One Stop Systems(US:OSS)2020-11-12 21:11Revenue Performance - For the three months ended September 30, 2020, total revenue decreased by $1,962,906 or 13.1% compared to the same period in 2019, with OSS experiencing a reduction of $759,091 or 5.1 percentage points primarily due to reduced revenue from its core media and entertainment business [155]. - For the nine months ended September 30, 2020, total revenue decreased by $1,922,076 or 4.8% compared to the same period in 2019, with OSS experiencing a reduction of $1,445,470 or 3.6 percentage points largely due to a decline in sales to its two largest customers impacted by the COVID-19 pandemic [157]. - Bressner Technology GmbH contributed $3,999,519 in revenue for the three months ended September 30, 2020, with a gross margin of 22.5% [154]. Profitability Metrics - Gross profit for the three months ended September 30, 2020, was $4,901,613, representing a gross margin of 37.8%, compared to a gross profit of $5,029,919 and a margin of 33.7% for the same period in 2019 [150]. - Overall gross margin percentage improved from 33.7% for the three-month period ended September 30, 2019, to 37.8% for the same period in 2020, an improvement of 4.1 percentage points [160]. - Net income attributable to common stockholders for the three months ended September 30, 2020, was $857,790, compared to $544,901 for the same period in 2019 [150]. - Adjusted EBITDA for Q3 2020 was $1,566,649, up from $1,041,286 in Q3 2019, indicating a 50.5% growth [222]. - Non-GAAP net income attributable to common stockholders for the nine months ended September 30, 2020, was $773,050, compared to $1,002,613 in the same period of 2019, reflecting a decrease of 22.9% [225]. Operating Expenses - Operating expenses for the three months ended September 30, 2020, totaled $3,922,171, a decrease from $4,610,362 in the same period of 2019, with general and administrative expenses at $1,817,499 [150]. - General and administrative expenses decreased by $372,504 or 17% for the three-month period ended September 30, 2020, compared to the same period in 2019 [162]. - Marketing and selling expenses decreased by $280,581 or 20.3% during the three-month period ended September 30, 2020, compared to the same period in 2019 [165]. - Research and development expenses for the three months ended September 30, 2020, were $1,001,288, compared to $1,036,394 in the same period of 2019 [150]. - Research and development expenses decreased by $35,106 or 3.4% during the three-month period ended September 30, 2020, compared to the same period in 2019 [167]. Cash Flow and Liquidity - As of September 30, 2020, the company's cash and cash equivalents were $5,519,829, and working capital totaled $15,467,546 [180]. - The company experienced an operating loss of $937,546 with cash used in operating activities of $1,385,390 during the nine months ended September 30, 2020 [180]. - Cash used in operating activities for the nine months ended September 30, 2020, was $(1,385,390), a decrease of $1,773,737 compared to $388,347 in the same period in 2019 [194]. - Cash used for working capital requirements increased to $2,523,409 for the nine months ended September 30, 2020, compared to $862,102 in the same period in 2019, an increase of $1,661,307 [198]. - The company generated net cash of $2,325,509 from financing activities during the nine months ended September 30, 2020, compared to $3,659,731 in the same period in 2019 [201]. - Cash used in investing activities decreased to $662,843 for the nine months ended September 30, 2020, from $2,060,712 in the same period in 2019, a decrease of $1,397,869 [200]. - 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 [192]. Debt and Financing - The company received a Paycheck Protection Plan loan of $1,499,360 on April 28, 2020, to support its operations during the pandemic [136]. - The company received a Paycheck Protection Plan loan of $1,499,360 on April 28, 2020, which management believes will likely be forgiven [202]. - The company issued a Senior Secured Convertible Promissory Note with an aggregate of $3,000,000 to an institutional investor on April 24, 2020 [135]. Customer Impact and Business Strategy - The largest customer is in the media and entertainment industry, which has been adversely affected by COVID-19, leading to slower sales and extended collection cycles [214]. - The company has formulated a plan to extend payment terms for its largest customer, who is experiencing financial hardships due to COVID-19 [180]. - The company implemented a cost reduction plan expected to save between $1.5 million and $2.0 million for the year ending 2020 [190]. - The company has no off-balance sheet financing arrangements or liabilities other than lease commitments incurred in the normal course of business [204]. Shareholder Metrics - Stock-based compensation expense for Q3 2020 was $210,280, compared to $164,857 in Q3 2019, marking a 27.5% increase [225]. - Weighted average diluted shares outstanding increased to 17,018,614 in Q3 2020 from 16,390,206 in Q3 2019, an increase of 3.8% [225]. - Interest expense for Q3 2020 was $174,205, significantly higher than $52,182 in Q3 2019, indicating a 233.5% increase [222]. - Depreciation and amortization for Q3 2020 was $410,552, compared to $352,905 in Q3 2019, representing a 16.3% increase [222]. - The company expects to continue incurring expenses similar to those reflected in adjusted income from continuing operations and adjusted EPS [224].