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What changed in ONE STOP SYSTEMS, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of ONE STOP SYSTEMS, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+335 added−400 removedSource: 10-K (2026-03-18) vs 10-K (2025-03-19)

Top changes in ONE STOP SYSTEMS, INC.'s 2025 10-K

335 paragraphs added · 400 removed · 244 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

168 edited+26 added−68 removed332 unchanged
Biggest changeAny of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations. We may be adversely affected by the effects of inflation.
Biggest changeIf we are unable to obtain financing on acceptable terms, or if access to our cash or liquidity resources is restricted, our ability to fund operations, meet financial obligations, or execute our business strategy could be adversely affected. Any of these developments could have a material adverse effect on our liquidity, business operations, financial condition, and results of operations.
To this end, we have built a five year pipeline in excess of one billion dollars. Although we are seeing progress, it will continue to take time to pursue, secure, and turn these target opportunities into increased revenue and profits, especially as we secure platform and incumbent positions in the military market.
To this end, we have built a five year pipeline of target opportunities in excess of one billion dollars. Although we are seeing progress, it will continue to take time to pursue, secure, and turn these target opportunities into increased revenue and profits, especially as we secure platform and incumbent positions in the military market.
Rugged Edge Servers While simple AI applications, such as facial recognition to open a door to a secure area, may run on traditional low power embedded processor, the needs of edge computing applications require datacenter-class server performance brought to a mobile platform.
Rugged Edge Servers While simple AI applications, such as facial recognition to open a door to a secure area, may run on a traditional low power embedded processor, the needs of edge computing applications require datacenter-class server performance brought to a mobile platform.
Our strategy is to be the disruptive leader in the platforms for rugged edge applications, based on our unique ability to design high-quality, high-performance AI workflow compute/storage engines that can be deployed in harsh dynamic environments, which require unique system level features for vibration, cooling, and power.
Our strategy is to be the disruptive leader in platforms for rugged edge applications, based on our unique ability to design high-quality, high-performance AI workflow compute/storage engines that can be deployed in harsh dynamic environments, which require unique system-level features for vibration, cooling, and power.
Our channel partners and other end-customers in the future may seek indemnification from us in connection with infringement claims brought against them regarding our products. These claims, regardless of their merits or outcome, would likely be time consuming expensive to resolve, and could divert management’s time and attention from managing our business.
Our channel partners and other end-customers in the future may seek indemnification from us in connection with infringement claims brought against them regarding our products. These claims, regardless of their merits or outcome, would likely be time consuming and expensive to resolve, and could divert management’s time and attention from managing our business.
For as long as we continue to be a smaller reporting company, we may choose to take advantage of certain exemptions from various reporting requirements or scaled disclosure requirements applicable to other public companies but not to smaller reporting companies, which includes, among other things: • being permitted to have only two years of audited financial statements and only two years of management discussion and analysis of financial condition and results of operations disclosure; • an exemption from the auditor attestation requirements under Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); • not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation; • reduced disclosure obligations regarding executive compensation, amongst other things, in our periodic reports and proxy statements; and • exemption from the requirements of holding non-binding stockholder votes on executive compensation arrangements and stockholder approval of any golden parachute payments not previously approved.
For as long as we continue to be a smaller reporting company, we may choose to take advantage of certain exemptions from various reporting requirements or scaled disclosure requirements applicable to other public companies but not to smaller reporting companies, which includes, among other things: • being permitted to have only two years of audited financial statements and only two years of management discussion and analysis of financial condition and results of operations disclosure; • an exemption from the auditor attestation requirements under Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); 41 • not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation; • reduced disclosure obligations regarding executive compensation, amongst other things, in our periodic reports and proxy statements; and • exemption from the requirements of holding non-binding stockholder votes on executive compensation arrangements and stockholder approval of any golden parachute payments not previously approved.
Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. • The price of our common stock may be volatile, and the price could decline if securities or industry analysts issue an adverse opinion regarding our stock or do not publish research or reports about our company or if there are substantial future sales of shares of our common stock, amongst other things. 25 • Our directors and principal stockholders own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval. • Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of the Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management and limit the market price of our common stock. • Our inability to raise additional capital on acceptable terms in the future may limit our ability to develop and commercialize new solutions and technologies and expand our operations.
Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. • The price of our common stock may be volatile, and the price could decline if securities or industry analysts issue an adverse opinion regarding our stock or do not publish research or reports about our company or if there are substantial future sales of shares of our common stock, amongst other things. • Our directors and principal stockholders own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval. • Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of the Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management and limit the market price of our common stock. • Our inability to raise additional capital on acceptable terms in the future may limit our ability to develop and commercialize new solutions and technologies and expand our operations.
Some of these provisions: • authorize our board of directors to issue, without further action by the stockholders, up to 10,000,000 shares of undesignated preferred stock and up to 50,000,000 shares of authorized common stock; • require that any action to be taken by our stockholders be affected at a duly called annual or special meeting, and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairman of the board of directors, the chief executive officer or the president; 42 • establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors; • provide that our directors may be removed only for cause; and • provide that vacancies on our board of directors may, except as otherwise required by law, be filled only by a majority of directors then in office, even if less than a quorum.
Some of these provisions: • authorize our board of directors to issue, without further action by the stockholders, up to 10,000,000 shares of undesignated preferred stock and up to 50,000,000 shares of authorized common stock; • require that any action to be taken by our stockholders be affected at a duly called annual or special meeting, and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairman of the board of directors, the chief executive officer or the president; • establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors; • provide that our directors may be removed only for cause; and • provide that vacancies on our board of directors may, except as otherwise required by law, be filled only by a majority of directors then in office, even if less than a quorum.
Factors that could cause fluctuations in the trading price of our common stock include, amongst other things: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or particularly, those companies in our industry; • sales of shares of our common stock or other securities by us or our stockholders; • failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow the Company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; 40 • announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any major change in our management; • general economic conditions and slow or negative growth of our markets; and • other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
Factors that could cause fluctuations in the trading price of our common stock include, amongst other things: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or particularly, those companies in our industry; • sales of shares of our common stock or other securities by us or our stockholders; • failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow the Company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; 38 • changes in accounting standards, policies, guidelines, interpretations or principles; • any major change in our management; • general economic conditions and slow or negative growth of our markets; and • other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
What Sets OSS Apart Several factors differentiate OSS from other suppliers of high-performance edge computing solutions, including, without limitation, the following: • Ruggedized SwaP-C – We provide systems that can support datacenter performance at the rugged edge by implementing unique form factors optimizing space and weight, variable power inputs sources and cost competitive solutions across a wide range of applications, including full mil-spec systems. • Lowest Latency – We have expertise in PCIe and NVLink® switch fabrics that deliver the lowest possible latency.
What Sets OSS Apart We believe several factors differentiate OSS from other suppliers of high-performance edge computing solutions, including, without limitation, the following: • Ruggedized SwaP-C – We provide systems that can support datacenter performance at the rugged edge by implementing unique form factors optimizing space and weight, variable power inputs sources, and cost competitive solutions across a wide range of applications, including full mil-spec systems. • Lowest Latency – We have expertise in PCIe and NVLink® switch fabrics that deliver the lowest possible latency.
