One Stop Systems(US:OSS)2021-03-25 20:05COVID-19 Impact - The ongoing COVID-19 pandemic has caused significant disruptions to the company's operations, impacting workforce availability and supply chain logistics [142]. - In Q4 of fiscal year 2020, the company faced prolonged delivery timelines and product shortages due to COVID-19, affecting business transactions [143]. - The concentration of manufacturing and assembly operations in regions affected by COVID-19 has created uncertainty regarding the company's ability to meet customer demand [144]. - Many customers have requested relief on existing contracts and delayed payments due to financial crises caused by COVID-19, particularly in the media, entertainment, and commercial airline sectors [150]. - The company anticipates that demand for certain products and services will remain limited until restrictions related to COVID-19 improve [150]. - The potential for an extended global economic downturn due to COVID-19 could adversely affect demand for the company's products and services [151]. - The company has not developed a comprehensive contingency plan to address the challenges posed by the COVID-19 pandemic, which may hinder its ability to mitigate adverse effects [145]. - The company's financial condition and results of operations may be materially impacted by the ongoing uncertainty surrounding COVID-19 and its effects on global financial markets [146]. - The ongoing COVID-19 pandemic has resulted in increased travel restrictions and potential disruptions in product shipments, which could materially impact business and financial results [172]. Market and Competition - The market for high-performance computing products is rapidly evolving, and the company's future success will depend on its ability to innovate and meet customer demands [157]. - New entrants and evolving distribution models in the market could increase pricing pressure and reduce profit margins, adversely affecting business performance [162]. - Increased pricing pressure due to the commoditization of HPC hardware and software may negatively impact gross margins and operating results [184]. Financial Performance and Risks - The company's operating results have historically fluctuated significantly, making future predictions challenging and potentially leading to operating results falling below expectations [158]. - Approximately 24.1% and 41.0% of net sales in 2020 and 2019, respectively, came from customers representing over 10% of consolidated annual revenue, specifically from disguise and Raytheon [167]. - Suppliers accounting for over 10% of total parts purchases represented approximately 18.3% and 11% of materials purchased in 2020 and 2019, respectively, with a significant concentration on Concisys Inc. [170]. - The company relies on a limited number of suppliers, and any significant change in relationships could adversely affect business operations and financial condition [171]. - The company faces risks from potential obsolescence of inventory due to lengthy sales cycles and inaccurate demand forecasting, which could lead to financial losses [176]. - The company faces challenges in successfully integrating acquired operations, systems, and personnel, which could adversely affect business performance [182]. - The company may incur significant costs related to intellectual property litigation, which could adversely affect its business and operating results [191]. - The company may have to liquidate assets or reduce development programs if it cannot raise adequate funds, which could harm its business and financial condition [213]. Intellectual Property and Compliance - The company relies on patents and trade secret laws to protect its intellectual property, but there is no assurance these protections will be effective against competitors [185]. - Cybersecurity breaches could lead to the theft of proprietary designs, impacting the company's competitive edge and financial results [186]. - Compliance with evolving data protection regulations, such as GDPR, could result in penalties of up to 4% of worldwide revenue if not met [195]. - Violations of anti-bribery laws could lead to substantial civil or criminal penalties, adversely impacting the company's business [199]. Stock and Ownership - The trading price of the company's common stock may be volatile, influenced by various factors beyond its control, potentially leading to investment losses [200]. - As of February 28, 2021, the company has 16,912,312 shares of common stock outstanding, with directors and significant stockholders owning 36.0% of the outstanding shares, allowing them to exert significant control over corporate matters [204][206]. - The company anticipates limited analyst coverage, which may adversely affect the market price of its common stock if analysts issue unfavorable opinions or cease coverage [205]. - The company is classified as an "emerging growth company" and may take advantage of reduced disclosure requirements until December 31, 2023, or until certain financial thresholds are met [214]. - Anti-takeover provisions in the company's charter documents may delay or prevent changes in control, which could negatively impact the market price of its common stock [209][211]. - The concentration of ownership among directors and significant stockholders may adversely affect the market price of the company's common stock [204][211]. - The company may experience increased volatility in its stock price if investors find its common stock less attractive due to reliance on exemptions from certain reporting requirements [215].