OSS One Stop Systems Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 09, 2024

 

 

One Stop Systems, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			001-38371	33-0885351
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
2235 Enterprise Street #110
Escondido, California				92029
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: 760 745-9883

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		OSS		The Nasdaq Capital Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Item 2.01 Completion of Acquisition or Disposition of Assets.

The information provided below in “Item 7.01 - Regulation FD Disclosure” of this Current Report on Form 8-K is incorporated by reference into this Item 2.02.

Item 7.01 Regulation FD Disclosure.

On May 9, 2024, One Stop Systems, Inc. (the “Company”) issued a press release regarding the Company’s financial results for its first fiscal quarter ended March 31, 2024. A copy of that press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.

Exhibit 99.1 includes non-GAAP financial measures as defined in Regulation G. Exhibit 99.1 also includes a presentation of the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), information reconciling the non-GAAP financial measures to the GAAP financial measures and a discussion of the reasons why the Company’s management believes that presentation of the non-GAAP financial measures provides useful information to investors regarding the Company’s financial condition and results of operations. The non-GAAP financial measures presented therein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated and presented in accordance with GAAP.

Exhibit 99.1 also contains forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed in these forward-looking statements.

The information set forth under Item 7.01 of this Current Report on Form 8-K (“Current Report”), including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of such section. The information in Item 7.01 of this Current Report, including Exhibit 99.1, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing, except as expressly set forth by specific reference in such a filing. This Current Report will not be deemed an admission as to the materiality of any information in this Current Report that is required to be disclosed solely by Regulation FD.

Item 9.01 Financial Statements and Exhibits.

(d)	Exhibits.

Exhibit		Description
99.1		Press Release, dated May 9, 2024.
104		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			ONE STOP SYSTEMS, INC.
Date:	May 9, 2024	By:	/s/ John Morrison
			John Morrison Chief Financial Officer

 

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One Stop Systems Reports Q1 2024 Results

Company to Hold a Conference Call Today at 5:00 p.m. Eastern Time

 

ESCONDIDO, Calif. – May 9, 2024 – – One Stop Systems, Inc. ("OSS" or the "Company") (Nasdaq: OSS), a leader in rugged Enterprise Class compute for artificial intelligence (AI), machine learning (ML) and sensor processing at the edge, reported results for the first quarter ended March 31, 2024. All quarterly comparisons are to the same year-ago period unless otherwise noted.

 

"Over the past year, we have focused on transitioning our business away from legacy media and niche enterprise customers to pursue emerging opportunities within large and growing defense and commercial markets," stated OSS President and CEO, Mike Knowles. “While we expect the transition to take a couple more quarters to complete, I am encouraged by our performance during the 2024 first quarter, as consolidated revenue, bookings, gross margin, and EBITDA met or exceeded our plan. This is a testament to the focus we have employed and the investments we have made over the past year within our sales and product teams, and the diverse sales pipeline we are building. I want to thank everyone at OSS for their continued hard work during the quarter.”

 

“As we look to the remainder of 2024, we are excited by the long-term strategies we are pursuing to scale our business and drive profitable growth. Our OSS segment ended the first quarter with a book-to-bill ratio of 1.1 and we anticipate positive order trends will continue throughout the remainder of the year as our growing pipeline successfully converts to orders. In addition, we continue to focus on improving working capital efficiencies. Our efforts in the quarter generated $2.0 million of operating cash flow, increasing net cash and short-term investments by over $1 million from December 31, 2023. While certain market challenges in the short term may impact our second quarter results, we are focused on successfully returning to year-over-year revenue growth in the second half of 2024 and positive consolidated EBITDA in the coming quarters,” concluded Mr. Knowles.

 

First Quarter Operating and Customer Momentum

 

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2024 First Quarter Financial Summary

Consolidated revenue was $12.7 million, a 24.6% decline from the prior year period. The year-over-year reduction in revenue was primarily a result of quarterly order fluctuations from a large defense customer and approximately $1.5 million related to a former media customer. Lower first-quarter revenue was partially offset by approximately $1.9 million in incremental revenue to an existing aerospace customer, and $0.6 million in additional revenue to an existing autonomous truck customer. Bressner segment revenue was $7.1 million, a 12.7% decline from the prior year period, primarily due to the expected discontinuance of and delays in certain programs.