The continuing commoditization of HPC hardware, such as processors, interconnects, flash storage and other infrastructure, and the growing commoditization of software, including plentiful building blocks and more capable open source software, as well as the potential for integration of differentiated technology into already-commoditized components, has resulted in, and may result in increased pricing pressure that may cause us to reduce our pricing in order to remain competitive, which can negatively impact our gross margins and adversely affect our operating results.
The continuing commoditization of HPC hardware, such as processors, interconnects, flash storage and other infrastructure, and the growing commoditization of software, including plentiful building blocks and more capable 34 open source software, as well as the potential for integration of differentiated technology into already-commoditized components, has resulted in, and may result in increased pricing pressure that may cause us to reduce our pricing in order to remain competitive, which can negatively impact our gross margins and adversely affect our operating results.
The OSS direct sales teams interface directly with new potential customers at their facilities, live events, and virtual industry tradeshows, and present standard solutions and/or proposals for customized solutions to address such customers’ datacenter class, rugged AI needs at the edge. 17 • Our Commercial Sales Team – Our commercial sales team focuses on OEM customers to whom we sell standard products and solutions or design and build customer specified systems based on OSS technology expertise that are branded with OSS or the OEM’s name and label.
The OSS direct sales teams interface directly with new potential customers at their facilities, live events, and virtual industry tradeshows, and present standard solutions and/or proposals for customized solutions to address such customers’ datacenter class, rugged AI needs at the edge. • Our Commercial Sales Team – Our commercial sales team focuses on OEM customers to whom we sell standard products and solutions or design and build customer specified systems based on OSS technology expertise that are branded with OSS or the OEM’s name and label.
If our products contain significant defects, we could incur significant expenses to remediate such defects, our reputation could be damaged, and we could lose market share. • If we fail to achieve design wins for our products, our business will be harmed. • Business disruptions could harm our business, lead to a decline in revenues and increase our costs. • If we cannot retain, attract, and motivate key personnel, we may be unable to effectively implement our business plan. • Any future acquisitions could require significant management attention, disrupt our business, result in dilution to our stockholders, deplete our cash reserves, and adversely affect our financial results. • The continuing commoditization of HPC hardware and software has resulted in increased pricing pressure. • If we are unable to protect our proprietary design and intellectual property rights and/or the confidentiality of our trade secrets, our competitive position could be harmed, or we could be required to incur significant expenses to enforce our rights. • Many of our proprietary designs are in digital form and the breach of our computer systems could result in these designs being stolen. • Our proprietary designs are susceptible to reverse engineering by our competitors. • Claims by others that we, our channel partners or our end-customers infringe their intellectual property or trade secret rights could harm our business, including as a result of our contractual indemnification obligations to certain channel partners and end customers. • Privacy concerns relating to our products and services could damage our reputation, deter current and potential users from using our products and services, result in liability, or result in legal or regulatory proceedings. • Our international operations, and in particular Bressner's operations in Germany, subject us to a variety of risks and challenges. • New regulations or standards or changes in existing regulations or standards, in the United States or internationally related to our suppliers’ products may result in unanticipated costs or liabilities, and could place additional burdens on the operations of our business. • We could be adversely affected by violations of the U.S.
If our products contain significant defects, we could incur significant expenses to remediate such defects, our reputation could be damaged, and we could lose market share. • If we fail to achieve design wins for our products, our business will be harmed. • Business disruptions could harm our business, lead to a decline in revenues and increase our costs. • If we cannot retain, attract, and motivate key personnel, we may be unable to effectively implement our business plan. • Any future acquisitions could require significant management attention, disrupt our business, result in dilution to our stockholders, deplete our cash reserves, and adversely affect our financial results. • The continuing commoditization of HPC hardware and software has resulted in increased pricing pressure. • If we are unable to protect our proprietary design and intellectual property rights and/or the confidentiality of our trade secrets, our competitive position could be harmed, or we could be required to incur significant expenses to enforce our rights. • Many of our proprietary designs are in digital form and the breach of our computer systems could result in these designs being stolen. • Our proprietary designs are susceptible to reverse engineering by our competitors. • Claims by others that we, our channel partners or our end-customers infringe their intellectual property or trade secret rights could harm our business, including as a result of our contractual indemnification obligations to certain channel partners and end customers. • Privacy concerns relating to our products and services could damage our reputation, deter current and potential users from using our products and services, result in liability, or result in legal or regulatory proceedings. • Our international operations subject us to a variety of risks and challenges. • New regulations or standards or changes in existing regulations or standards, in the United States or internationally related to our suppliers’ products may result in unanticipated costs or liabilities, and could place additional burdens on the operations of our business. • We could be adversely affected by violations of the U.S.
The CPRA, among other things, gives California residents the ability to limit use of certain sensitive personal information, further restricts the use of cross-contextual advertising, establishes restrictions on the retention of personal information, expands the types of data breaches subject to the CCPA’s private right of action, provides for increased penalties for CPRA violations concerning California residents under the age of 16, and establishes a new California Privacy Protection Agency to implement and enforce the new law.
The CPRA, among other things, gives California residents the ability to limit use of 36 certain sensitive personal information, further restricts the use of cross-contextual advertising, establishes restrictions on the retention of personal information, expands the types of data breaches subject to the CCPA’s private right of action, provides for increased penalties for CPRA violations concerning California residents under the age of 16, and establishes a new California Privacy Protection Agency to implement and enforce the new law.
New entrants seeking to gain market share by introducing new technology, new products and new server configurations may make it more difficult for us to sell our products and earn design wins, which could create 29 increased pricing pressure, reduced profit margins, increased sales and marketing expenses, or the loss of market share or expected market share, any of which may significantly harm our business, operating results and financial condition.
New entrants seeking to gain market share by introducing new technology, new products and new server configurations may make it more difficult for us to sell our products and earn design wins, which could create increased pricing pressure, reduced profit margins, increased sales and marketing expenses, or the loss of market share or expected market share, any of which may significantly harm our business, operating results and financial condition.
These typically include compute and storage racks in environmentally controlled buildings, similar to large cloud datacenters. Suppliers in this space tend to be the same large server and storage manufacturers whose products are used at cloud datacenters. The second segment includes billions of Internet-of-Things (“IOT”) devices that may reside in everything from home appliances to the factory production floor.
These typically include compute and storage racks in environmentally controlled buildings, similar to large cloud datacenters. Suppliers in this space tend to be the same large server and storage manufacturers whose products are used at cloud datacenters. The second segment includes billions of Internet-of-Things (“IOT”) devices that may reside in everything from home appliances to the factory 4 production floor.
We have also established good relationships with prime contractors and governmental agencies (Raytheon, Sierra Nevada, Lockheed, Boeing, NASA, GVSC, L3Harris, and others), which can be important influencers or decision makers on technology selection. Competitors in this space include companies such as Mercury, Crystal, Curtiss Wright, Kontron, Trenton, Core Systems and Systel.
We believe we have also established good relationships with prime contractors and governmental agencies (Raytheon, Sierra Nevada, Lockheed, Boeing, NASA, GVSC, L3Harris, and others), which can be important influencers or decision makers on technology selection. Competitors in this space include companies such as Mercury, Crystal, Curtiss Wright, Kontron, Trenton, Core Systems and Systel.
