sales to media and entertainment customers[155] - Bressner's cost of revenue increased by $1,568,705, or 44.3%, primarily due to higher sales and changes in product mix[155] Gross Margin - Overall gross margin percentage decreased from 33.3% in March 2021 to 30.1% in March 2022, a decline of 3.2 percentage points[156] - OSS's gross margin percentage for the three months ended March 31, 2022, was 35.7%, down 2.2 percentage points from 37.9% in the prior year[156] - Bressner's gross margin decreased to 21% from 24.9% in the prior year, primarily due to increased material and transportation costs[156] Management Strategy - Management plans to control costs, conserve cash, strengthen margins, and improve execution in response to the changing economic landscape[139] Operating Expenses - General and administrative expenses decreased by $382,930, or 17.8%, to 10.4% of revenue for the three months ended March 31, 2022, compared to 16.2% in the same period in 2021[157] - Selling and marketing expenses increased by $303,819, or 26%, to 8.6% of revenue for the three months ended March 31, 2022, compared to 8.8% in the same period in 2021[158] - Research and development expenses increased by $411,882, or 49.5%, to 7.3% of revenue for the three months ended March 31, 2022, compared to 6.2% in the same period in 2021[159] Cash Flow and Liquidity - Net cash used in operating activities was $5,018,398 for the three months ended March 31, 2022, a decrease of $9,309,464 compared to cash provided of $4,291,066 in the same period in 2021[175] - Cash generated from investing activities was $1,028,504 for the three months ended March 31, 2022, compared to cash used of $121,759 in the prior year, an improvement of $1,150,263[178] - Cash generated from financing activities was $1,131,345 for the three months ended March 31, 2022, compared to $9,173,593 in the same period in 2021[179] - The company had $2,219,800 in cash and cash equivalents as of March 31, 2022, down from $5,101,174 at the end of 2021, indicating a liquidity contraction[194] Tax and Income - The company recorded an income tax provision of $165,308 for the three months ended March 31, 2022, compared to $60,522 in the same period in 2021[163] - The annual expected tax rate for 2022 is anticipated to be approximately 20.66%[163] - For the three months ended March 31, 2022, net income was $579,234, compared to $41,198 for the same period in 2021, representing a significant increase[203] - Non-GAAP net income for the three months ended March 31, 2022, was $977,871, compared to $643,492 in 2021, showing an increase of approximately 52%[206] - Basic adjusted EPS for the three months ended March 31, 2022, was $0.05, compared to $0.04 in the same period in 2021, reflecting a 25% increase[206] EBITDA - Adjusted EBITDA for the three months ended March 31, 2022, was $1,404,871, up from $1,065,574 in the prior year, indicating a growth of approximately 31.8%[203] Free Cash Flow - Free cash flow for the three months ended March 31, 2022, was $(5,104,239), a decrease from $4,169,307 in the same period of 2021, reflecting a negative cash flow trend[209] Interest and Borrowing - Interest income increased by $45,705 for the three months ended March 31, 2022, due to interest on marketable securities purchased in April 2021[160] - Interest expense for the three months ended March 31, 2022, was $58,715, down from $149,982 in the prior year, indicating a reduction in borrowing costs[203] Currency Risk Management - The company is exposed to foreign currency risk primarily through its operations in Germany, where transactions are conducted in Euros, affecting financial results due to exchange rate fluctuations[196] - The company employs derivatives to manage market risks, specifically using foreign exchange forward contracts to hedge against currency fluctuations[198] Accounting Changes - The company adopted ASU No. 2016-02, Leases, effective January 1, 2022, which requires recognition of lease liabilities and right-of-use assets[192]

| --- | --- | --- | --- | --- | --- | |------------|----------------------------|-------|-------|-------|-------------------------------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | April 2022 | OSS Corporate Presentation | | | | | | | | | | | | | | | | | | OneStopSystems.com NASDAQ:OSS | 1 Important Disclaimers & Cautions Regarding Forward-Looking Statements 2 One Stop Systems cautions you that statements in this presentation that are not a description of historical facts are forward-looking ...

One Stop Systems, Inc. (NASDAQ:OSS) Q4 2021 Earnings Conference Call March 24, 2022 5:00 PM ET Company Participants David Raun – President and Chief Executive Officer John Morrison – Chief Financial Officer Jim Ison – Chief Sales and Marketing Officer Conference Call Participants Scott Searle – Roth Capital Eric Martinuzzi – Lake Street Capital Joe Gomes – Noble Capital David Williams – Benchmark Brian Kinstlinger – Alliance Global Partners Operator Good afternoon and thank you for joining us today to discu ...