 

The following table sets forth net revenue by product category for the three months ended March 31, 2024, and March 31, 2023, by segment:

 

	Three Months Ended
Entity:	March 31, 2024	% of Net Revenue	March 31, 2023	% of Net Revenue	% Change
OSS	$5,533,872	43.7%	$8,630,586	51.4%	-35.9%
Bressner	7,117,914	56.3%	8,151,308	48.6%	-12.7%
Total net revenue	$12,651,786	100.0%	$16,781,894	100.0%	-24.6%

 

Gross margin percentage was 29.4%, as compared to 30.2% in the same year-ago quarter. OSS segment gross margin was 34.2%, a reduction of 2.1 percentage points from the same period a year ago, primarily due to a less profitable mix of revenue. Bressner gross margin improved 1.9 percentage points to 25.7%, primarily due to a more favorable mix of revenue.

 

Total operating expenses decreased 5.4% to $5.0 million. This decrease was predominantly attributable to the elimination of costs associated with organizational restructuring and outside professional services, as well as reduced R&D expenses, partially offset by higher marketing and selling expenses during the quarter.

 

OSS reported a net loss of $1.3 million, or $0.06 per share, as compared to a net loss of $401,000, or $0.02 per share in the prior year. The Company reported a non-GAAP net loss of $931,000, or $0.04 per share, compared to non-GAAP net income of $90,000, or $0.00 per diluted share.

 

Adjusted EBITDA, a non-GAAP metric, was a loss of $456,000, a decrease from adjusted EBITDA of $633,000 in the prior year first quarter.

 

As of March 31, 2024, OSS reported cash and short-term investments of $12.9 million, and total working capital of $34.3 million, compared to cash and short-term investments of $11.8 million, and total working capital of $35.6 million at December 31, 2023.

 

Outlook

The Company anticipates revenue of approximately $13.0 million in the second quarter of 2024. The Company’s revenue guidance for the second quarter of 2024 includes expected program delays from certain defense customers as a result of the prolonged U.S. government budgeting process and continuing resolution for fiscal year 2024, and softer European customer demand over the near-term.

 

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While the Company expects revenue in the second quarter will be down on a year-over-year basis, management anticipates sequential revenue growth throughout the year. This will be supported by a continued positive book-to-bill ratio, as OSS executes on converting its growing opportunity pipeline. In addition, European demand is expected to improve in the second half of 2024, and higher bookings in the Company’s core OSS business is expected to support year-over-year revenue growth and positive consolidated EBITDA in the coming quarters.

 

Conference Call

OSS will hold a conference call to discuss its results for the first quarter of 2024 followed by a question-and-answer period.

 

Date: Thursday, May 9, 2024

Time: 5:00 p.m. ET (2:00 p.m. PT)

Toll-free dial-in: 800-901-2707

International dial-in: 785-424-1629

Conference ID: ONESTOP (required for entry)
Webcast: https://viavid.webcasts.com/starthere.jsp?ei=1667836&tp_key=45b15714d0

 

A replay of the call will be available after 8:00 p.m. ET on May 9, 2024, through May 23, 2024.

 

Toll-free replay: 844-512-2921

International replay: 412-317-6671

Passcode: 11155784

 

About One Stop Systems

One Stop Systems, Inc. (Nasdaq: OSS) is a leader in AI enabled solutions for the demanding ‘edge’. OSS designs and manufactures Enterprise Class compute and storage products that enable rugged AI, sensor fusion and autonomous capabilities without compromise. These hardware and software platforms bring the latest data center performance to harsh and challenging applications, whether they are on land, sea or in the air.

 

OSS products include ruggedized servers, compute accelerators, flash storage arrays, and storage acceleration software. These specialized compact products are used across multiple industries and applications, including autonomous trucking and farming, as well as aircraft, drones, ships and vehicles within the defense industry.

 

OSS solutions address the entire AI workflow, from high-speed data acquisition to deep learning, training and large-scale inference, and have delivered many industry firsts for industrial OEM and government customers.

 

As the fastest growing segment of the multi-billion-dollar edge computing market, AI enabled solutions require—and OSS delivers—the highest level of performance in the most challenging environments without compromise.

 

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OSS products are available directly or through global distributors. For more information, go to www.onestopsystems.com. You can also follow OSS on X, YouTube, and LinkedIn.
 

Non-GAAP Financial Measures

We believe that the use of adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, is helpful for an investor to assess the performance of the Company. The Company defines adjusted EBITDA as income (loss) before interest, taxes, depreciation, amortization, acquisition expenses, impairment of long-lived assets, financing costs, fair value adjustments from purchase accounting, stock-based compensation expense and expenses related to discontinued operations.

Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States, or GAAP. Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company’s non-cash operating expenses, we believe that providing a non-GAAP financial measure that excludes non-cash and non-recurring expenses allows for meaningful comparisons between our core business operating results and those of other companies, as well as providing us with an important tool for financial and operational decision making and for evaluating our own core business operating results over different periods of time.

Our adjusted EBITDA measure may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. Our adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to operating income or as an indication of operating performance or any other measure of performance derived in accordance with GAAP. We do not consider adjusted EBITDA to be a substitute for, or superior to, the information provided by GAAP financial results.

 

	For the Three Months Ended March 31,
	2024				2023
Net loss	$	(1,339,622	)		$	(400,512	)
Depreciation		289,547				256,465
Amortization of right-of-use assets		100,138				118,530
Stock-based compensation expense		408,740				474,209
Interest expense		35,342				32,705
Interest income		(141,725	)			(110,266	)
Provision for income taxes		191,269				261,502
Adjusted EBITDA	$	(456,311	)		$	632,633

Adjusted EPS excludes the impact of certain items, and therefore, has not been calculated in accordance with GAAP. We believe that exclusion of certain selected items assists in providing a more complete understanding of our underlying results and trends and allows for comparability with our peer company index and industry. We use this measure along with the corresponding GAAP financial measures to manage our business and to evaluate our performance compared to prior periods and the marketplace. The Company defines non-GAAP income (loss) as income or (loss) before amortization, stock-based compensation, expenses related to discontinued operations, impairment of long-lived assets and non-recurring acquisition costs. Adjusted EPS expresses adjusted income (loss) on a per share basis using weighted average diluted shares outstanding.

Adjusted EPS is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. These non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenses similar to the adjusted income from continuing operations and adjusted EPS financial adjustments

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described above, and investors should not infer from our presentation of these non-GAAP financial measures that these costs are unusual, infrequent or non-recurring.

The following table reconciles non-GAAP net income and basic and diluted earnings per share:

 

		For the Three Months Ended March 31,
		2024				2023
Net loss		$	(1,339,622	)		$	(400,512	)
Amortization of intangibles			-				15,808
Stock-based compensation expense			408,740				474,209
Non-GAAP net (loss) income		$	(930,882	)		$	89,505
Non-GAAP net (loss) income per share:
Basic		$	(0.04	)		$	0.00
Diluted		$	(0.04	)		$	0.00
Weighted average common shares outstanding:
Basic			20,709,234				20,251,509
Diluted			20,709,234				20,380,383

 

Forward-Looking Statements

One Stop Systems cautions you that statements in this press release that are not a description of historical facts are forward-looking statements. These statements are based on the company's current beliefs and expectations. The inclusion of forward-looking statements should not be regarded as a representation by One Stop Systems or its partners that any of our plans or expectations will be achieved. Actual results may differ from those set forth in this press release due to the risk and uncertainties inherent in our business, including risks described in our prior press releases and in our filings with the Securities and Exchange Commission (SEC), including under the heading "Risk Factors" in our latest Annual Report on Form 10-K and any subsequent filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the company undertakes no obligation to revise or update this press release to reflect events or circumstances after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
 

Media Contacts:
Katie Rivera
One Stop Systems, Inc.
Tel (760) 745-9883

Email contact

 

Investor Relations:

Andrew Berger

Managing Director

SM Berger & Company, Inc.

Tel (216) 464-6400

Email contact

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ONE STOP SYSTEMS, INC. (OSS)

CONSOLIDATED BALANCE SHEETS

 

		Unaudited				Audited
		March 31,				December 31,
		2024				2023
ASSETS
Current assets
Cash and cash equivalents		$	6,904,102			$	4,048,948
Short-term investments (Note 3)			5,955,248				7,771,820
Accounts receivable, net (Note 4)			7,406,766				8,318,247
Inventories, net (Note 5)			21,483,812				21,694,748
Prepaid expenses and other current assets			832,049				611,066
Total current assets			42,581,977				42,444,829
Property and equipment, net			2,245,647				2,370,224
Operating lease right-of use assets			1,817,582				1,922,784
Deposits and other			38,093				38,093
Deferred tax asset, net			140,848				-
Goodwill			1,489,722				1,489,722
Total Assets		$	48,313,869			$	48,265,652
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	2,671,483			$	1,201,781
Accrued expenses and other liabilities (Note 6)			3,807,045				3,202,519
Current portion of operating lease obligation (Note 9)			413,679				390,926
Current portion of notes payable (Note 7)			1,357,201				2,077,895
Total current liabilities			8,249,408				6,873,121
Deferred tax liability, net			-				44,673
Operating lease obligation, net of current portion (Note 9)			1,693,542				1,765,536
Total liabilities			9,942,950				8,683,330
Commitments and contingencies (Note 9)
Stockholders’ equity
Common stock, $0.0001 par value; 50,000,000 shares authorized;    20,873,070 and 20,661,341 shares issued and outstanding, respectively			2,087				2,066
Additional paid-in capital			47,613,366				47,323,673
Accumulated other comprehensive income			513,815				675,310
Accumulated deficit			(9,758,349	)			(8,418,727	)
Total stockholders’ equity			38,370,919				39,582,322
Total Liabilities and Stockholders' Equity		$	48,313,869			$	48,265,652