To the extent we incur costs in excess of funds 31 obligated on a contract or in advance of a contract award or contract definitization, we are at risk of not being reimbursed for those costs unless and until additional funds are obligated under the contract or the contract is successfully awarded, definitized and funded, which could adversely affect our results of operations, financial condition and cash flows.
To the extent we incur costs in excess of funds obligated on a contract or in advance of a contract award or contract definitization, we are at risk of not being reimbursed for those costs unless and until additional funds are obligated under the contract or the contract is successfully awarded, definitized and funded, which could adversely affect our results of operations, financial condition and cash flows.
Our systems optimize switch and GPU configuration topologies to optimize GPU-to-GPU communication without requiring latency-inducing data transfer between host dual processors. Our platforms feature RDMA (remote direct memory access) across compute-nodes, which support data transfer without burdening the host CPU, as well as NVMe over Fabrics for efficient data transfer from remote storage to compute.
Our systems optimize switch and GPU configuration topologies to optimize GPU-to-GPU communication without requiring latency-inducing data transfer between host dual processors. Our 12 platforms feature RDMA (remote direct memory access) across compute-nodes, which support data transfer without burdening the host CPU, as well as NVMe over Fabrics for efficient data transfer from remote storage to compute.
It is difficult to predict the development of the demand for high-performance computing, supercomputers, and related hardware solutions, the size and growth rate for this market, the entry of competitive products, or the success of existing competitive products. Any expansion in our market depends on several factors, including the demand, cost, performance, and perceived value associated with our products.
It is difficult to predict the development of the demand for high-performance computing, supercomputers, and related hardware solutions, the size and growth rate for this market, the entry of competitive 25 products, or the success of existing competitive products. Any expansion in our market depends on several factors, including the demand, cost, performance, and perceived value associated with our products.
Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Claims by others that we infringe their intellectual property or trade secret rights could harm our business.
Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. 35 Claims by others that we infringe their intellectual property or trade secret rights could harm our business.
The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our certificate of incorporation to be inapplicable or unenforceable in such action.
The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action 40 brought against us, a court could find the choice of forum provisions contained in our certificate of incorporation to be inapplicable or unenforceable in such action.
While NVIDIA is focused on the deployment of their GPUs in hyperscale datacenters and for consumer gaming purposes, we are focused on taking the datacenter class capability to the edge compute market, expanding the overall market significantly. Many of these applications also scale performance, based on the number of GPU components utilized.
While we believe NVIDIA is focused on the deployment of their GPUs in hyperscale datacenters and for consumer gaming purposes, we are focused on taking the datacenter class capability to the edge compute market, expanding the overall market significantly. Many of these applications also scale performance, based on the number of GPU components utilized.
The European Union Parliament recently adopted the EU AI Act, which introduces regulations and restrictions around the use of AI technologies. Additionally, Colorado has passed a bill introducing certain regulations around the use of AI. These and other regulatory or legislative actions related to the development and deployment of AI technologies could impact our business and our growth prospects.
The European Union Parliament adopted the EU AI Act, which introduces regulations and restrictions around the use of AI technologies. Additionally, Colorado has passed a bill introducing certain regulations around the use of AI. These and other regulatory or legislative actions related to the development and deployment of AI technologies could impact our business and our growth prospects.
As the 6 demand for AI on the edge and autonomous vehicles grew, so did the need for high-performance solutions to operate in harsh environments and reduce risk of loss of connectivity to the cloud. Edge computing is one of the fastest growing markets in the computing space, driven by the need to do more at the edge.
As the demand for AI on the edge and autonomous vehicles grew, so did the need for high-performance solutions to operate in harsh environments and reduce risk of loss of connectivity to the cloud. Edge computing is one of the fastest growing markets in the computing space, driven by the need to do more at the edge.
The more GPUs and flash devices available to a server, the faster that system can process and store data. 7 The capabilities and speed of GPU accelerated computers are driving significant advances in AI and machine learning. Massive amounts of data are collected, stored, and analyzed by today’s sophisticated algorithms.
The more GPUs and flash devices available to a server, the faster that system can process and store data. The capabilities and speed of GPU accelerated computers are driving significant advances in AI and machine learning. Massive amounts of data are collected, stored, and analyzed by today’s sophisticated algorithms.
Our expertise in high-speed signal design in printed circuit boards, connectors, and cables is essential to successful expansion designs. We also hold expertise in incorporating clustering and rack scale expansion into our system designs, including 200/400 gigabit Ethernet, 200/400 gigabit InfiniBand, and emerging PCIe top-of-rack switch technology.
Our expertise in high-speed signal design in printed circuit boards, connectors, and cables is essential to successful expansion designs. We also hold expertise in incorporating clustering and rack scale expansion into our system designs, including 200/400/800 gigabit Ethernet, 200/400 gigabit InfiniBand, and emerging PCIe top-of-rack switch technology.
A product recall, including a recall due to a bug in our products, or a significant number of product returns could be expensive, damage our reputation, harm our ability to attract new customers or maintain our current customers, result in the shifting of business to our competitors and/or result in litigation against us, such as product liability suits.
A 32 product recall, including a recall due to a bug in our products, or a significant number of product returns could be expensive, damage our reputation, harm our ability to attract new customers or maintain our current customers, result in the shifting of business to our competitors and/or result in litigation against us, such as product liability suits.
These IOT devices and applications tend not to be challenged on performance and easily communicate up to the cloud or the datacenters on the edge. OSS does not focus on either of the foregoing segments. 4 The third segment is focused on edge platforms generally on the move or located in challenging environmental conditions.
These IOT devices and applications tend not to be challenged on performance and easily communicate up to the cloud or the datacenters on the edge. OSS does not focus on either of the foregoing segments. The third segment is focused on edge platforms generally on the move or located in challenging environmental conditions.
GPU Compute Acceleration When GPU technology and solid-state flash were first introduced, we began designing systems that maximize the effectiveness of these technologies. We now produce compute-systems with large numbers of GPUs and flash memory that communicate over PCIe and allow faster processing, data storage, and data retrieval.
GPU Compute Acceleration 7 When GPU technology and solid-state flash were first introduced, we began designing systems that maximize the effectiveness of these technologies. We now produce compute-systems with large numbers of GPUs and flash memory that communicate over PCIe and allow faster processing, data storage, and data retrieval.
We believe we are one of the leading designers and suppliers of PCIe host bus adapters that extend PCIe signals from the host motherboard across copper or optical cables to expansion enclosures, which provide application acceleration through scale. Our adapters provide both ends of the external cable 12 connection.
We believe we are one of the leading designers and suppliers of PCIe host bus adapters that extend PCIe signals from the host motherboard across copper or optical cables to expansion enclosures, which provide application acceleration through scale. Our adapters provide both ends of the external cable connection.
Upon receipt, the customer has a unique product that performs all the functions and has the physical dimensions that match their specifications. • Engineering Project Builds – We support the product development process by building models and prototypes of products. Developed by our engineering group, the prototypes can be of standard or custom products.
Upon receipt, the customer has a unique product that performs all the functions and has the physical dimensions that match their specifications. • Engineering Project Builds – We support the product development process by building models and prototypes of products. Developed by our engineering group, these prototypes can be of standard or custom products.
We believe that our operations are in compliance with all material applicable laws and regulations and that we hold all necessary permits to operate our business in each jurisdiction in which our facilities are located. Our 23 worldwide business activities are subject to various laws, rules, and regulations of the United States as well as of foreign governments.