Business Impact and Risks - The ongoing COVID-19 pandemic continues to impact the company's business, leading to operational challenges and potential adverse effects on financial condition and results of operations [132]. - Economic uncertainty and capital markets disruption, significantly influenced by the military conflict between Russia and Ukraine, could materially affect the company's financial condition and results of operations [144]. - Supply chain disruptions have resulted in longer lead times and increased product costs, impacting the company's ability to meet customer demands [135]. - A limited number of customers represent a significant portion of sales, and the loss of key customers could lead to a substantial decrease in revenue [132]. - The company faces increased pricing pressure due to the commoditization of HPC hardware and software, which may harm its competitive position [134]. - The company has not developed a specific contingency plan to address the challenges posed by the COVID-19 pandemic, which may hinder its ability to mitigate potential adverse effects [137]. - The company relies on a limited number of parts suppliers, and any disruptions could adversely affect manufacturing and design processes [132]. - The ongoing COVID-19 pandemic has led to increased product costs, limited supplies, and protracted delivery dates, which could materially impact business operations and financial results [164]. - Inflation has increased overall cost structures, potentially affecting liquidity and financial condition if price increases to customers do not keep pace [148]. - The company has experienced fluctuations in operating results, making future predictions challenging and potentially leading to operating results falling below expectations [150]. - Competition in the market is expected to increase, with established competitors and new entrants posing risks to market share and profit margins [152]. - The company faces risks from unsuccessful product launches, which could lead to reduced revenues and potential returns of products, adversely affecting financial condition and operating results [168]. - Inventory may become obsolete due to varying sales cycles, leading to potential write-offs or reduced inventory value, impacting financial results [169]. - Significant defects in products could incur high remediation costs, damage reputation, and result in loss of market share, affecting overall business performance [170]. - The company offers extended product warranties, which could lead to unexpected costs if failure rates change, impacting financial stability [171]. - Achieving design wins is crucial for growth; failure to do so could harm the company's business and market position [174]. - Retaining key personnel is essential; loss of executives could delay business objectives and affect development efforts [175]. Financial Position and Capital Structure - The company has never paid, and does not expect to pay, any cash dividends to common stockholders for the foreseeable future, which may limit attractiveness to investors [144]. - As of February 28, 2022, the company has 18,878,183 shares of common stock outstanding, and substantial future sales could lead to a decline in stock price [202]. - The company's directors and significant stockholders collectively own 26.7% of outstanding common stock, allowing them to exert significant control over corporate matters [200]. - The company may seek to raise additional capital through equity offerings, debt financings, collaborations, or licensing arrangements if cash balances and anticipated cash flow are insufficient [210]. - The company qualifies as an "emerging growth company" and a "smaller reporting company," which may make its common stock less attractive to investors due to reduced reporting requirements [213][215]. - The company could remain an emerging growth company until December 31, 2023, or until it meets certain revenue or debt thresholds [214]. - If the company raises funds by issuing equity securities, it may result in dilution to stockholders and could impose significant restrictions on operations [211]. - The issuance of additional equity securities may cause the market price of the company's common stock to decline [211]. - The company may have to liquidate assets or reduce the scope of development programs if it is unable to raise adequate funds [211]. - The company may continue to qualify as a "smaller reporting company" until it has more than $250 million in public float or annual revenues exceeding $100 million [215]. - The company’s reliance on exemptions from various reporting requirements may lead to less active trading and increased stock price volatility [216]. - Any delay or prevention of a change of control transaction could cause the market price of the company's common stock to decline [209]. Regulatory and Compliance Risks - The company is subject to various risks related to international operations, including regulatory changes and geopolitical instability, which could adversely affect business plans [143]. - Privacy concerns regarding data handling could damage reputation and result in legal or regulatory issues, adversely affecting operating results [189]. - The European Union's GDPR imposes penalties of up to 4% of worldwide revenue for non-compliance, affecting the company's data handling practices [190]. - The California Consumer Privacy Act (CCPA) took effect on January 1, 2020, expanding rights for California residents and potentially increasing compliance costs and liabilities for the company [191]. - The California Privacy Rights Act (CPRA) will expand the CCPA significantly on January 1, 2023, introducing stricter regulations on personal information usage and retention [191]. - Compliance with evolving data protection laws may incur substantial costs, adversely impacting the company's business and operational results [192]. - International operations expose the company to risks such as foreign currency fluctuations, increased compliance costs, and political instability, which could negatively affect financial performance [193]. - The company is subject to U.S. export and import controls, and violations could lead to significant penalties and loss of business opportunities [194]. - Changes in regulations affecting suppliers' products may result in unexpected costs or liabilities, impacting the company's market acceptance and sales [195]. - The company faces risks related to anti-bribery laws, with potential penalties that could adversely affect its business if violations occur [196]. Supply Chain and Product Development - The complexity and unpredictability of product development cycles may result in delays, leading to outdated products and decreased sales [166]. - The introduction of new products and enhancements is critical for future success, requiring effective coordination with customers and suppliers [165]. - Suppliers representing over 10% of total parts purchases accounted for approximately 12.6% and 18.3% of materials purchased in 2021 and 2020, respectively, highlighting reliance on a limited number of suppliers [162].

One Stop Systems, Inc. (NASDAQ:OSS) Q3 2021 Earnings Conference Call November 11, 2021 5:00 PM ET Company Participants David Raun - President and CEO John Morrison - CFO Jim Ison - Chief Sales and Marketing Officer Conference Call Participants Eric Martinuzzi - Lake Street Joseph Gomes - Noble Capital Scott Searle - ROTH Capital Brian Kinstlinger - Alliance Global Partners David Williams - Benchmark Operator Good afternoon, and thank you for joining us today to discuss One Stop Systems' financial results fo ...