One Stop Systems(US:OSS)2020-08-06 21:24Revenue Performance - For the three months ended June 30, 2020, total revenue decreased by $3,260,909 or 21.9% compared to the same period in 2019, primarily due to reduced revenue from OSS's core media and entertainment business and data storage units [141]. - For the six months ended June 30, 2020, total revenue increased by $40,829 or less than 1% compared to the same period in 2019, with OSS experiencing a reduction in revenue of approximately $4,100,000 from its two largest customers [142]. - Revenue for the three months ended June 30, 2020 was $11,625,327, down from $14,886,236 in the same period of 2019, while gross profit decreased to $3,325,195 from $5,413,158 [138]. - Bressner contributed $727,210 or an increase of 2.9 percentage points to revenue for the six months ended June 30, 2020, while CDI had a decrease of $185,599 or 0.8 percentage points [142]. Cost and Expenses - The cost of revenue for the three months ended June 30, 2020 was $8,300,132, representing 71.4% of total revenue, compared to 63.6% in the same period of 2019 [139]. - Operating expenses for the three months ended June 30, 2020 totaled $3,731,081, down from $6,393,638 in the same period of 2019, with significant reductions in general and administrative expenses [138]. - Cost of revenue decreased by $1,172,946 or 12.4% for the three-month period ended June 30, 2020, compared to the same period in 2019, primarily due to reduced media and entertainment sales [143]. - General and administrative expenses decreased by $2,054,120 or 52.3% for the three-month period ended June 30, 2020, compared to the same period in 2019, with expenses as a percentage of revenue decreasing to 16.1% [147]. - Marketing and selling expenses decreased by $391,905 or 31.7% during the three-month period ended June 30, 2020, as a result of cost reduction initiatives and reduced travel due to COVID-19 [150]. - Research and development expenses decreased by $216,532 or 17.7% during the three-month period ended June 30, 2020, although the percentage of revenue increased to 8.7% [152]. Profitability and Loss - The net loss attributable to common stockholders for the three months ended June 30, 2020 was $12,162, compared to a loss of $1,594,633 in the same period of 2019 [138]. - OSS's gross profit margin for the three months ended June 30, 2020 was 28.6%, down from 36.4% in the same period of 2019 [139]. - Adjusted EBITDA for the three months ended June 30, 2020, was $72,574, a significant decrease from $1,267,361 in the prior year [202]. - Non-GAAP net income attributable to common stockholders for the six months ended June 30, 2020, was $(466,004), compared to $105,959 for the same period in 2019 [206]. - Free cash flow for the six months ended June 30, 2020, was $(3,350,641), a decline of $3,707,550 compared to $356,909 in 2019 [209]. Financing Activities - The company received a two-year Paycheck Protection Plan loan in the amount of $1,499,360 on April 28, 2020 [123]. - The company issued a Senior Secured Convertible Promissory Note with an aggregate of $3,000,000 to an institutional investor on April 24, 2020 [122]. - The company closed on a $3,000,000 senior secured convertible debt offering in April 2020, resulting in net proceeds of $2,383,726 after fees [180]. - The company generated net cash of $2,817,718 from financing activities for the six months ended June 30, 2020, compared to $2,323,170 in the same period in 2019 [180]. Cash Flow and Liquidity - As of June 30, 2020, the company's cash and cash equivalents were $4,654,602, with working capital of $14,381,656 [163]. - The company experienced an operating loss of $1,917,040 during the six months ended June 30, 2020, with cash used in operating activities amounting to $2,935,059 [163]. - The company used $2,935,059 in cash from operating activities for the six months ended June 30, 2020, a decrease of $4,648,943 compared to $1,713,884 in the same period in 2019 [175]. - Cash used for investing activities decreased to $414,040 in the six months ended June 30, 2020, from $1,355,925 in the same period in 2019, a reduction of $941,885 [179]. - The company has sufficient liquidity to meet its cash requirements for at least the next twelve months, although there are no assurances regarding the effectiveness of cost reduction efforts [173]. Interest and Other Financial Metrics - Interest income increased by $89,175 for the three-month period ended June 30, 2020, attributed to increased finance charges on accounts receivable from the largest customer in the media and entertainment industry [154]. - Interest expense increased by $97,173 for the three-month period ended June 30, 2020, due to new borrowings and amortization of related costs [156]. - Interest expense for the three months ended June 30, 2020, was $150,186, compared to $53,013 in the same period of 2019 [202]. - Amortization of intangibles for the three months ended June 30, 2020, was $174,525, down from $269,151 in 2019 [206]. - Non-cash adjustments decreased to $406,785 for the six months ended June 30, 2020, from $2,727,460 in the same period in 2019, a decrease of $2,320,675 [176]. Customer Impact and Business Strategy - The company has formulated a plan to extend payment terms for its largest customer, who is facing financial hardships due to COVID-19 [164]. - The largest customer, in the media and entertainment industry, has experienced slowed sales and extended collection cycles due to the COVID-19 pandemic [194].