We believe that our operations are in compliance with all material applicable laws and regulations and that we hold all necessary permits to operate our business in each jurisdiction in which our facilities are located. Our worldwide business activities are subject to various laws, rules, and regulations of the United States as well as of foreign governments.
In particular, revisions to laws or regulations or their interpretation and enforcement could result in increased taxation, trade sanctions, the imposition of import duties or tariffs, restrictions and controls on imports or exports, or other retaliatory actions, which could have an adverse effect on our business plans.
In particular, revisions to laws or regulations or their interpretation and enforcement could result in increased taxation, trade sanctions, the imposition of additional import duties or tariffs, restrictions and controls on imports or exports, or other retaliatory actions, which could have an adverse effect on our business plans.
While we consider our design specifications to be protected by various proprietary, trade secret and intellectual property laws, such information is susceptible to reverse engineering by our competitors. We may not be able to prevent our 37 competitors from developing competing design specifications and the cost of enforcing these rights may be significant.
While we consider our design specifications to be protected by various proprietary, trade secret and intellectual property laws, such information is susceptible to reverse engineering by our competitors. We may not be able to prevent our competitors from developing competing design specifications and the cost of enforcing these rights may be significant.
We build these products with the intent of shipping in volume later. 21 We are dedicated to quality and customer satisfaction. Our continuous improvement efforts require us to review products, services, and processes with the idea that minor changes can lead to greater outcomes for our customers.
We build these products with the intent of shipping in volume later. We are dedicated to quality and customer satisfaction. Our continuous improvement efforts require us to review products, services, and processes with the idea that minor changes can lead to greater outcomes for our customers.
The failure of their products to comply, or delays in compliance, with the existing and evolving industry regulations and standards could prevent or delay introduction of our products, which could harm our business. Supplier uncertainty regarding future policies may also affect demand for HPC products, including our products.
The failure of their products to comply, or delays in compliance, with the 37 existing and evolving industry regulations and standards could prevent or delay introduction of our products, which could harm our business. Supplier uncertainty regarding future policies may also affect demand for HPC products, including our products.
If securities or industry analysts issue an adverse opinion regarding our securities or do not publish research or reports about our Company, our stock price and trading volume could decline. 41 The trading market for our common stock will depend in part on the research and reports that equity research analysts publish about us and our business.
If securities or industry analysts issue an adverse opinion regarding our securities or do not publish research or reports about our Company, our stock price and trading volume could decline. The trading market for our common stock will depend in part on the research and reports that equity research analysts publish about us and our business.
Instead, we plan to retain any earnings to establish, maintain and expand our operations and 43 product offerings. In addition, any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our stock.
Instead, we plan to retain any earnings to establish, maintain and expand our operations and product offerings. In addition, any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our stock.
We have consistently been among a small handful of companies able to come to market first with the latest technology. In fact, we delivered the industry’s first PCIe over cable solutions for PCIe Gen 1.0, Gen 2.0, Gen 3.0, Gen 4.0, and Gen 5.0.
We have consistently been among a small handful of companies able to come to market first with the latest technology. In fact, we delivered the industry’s first PCIe over cable solutions for PCIe Gen 1.0, Gen 2.0, Gen 3.0, Gen 4.0, Gen 5.0, and Gen 6.0.
In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company. ITEM 1 A. RISK FACTORS Investing in our common stock involves a high degree of risk.
In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company. 21 ITEM 1 A. RISK FACTORS Investing in our common stock involves a high degree of risk.
Changes in our products or changes in applicable export or import laws and regulations may also create delays in the introduction and sale of our products in international markets, prevent our end-customers with international operations from deploying our products or, in some cases, prevent the export or import of our products to certain countries, 39 governments or persons altogether.
Changes in our products or changes in applicable export or import laws and regulations may also create delays in the introduction and sale of our products in international markets, prevent our end-customers with international operations from deploying our products or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether.
The computer hardware and technology fields are well established with limited, and in many cases no, intellectual property and technological barriers to entry. The markets in which we operate are competitive and we expect competition to increase in the future from established competitors and new market entrants.
The computer hardware and technology fields are well established with limited, and in many cases no, intellectual property and technological barriers to entry. The markets in which we operate are competitive and we expect competition to increase in the future from established competitors and 26 new market entrants.
Introduction of new products and product enhancements will require coordination of our efforts with those of our customers, suppliers, and manufacturers to develop products that offer performance features desired by our customers and performance and functionality superior or more cost effective than solutions offered by our competitors.
Introduction of new products and 31 product enhancements will require coordination of our efforts with those of our customers, suppliers, and manufacturers to develop products that offer performance features desired by our customers and performance and functionality superior or more cost effective than solutions offered by our competitors.
Also, elements of certain of contracts and/or programs are classified by the U.S. Government, which imposes security requirements that limit our ability to discuss our performance on these contracts and programs, including any specific risks, disputes and claims. The U.S.
Also, elements of certain of contracts and/or programs are 29 classified by the U.S. Government, which imposes security requirements that limit our ability to discuss our performance on these contracts and programs, including any specific risks, disputes and claims. The U.S.
We periodically update our website to capture new products, as well as align with new applications and emerging markets. • Social Media – OSS regularly uses Facebook, LinkedIn, and Twitter to instantly alert the Company’s followers to new events, products, services, and customer stories. • Publications – We periodically publish white papers, customer success stories, and other demand generation technology articles in printed and electronic periodicals and newsletters, including, but not limited to, Autonomous Vehicle International, Military Embedded Systems, Edge Industry Review, Aerospace and Defense and Auto News.
We periodically update our website to capture new products, as well as align with new applications and emerging markets. • Social Media – OSS regularly uses Facebook, LinkedIn, and X to instantly alert the Company’s followers to new events, products, services, and customer stories. • Publications – We periodically publish white papers, customer success stories, and other demand generation technology articles in printed and electronic periodicals and newsletters, including, but not limited to, Autonomous Vehicle International, Military Embedded Systems, Edge Industry Review, Aerospace and Defense, and Auto News.
A standard datacenter server BMC needs to conform to the basic agency requirements of electrical interference and personal safety regulated by agencies such as 13 the FCC or CE and administered by testing companies such as UL and TüV.
A standard datacenter server BMC needs to conform to the basic agency requirements of electrical interference and personal safety regulated by agencies such as the FCC or CE and administered by testing companies such as UL and TüV.
Intellectual Property Our primary intellectual property value emanates from the more than 600 individual design projects that we have undertaken over the decades since our founding, experience, and know how, in addition to trade secrets and copyrights.
Intellectual Property 19 Our primary intellectual property value emanates from the more than 600 individual design projects that we have undertaken over the decades since our founding, experience, and know how, in addition to trade secrets and copyrights.
We make substantially all of our purchases from our contract suppliers on a purchase order basis. Our suppliers are not required to supply our raw materials for any specific period or at any specific quantity or price.
We make substantially all of our purchases from our contract suppliers on a purchase order basis. Our suppliers are generally not required to supply our raw materials for any specific period or at any specific quantity or price.
The replacement of members of our senior management team or other key personnel may involve significant time and costs, and the loss of these employees could significantly delay or prevent the achievement of our business objectives.