 

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ONE STOP SYSTEMS, INC. (OSS)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 

		For the Three Months Ended March 31,
		2024				2023
Revenue:
Product		$	12,287,046			$	16,388,684
Customer funded development			364,740				393,210
			12,651,786				16,781,894
Cost of revenue:
Product			8,818,756				11,416,539
Customer funded development			109,737				294,593
			8,928,493				11,711,132
Gross profit			3,723,293				5,070,762
Operating expenses:
General and administrative			2,094,317				2,285,101
Marketing and selling			1,920,113				1,786,681
Research and development			970,877				1,195,328
Total operating expenses			4,985,307				5,267,110
Loss from operations			(1,262,014	)			(196,348	)
Other income (expense), net:
Interest income			141,725				110,266
Interest expense			(35,342	)			(32,705	)
Other Income (expense), net			7,278				(20,223	)
Total other income, net			113,661				57,338
Loss before income taxes			(1,148,353	)			(139,010	)
Provision for income taxes			191,269				261,502
Net loss		$	(1,339,622	)		$	(400,512	)
Net loss per share:
Basic		$	(0.06	)		$	(0.02	)
Diluted		$	(0.06	)		$	(0.02	)
Weighted average common shares outstanding:
Basic			20,709,234				20,251,509
Diluted			20,709,234				20,251,509

 

 

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ONE STOP SYSTEMS, INC. (OSS)

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the Three Months Ended March 31,
		2024				2023
Cash flows from operating activities:
Net loss		$	(1,339,622	)		$	(400,512	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income taxes			(188,674	)			-
Disposal (Gain) on disposal of property and equipment			354				(43,243	)
Provision for bad debt			-				30,000
Warranty reserves			(15,000	)			591
Amortization of intangibles			-				15,808
Depreciation			289,547				256,465
Amortization of right-of-use assets			100,138				118,530
Inventory reserves			94,063				173,970
Stock-based compensation expense			408,740				474,209
Changes in operating assets and liabilities:
Accounts receivable			842,057				1,628,801
Inventories			(66,013	)			(2,909,978	)
Prepaid expenses and other current assets			(224,116	)			(938,797	)
Accounts payable			1,486,003				1,097,691
Accrued expenses and other liabilities			700,042				658,543
Operating lease liabilities			(44,141	)			(138,115	)
Net cash provided by operating activities			2,043,378				23,963
Cash flows from investing activities:
Redemption of short-term investment grade securities			1,811,364				918,609
Purchases of property and equipment, including capitalization of    labor costs for test equipment and ERP			(167,168	)			(85,085	)
Net cash provided by investing activities			1,644,196				833,524
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants			127,350				-
Payment of payroll taxes on net issuance of employee stock options			(246,376	)			(326,534	)
Proceed on borrowing of notes payable			-				-
Repayments on notes payable			(680,948	)			(199,399	)
Net cash (used in) financing activities			(799,974	)			(525,933	)
Net change in cash and cash equivalents			2,887,600				331,554
Effect of exchange rates on cash			(32,446	)			26,310
Cash and cash equivalents, beginning of period			4,048,948				3,112,196
Cash and cash equivalents, end of period		$	6,904,102			$	3,470,060

 

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v3.24.1.u1

Document And Entity Information	May 09, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	May 09, 2024
Entity Registrant Name	One Stop Systems, Inc.
Entity Central Index Key	0001394056
Entity Emerging Growth Company	false
Entity File Number	001-38371
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	33-0885351
Entity Address, Address Line One	2235 Enterprise Street #110
Entity Address, City or Town	Escondido
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92029
City Area Code	760
Local Phone Number	745-9883
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.0001 par value per share
Trading Symbol	OSS
Security Exchange Name	NONE

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