The replacement of members of our senior management team or other key personnel may involve 33 significant time and costs, and the loss of these employees could significantly delay or prevent the achievement of our business objectives.
By combining our knowledge and execution for deploying these systems in challenging environments, we bring the latest commercially available datacenter level technology and products to this market.
By combining our knowledge and execution for deploying these systems in challenging environments, we believe we bring the latest commercially available datacenter-level technology and products to this market.
The Donati CPU/GPU compute and visualization systems are interconnected using the Cernis PCIe switch, creating an optimized data path that takes advantage of OSS low latency breakthroughs in PCIe interconnect, typically found in higher performance products like Torrey Break and SDS servers, while being highly rugged for use in wheeled and tracked land vehicles that require conduction cooling.
The Sensor Concentrator, Donati CPU/GPU compute and visualization systems are interconnected using the Cernis PCIe switch, creating an optimized data path that takes advantage of OSS low latency breakthroughs in PCIe interconnect, typically found in higher performance products like Torrey Break and SDS servers, while being highly rugged for use in wheeled and tracked land vehicles that require conduction cooling.
Political instability or adverse political developments in or around any of the major countries in which we do business could also harm our business, financial 26 condition, and results of operations.
Political instability or adverse political developments in or around any of the major countries in which we do business could also harm our business, financial condition, and results of operations.
We have pursued these engagements throughout 2024 by incorporating an AI compute and storage product strategy that applies OSS expertise in three product levels that cover the needs of land, sea and air deployments. At the high end, we introduced Torrey Break, which is an edge super-computing platform based on the latest PCIe 5.0 technology.
We have pursued these engagements throughout 2025 by incorporating an AI compute and storage product strategy that applies OSS expertise in three product levels that cover the needs of land, sea and air deployments. At the high end, we introduced Torrey Break, which is an edge super-computing platform based on the latest PCIe 5.0 technology.
Additionally, they must continue to operate at extreme temperatures and in dusty or wet conditions. Many companies that enter this space tend to offer solutions based on older and lower performance technology, whereas we advance our proprietary state-of-the-art technologies and utilize the latest generation of enterprise class products to ensure superior performance.
Additionally, they must continue to operate at extreme temperatures and in dusty or wet conditions. Many companies that enter this space tend to offer solutions based on older and lower performance technology, whereas we aim to advance our proprietary state-of-the-art technologies and utilize the latest generation of enterprise class products to help ensure superior performance.
Government and 34 military, to hackers or other unscrupulous third parties who develop and deploy viruses, worms and other malicious software programs that could attack our products or services.
Government and military, to hackers or other unscrupulous third parties who develop and deploy viruses, worms and other malicious software programs that could attack our products or services.
Our contracts with the U.S. government are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds on a fiscal year basis, even though contract performance may extend over many years. Consequently, contracts are often partially funded initially, and additional funds are committed only as Congress makes further appropriations over time.
Our contracts with the U.S. government are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds on a fiscal year basis, even though contract performance may extend over many years. Consequently, contracts are sometimes partially funded initially, and additional funds are committed only as Congress makes further appropriations over time.
Additional discussion of the risks summarized in this “Risk Factors Summary” section, and other risks that we face, can be found below and should be carefully considered, together with other information included in this Annual Report. • Economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, could harm our financial condition and results of operations. • Volatile or recessionary conditions in the United States or abroad could adversely affect our business and/or our access to capital markets in a material manner. • Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations. • We may be adversely affected by the effects of inflation. • The market for our products is developing and may not develop as we expect. • Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance. • Our products are subject to competition, including competition from the customers to whom we sell and from new entrants, and the introduction of other distribution models in our markets may harm our competitive position. • Cybersecurity risks and cyber incidents, as well as other significant disruptions of our information technology networks and related systems and resources, could adversely affect our business, disrupt operations and expose us to significant liabilities. 24 • Changes in U.S. government priorities and/or delays or reductions in defense spending could negatively impact our financial position, results of operations, liquidity and overall business. • Changing procurement policies could adversely affect our business and financial results. • If we are unable to manage our growth and expand our operations successfully, our business and operating results will be harmed, and our reputation may be damaged. • A limited number of customers represents a significant portion of our sales, and the loss of any key customers could cause our sales to decrease significantly. • We rely on a limited number of parts suppliers to support our manufacturing and design processes. • Our future success depends on our ability to develop and successfully introduce new and enhanced products that meet the needs of our customers, as well as our ability to maintain our production schedule. • Unsuccessful government programs or OEM contracts could lead to reduced revenues. • Our inventory may rapidly become obsolete. • We offer an extended product warranty to cover defective products at no cost to the customer.
Additional discussion of the risks summarized in this “Risk Factors Summary” section, and other risks that we face, can be found below and should be carefully considered, together with other information included in this Annual Report. • Economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, could harm our financial condition and results of operations. • Volatile or recessionary conditions in the United States or abroad could adversely affect our business and/or our access to capital markets in a material manner. • Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations. • We may be adversely affected by the effects of inflation. • The market for our products is developing and may not develop as we expect. • Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance. • Our products are subject to competition, including competition from the customers to whom we sell and from new entrants, and the introduction of other distribution models in our markets may harm our competitive position. • Cybersecurity risks and cyber incidents, as well as other significant disruptions of our information technology networks and related systems and resources, could adversely affect our business, disrupt operations and expose us to significant liabilities. • Changes in U.S. government priorities and/or delays or reductions in defense spending could negatively impact our financial position, results of operations, liquidity and overall business. • Changing procurement policies could adversely affect our business and financial results. • If we are unable to manage our growth and expand our operations successfully, our business and operating results will be harmed, and our reputation may be damaged. • A limited number of customers represents a significant portion of our sales, and the loss of any key customers could cause our sales to decrease significantly. • We rely on a limited number of parts suppliers to support our manufacturing and design processes. • Supply chain disruptions, including those which may impact our ability to obtain critical parts at reasonable prices, could adversely affect our business, disrupt operations, and impact our profitability. • Our future success depends on our ability to develop and successfully introduce new and enhanced products that meet the needs of our customers, as well as our ability to maintain our production schedule. • Unsuccessful government programs or OEM contracts could lead to reduced revenues. • Our inventory may rapidly become obsolete. 22 • We offer an extended product warranty to cover defective products at no cost to the customer.
We leverage our proven track-record of delivering first-to-market advanced technologies and technical strength, working with the latest high-speed networks like PCI Express and NVIDIA’s NVLink ® . This is in addition to our expertise with rugged servers, compute acceleration, and high-performance flash array storage systems.
We aim to leverage our proven track-record of delivering first-to-market advanced technologies and technical strength, working with the latest high-speed networks like PCI Express, Ethernet, and NVIDIA’s NVLink ® . This is in addition to our expertise with rugged servers, compute acceleration, and high-performance flash array storage systems.
Our ability to drive the leading edge of technology is enabled by our strong relationships with strategic component manufacturers, including NVIDIA (for GPUs, ARM processors and networking), NetList and Micron (for flash memory), Broadcom (for PCIe switch components), Microchip (for vehicle rated switch and functional safety processors), and Intel and AMD (for CPUs).
Our ability to drive the leading edge of technology is enhanced by our strong relationships with strategic component manufacturers, including NVIDIA (for GPUs, ARM processors and networking), NetList and Micron (for flash memory), Broadcom (for PCIe switch components), Microchip (for vehicle rated switch and functional safety processors), and Intel and AMD (for CPUs).
Business Strategy We continue to execute our strategic commitment to the rugged edge HPC market, and we believe that our engagement in the markets and with customers, supported by our portfolio of products and solutions, are validating this approach. In this portfolio, we are witnessing some of our highest margins, repeat business, and expanding levels of interest.
Business Strategy We continue to execute our strategic commitment to the rugged edge HPC market, and we believe that our engagement in the markets and with customers, supported by our portfolio of products and solutions, validates this approach. In this portfolio, we are witnessing some of our highest margins, repeat business, and expanding levels of interest.
We believe our core competency in large-scale, high-speed design and layout will allow us to remain at the forefront of this growing industry. Complex System Design In addition to low-level signal integrity design expertise, we have amassed expertise and intellectual property in high-performance system architecture design and software.
We believe our core competency in large-scale, high-speed design and layout will allow us to remain at the forefront of this growing industry. Complex System Design In addition to signal integrity design expertise, we have amassed expertise and intellectual property in high-performance system architecture design and software.
In our current systems, PCIe Gen 5.0 signals are propagated across multiple PCBs and connectors, as well as both copper and fiber optic cabling, while maintaining the ability to recognize digital signal transitions at 32 billion times per second.
In our current systems, PCIe Gen 6.0 signals are propagated across multiple PCBs and connectors, as well as both copper and fiber optic cabling, while maintaining the ability to recognize digital signal transitions at 32 billion times per second.
GPUs also pose significant system design challenges due to their high-power requirements. High-end GPUs can require 500 – 700 watts of power or more, which generates a tremendous amount of heat. Sophisticated power distribution and cooling designs are required, especially for large-scale systems with multiple GPUs per chassis. OSS has significant expertise in addressing these challenges.
GPUs also pose significant system design challenges due to their high-power requirements. High-end GPUs can require 1000 watts of power or more, which generates a tremendous amount of heat. Sophisticated power distribution and cooling designs are required, especially for large-scale systems with multiple GPUs per chassis. OSS has significant expertise in addressing these challenges.
Our web site is key at leveraging our leadership content, positioning, and search engine optimization (“SEO”) capabilities.
Our web site is key at leveraging our 17 leadership content, positioning, and search engine optimization (“SEO”) capabilities.
The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report.
The extent and duration of military actions, sanctions, and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report.
OSS leverages the latest technology to build complete storage and data logging systems, including all the software to provide the highest density and performance in a compact form factor ideal for vehicles of all types. This, combined with our hot swappable canisters, has enabled autonomous truck and military aircraft applications.
OSS aims to leverage the latest technology to build complete storage and data logging systems, including all the software to provide the highest density and performance in a compact form factor ideal for vehicles of all types. This, combined with our hot swappable canisters, has enabled autonomous truck and military aircraft applications.
Main markets serviced by NVIDIA GPUs include, without limitation: • Autonomous navigation; • Computational finance; • Climate, weather and ocean modeling; • Computational chemistry and biology; • Data science and analytics; • Deep learning and machine learning; • Federal defense and intelligence; • Genomics; • Manufacturing; • Media and entertainment; • Medical imaging; • Robotics; • Oil and gas; and • Safety and security.
We believe the main markets serviced by NVIDIA GPUs include, without limitation: • Autonomous navigation; • Computational finance; • Climate, weather and ocean modeling; • Computational chemistry and biology; • Data science and analytics; • Deep learning and machine learning; • Federal defense and intelligence; • Genomics; • Manufacturing; • Media and entertainment; • Medical imaging; • Robotics; • Oil and gas; and • Safety and security.
Our international operations subject us to a variety of risks and challenges, including, without limitation, exposure to fluctuations in foreign currency exchange rates; inflationary pressures and the possibility of recession; increased management, travel, infrastructure and legal compliance costs associated with having international operations; reliance on channel partners; increased financial accounting and reporting burdens and complexities; compliance with foreign laws and regulations, which are subject to change; compliance with U.S. laws and regulations for foreign operations; conflicts between U.S. laws and regulations and foreign laws and regulations; import and export licensing requirements; and reduced protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad.
Our international operations subject us to a variety of risks and challenges, including, without limitation, exposure to fluctuations in foreign currency exchange rates; inflationary pressures and the possibility of recession; increased management, travel, infrastructure and legal compliance costs associated with having international operations; reliance on channel partners; compliance with foreign laws and regulations, which are subject to change; compliance with U.S. laws and regulations for foreign operations; conflicts between U.S. laws and regulations and foreign laws and regulations; import and export licensing requirements; and reduced protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad.
We believe a first-to-market strategy is key to our ability to continue to win significant opportunities. As a result, we continue to develop new state-of-the-art products across a range of HPC demand, providing a unique value proposition for our customers in the targeted spaces.
We believe a first-to-market strategy is key to our ability to continue to win significant opportunities. As a result, we continue to develop new state-of-the-art products across a range of HPC demand, aiming to provide a unique value proposition for our customers in the targeted spaces.
In 2026, we expect to address target markets with PCIe Gen 6.0 and Compute Express Link. Compute Acceleration with GPUs GPUs have evolved from graphics display acceleration to general-purpose processing workhorses for high-performance computing systems. Today, most of the fastest supercomputers in the world utilize GPUs as their primary 10 compute engines.
We expect to further address target markets with PCIe Gen 6.0, Compute Express Link, and related technologies in 2026 and beyond. 10 Compute Acceleration with GPUs GPUs have evolved from graphics display acceleration to general-purpose processing workhorses for high-performance computing systems. Today, most of the fastest supercomputers in the world utilize GPUs as their primary compute engines.
Our worldwide operations could be disrupted by earthquakes, telecommunications failures, power or water shortages, outages at cloud service providers, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, cyber-attacks, terrorist attacks, war or military conflicts (such as the ongoing military conflict between Russia and Ukraine and the more recent conflict between Israel and Hamas), medical epidemics or pandemics and other natural or man-made disasters, catastrophic events or climate change.
Our worldwide operations could be disrupted by earthquakes, telecommunications failures, power or water shortages, outages at cloud service providers, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, cyber-attacks, terrorist attacks, war or military conflicts (such as the ongoing military conflict between Russia and Ukraine and the more recent conflicts in the Middle East), medical epidemics or pandemics and other natural or man-made disasters, catastrophic events or climate change.
As a result, these stockholders, acting together, would have the ability to exert significant control over the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets.
As a result, these stockholders, acting together, would have the ability to exert influence over the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets.
Our technology enhances innovation by allowing more “what-if” analysis in a finite amount of time. Our price/performance leadership enhances our customers’ competitiveness and lowers capital expense and total cost of ownership. We work with our OEM customers to develop custom “perfect fit solutions” for their unique requirements when the anticipated return justifies the investment.
We believe our technology enhances innovation by allowing more “what-if” analysis in a finite amount of time. Our price/performance leadership aims to enhance our customers’ competitiveness and lower capital expense and total cost of ownership. We work with our OEM customers to develop custom “perfect fit solutions” for their unique requirements when the anticipated return justifies the investment.
Geopolitical change or changes in government regulations and policies in the United States or abroad may result in changing regulatory requirements, economic sanctions (such as those recently imposed by the United States and other countries on Russia), trade policies, import duties and economic disruptions that could impact our operating strategies, product demand, access to global markets, hiring, and profitability.
Geopolitical change or changes in government regulations and policies in the United States or abroad may result in changing regulatory requirements, economic sanctions (such as those recently imposed by the United States and other countries on Russia), trade policies, import duties (such as recent tariffs applied on many imports) and economic disruptions that could impact our operating strategies, product demand, access to global markets, hiring, and profitability.
Since acquiring this software asset, we have extended its capability to align with our AI Transportable strategy by adding Network Attached Storage (“NAS”), support for NVMe flash drives, NVMe over Fabric expansion capability, and several encryption methods required for government security applications.
Since acquiring this software asset, we have extended its capability to align with our edge computing strategy by adding Network Attached Storage (“NAS”), support for NVMe flash drives, NVMe over Fabric expansion capability, and several encryption methods required for government security applications.
Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that we make significant payments. Our directors and principal stockholders own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that we make significant payments. Our directors and principal stockholders own a percentage of our stock and will be able to influence matters subject to stockholder approval.
We will continue to execute current profitable business where we offer product and solution differentiation, but our primary focus will be on our rugged edge HPC strategy. We continue to see and pursue opportunities in both the commercial/industrial and military/government segments.
We will continue to execute current profitable business where we offer product and solution differentiation, but our primary focus will be on our rugged edge HPC strategy. We continue to see and pursue opportunities in both the commercial/industrial and military/government segments. In our military business, we will leverage commerciality to maintain margins.
Emerging markets and applications such as AI, image rendering and processing, autonomous vehicles, deep learning, molecular modeling, genomics, advanced visualization, machine learning, and image processing all benefit from the ability to use GPUs to accelerate the application. We build specialized compute-servers and accelerators used in these emerging growth markets.
Emerging markets and applications such as AI, image rendering and processing, autonomous vehicles, deep learning, molecular modeling, genomics, advanced visualization, machine learning, and image processing all benefit from the ability to use GPUs to accelerate the application. We build specialized compute-servers and accelerators used in these emerging growth markets. We estimate these markets to be very large and growing.
Our directors, executive officers, and holders of more than 5% of our common stock, together with their affiliates, beneficially own, in the aggregate, approximately 40% of our outstanding common stock, based on the number of shares outstanding as of March 5, 2024.
Our directors, executive officers, and holders of more than 5% of our common stock, together with their affiliates, beneficially own, in the aggregate, approximately 12% of our outstanding common stock, based on the number of shares outstanding as of March 5, 2026.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIntellectual Property Theft: Unauthorized access to our proprietary information could result in intellectual property theft, which would impact our competitive position in the market. 4. Regulatory and Legal Compliance: Cybersecurity incidents may subject us to regulatory investigations, legal claims, and penalties, affecting our compliance with applicable laws and regulations. 5.
Biggest changeSpecific risks include: • Data Breaches: A breach of our information systems could lead to unauthorized access to customer or employee data, resulting in reputational harm and legal liabilities. • Operational Disruption: Cybersecurity incidents could disrupt our operations, leading to delays in production, delivery, or fulfillment of customer orders. • Intellectual Property Theft: Unauthorized access to our proprietary information could result in intellectual property theft, which would impact our competitive position in the market. • Regulatory and Legal Compliance: Cybersecurity incidents may subject us to regulatory investigations, legal claims, and penalties, affecting our compliance with applicable laws and regulations. • Third-Party Relationships: Our reliance on third-party vendors and service providers exposes us to additional cybersecurity risks, and a security breach affecting these entities could impact our operations.
Our Board of Directors, through its Audit & Risk Committee, provides oversight and oversees management processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk exposure with our strategic objectives.
Our Board of Directors, through its Audit & Risk Committee, provides oversight of management processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk exposure with our strategic objectives.
As cyber threats evolve and become more sophisticated, we believe that the Board's involvement in cybersecurity governance ensures that we adequately focus resources to protect the Company’s assets and reputation.
As cyber threats evolve and become more sophisticated, the Board's involvement in cybersecurity governance ensures that we adequately focus resources to protect the Company's assets and reputation.
The rapidly evolving nature of cybersecurity threats requires ongoing vigilance, and there can be no assurance that our efforts will prevent all incidents.
Despite these efforts, the rapidly evolving nature of cybersecurity threats requires ongoing vigilance, and there can be no assurance that our efforts will prevent all incidents.
Management, including our Vice President of Technology and our Audit & Risk Committee members, regularly brief our board of directors on our cybersecurity and information security posture and cybersecurity incidents deemed to have a moderate or higher business impact, even if viewed as immaterial to us.
Management, including our Vice President of Technology and our Audit & Risk Committee members, regularly brief our Board on our cybersecurity and information security posture and cybersecurity incidents deemed to have a moderate or higher business impact.
Governance Our management team, including our Vice President of Technology , is primarily responsible for assessing and managing our material risks from cybersecurity threats. Management supervises our internal cybersecurity and IT personnel and our retained external cybersecurity consultants and vendors.
We provide cybersecurity awareness training to our employees, incident response personnel, and senior management. Governance Our management team, including our Vice President of Technology , is primarily responsible for assessing and managing our material risks from cybersecurity threats. Management supervises our internal cybersecurity and IT personnel and our retained external cybersecurity consultants and vendors.
Management and the Board are evaluating and intend to implement further cybersecurity-related measures, including, without limitation, developing a more robust internal policy framework, incident response plan, crisis management planning, third-party vendor assessments, and contractual obligations for third parties that the Company engages with.
Ongoing Initiatives Management and the Board are evaluating and intend to implement further cybersecurity-related measures throughout 2026 and beyond, including developing a more robust internal policy framework, incident response plan, crisis management planning, and third-party vendor assessments and contractual obligations.
Additionally, they supervise efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefing from internal or external security personnel; threat intelligence and other information obtained from governmental, public, or private sources, including external consultants or vendors engaged by us; and alerts and reports produced by security tools deployed in our IT environment.
They oversee efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through briefings from internal or external security personnel, threat intelligence obtained from governmental, public, or private sources, and alerts and reports produced by security tools deployed in our IT environment.
We consult with external parties, such as cybersecurity firms and risk management and governance experts, on risk management and strategy. We use a team of outside vendors and government services specializing in IT and cybersecurity that provide expertise, tools, and methodologies to identify and assess vulnerabilities and potential threats.
These include processes for assessing, identifying, and managing material risks from cybersecurity threats. We consult with external parties, such as cybersecurity firms and risk management experts, on our risk management strategy. We engage outside vendors and utilize government services specializing in IT and cybersecurity that provide expertise, tools, and methodologies to identify and assess vulnerabilities and potential threats.
Events that our IT and cybersecurity providers do not routinely resolve are brought to the Board's attention. Critical business and operational data are backed up nightly and securely stored offsite to mitigate the risks of cybersecurity incidents or equipment failure. We provide cybersecurity awareness training to our employees, incident response personnel, and senior management.
If resolution cannot be achieved, the problem is escalated to our cybersecurity monitoring and detection software provider. Events that our IT and cybersecurity providers do not routinely resolve are brought to the Board's attention. Critical business and operational data are backed up nightly and securely stored offsite to mitigate the risks of cybersecurity incidents or equipment failure.
ITEM 1C. CYBERSECURITY. Risks related to Cybersecurity Incidents We face significant risks related to cybersecurity threats, which could adversely affect our business, financial condition, and results of operations.
ITEM 1C. CYBERSECURITY. Risks Related to Cybersecurity Incidents We face significant risks related to cybersecurity threats, which could adversely affect our business, financial condition, and results of operations. Cybersecurity incidents, including unauthorized access, data breaches, and other malicious activities, could result in the loss or theft of sensitive information, disruption of our operations, and damage to our reputation.
In the event of a detected cyber incident by 24/7 monitoring software or employee notification, our IT and cybersecurity provider performs a detailed assessment of the incident, identifies the source of the problem, and resolves the issue as appropriate. If they cannot resolve the issue, the problem is escalated to our cybersecurity monitoring and detection software provider for resolution.
Automated tools and AI-based user behavior analytics support our efforts to identify and manage cyber threats. When a cyber incident is detected through our 24/7 monitoring software or employee notification, our IT and cybersecurity provider performs a detailed assessment, identifies the source of the problem, and resolves the issue as appropriate.
Cybersecurity incidents, including but not limited to unauthorized access, data breaches, and other malicious activities, could result in the loss or theft of sensitive information, disruption of our operations, and damage to our reputation. While we have implemented measures to protect our information systems, there can be no assurance that these measures will effectively prevent all cybersecurity incidents.
While we have implemented measures to protect our information systems, there can be no assurance that these measures will effectively prevent all cybersecurity incidents.
Third-Party Relationships: Our reliance on third-party vendors and service providers exposes us to additional cybersecurity risks, and a security breach affecting these entities could impact our operations. Although cybersecurity incidents have not materially impacted our business strategy, results of operations, or financial condition to date, there can be no assurance that they will not do so in the future.
Although cybersecurity incidents have not materially impacted our business strategy, results of operations, or financial condition to date, there can be no assurance that they will not do so in the future. Risk Management and Strategy 42 Assessing, Identifying, and Managing Material Cyber Threats We have implemented infrastructure, systems, policies, and procedures designed to proactively and reactively address cybersecurity incidents.
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Specific risks include, but are not limited to: 1. Data Breaches: A breach of our information systems could lead to unauthorized access to customer or employee data, resulting in reputational harm and legal liabilities. 2. Operational Disruption: Cybersecurity incidents could disrupt our operations, leading to delays in production, delivery, or fulfillment of customer orders. 44 3.
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Our systems are often deployed in environments supporting AI workloads and large-scale data processing. Unauthorized access to such systems could expose sensitive operational or training data belonging to our customers.
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Risk Management and Strategy Assessing, Identifying, and Managing Material Cyber Threats We have specific infrastructure, systems, policies, and procedures designed to proactively and reactively address circumstances that arise when unexpected events such as a cybersecurity incident occur. These include processes for assessing, identifying, and managing material risks from cybersecurity threats.
Added
Key aspects of our cybersecurity governance include: • Governance and Strategy: Management, the Audit & Risk Committee, and the Board ensure that our cybersecurity strategy is aligned with our business strategy. • Risk Management and Oversight: Our Audit & Risk Committee and the Board actively oversee our cybersecurity risk management framework as part of enterprise risk management oversight, ensuring that material risks are identified, assessed, and mitigated. • Resource Allocation: The Board reviews and approves cybersecurity budgets and resource allocations to ensure adequate resources are available to implement and maintain effective cybersecurity measures.
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Automated tools and AI-based user behavior analytics also support identifying and managing cyber threats. Response to a broad category of threats is immediate and automatic. Security personnel and members of our management are alerted when cyber threats or anomalies are detected.
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The Board evaluates and approves significant investments in cybersecurity technologies, training, and talent based on recommendations from management and our external vendors and consultants. • Compliance and Legal Obligations: Management and the Board oversee compliance with relevant cybersecurity regulations and legal requirements and ensure we have appropriate legal counsel to address cybersecurity-related issues, including incident notification requirements.
Removed
Persistent threats or issues that, in the opinion of management, are material are immediately brought to the attention of our board of directors.
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Management has identified the need to further comply with government Cybersecurity Maturity Model Certification (CMMC) requirements that became effective on November 9, 2025, which will include formal external assessment of cybersecurity controls and policies used to manage Controlled Unclassified Information (CUI) within the Company.
Removed
Vital aspects of our cybersecurity governance that are currently in process or have been implemented include the following: 45 • Governance and Strategy: Management, the Audit & Risk Committee, and the Board ensure that our cybersecurity strategy is aligned with our business strategy. • Risk Management and Oversight: Our Audit & Risk Committee and the Board, as part of the board’s enterprise risk management oversight, actively oversee our cybersecurity risk management framework, ensuring that material risks are identified, assessed, and mitigated. • Resource Allocation: o Budget Approval: The Board reviews and approves cybersecurity budgets and resource allocations to ensure we have adequate resources to implement and maintain effective cybersecurity measures. o Investment Decisions: The Board evaluates and approves significant investments in cybersecurity technologies, training, and talent based on the recommendations of management or our external vendors and consultants. • Compliance and Legal Obligations: o Regulatory Compliance: Management and the Board oversee compliance with relevant cybersecurity regulations and legal requirements. o Legal Oversight: Management and the Board ensure we have appropriate legal counsel to address cybersecurity-related issues, including incident notification requirements. • Education and Awareness: o Training and Awareness: Management and the Board take reasonable steps to stay informed about cybersecurity trends, threats, and best practices through ongoing education and training. o Management reviews Company employee training programs to ensure employees are trained appropriately and updated on evolving cyber trends. o Board Training: Certain board members have received training to understand cybersecurity risks and their role in overseeing cybersecurity. • Reporting and Communication: o Periodic Updates: The Board receives periodic updates from management, responsible staff, and the Audit & Risk Committee regarding the Company’s cybersecurity posture, incidents, and risk management efforts. o Communication Strategy: Management and the Board have a communication strategy for addressing cybersecurity disclosures with stakeholders, including customers, employees, and the public. • Performance Evaluation: The Board’s annual evaluation of the Chief Executive Officer's performance includes assessing the effectiveness of implementing cybersecurity policy and measures and ensuring that cybersecurity policies and practices are effective and aligned with organizational goals. • Cybersecurity Culture: The Board fosters a cybersecurity-aware culture throughout the organization, supporting management’s efforts to integrate risk management, including cybersecurity, into the operating culture.
Added
We anticipate increased demands from government and government prime contractor customers who entrust CUI to us during the normal course of business.
Removed
Despite these efforts, the rapidly evolving nature of cybersecurity threats requires ongoing vigilance, and there can be no assurance that our efforts will prevent all incidents. 46 In addition to the foregoing, management and the board are evaluating, and intend to implement, further cybersecurity related measures, including without limitation developing a more robust internal policy framework, incident response plan, crisis management planning, and third-party vendor assessments and contractual obligations for third parties that the Company engages with.
Added
The initial and ongoing cost of this compliance will be an additional budgeted IT expense in future years. 43 • Education and Awareness: Management and the Board stay informed about cybersecurity trends, threats, and best practices through ongoing education and training. Management reviews Company employee training programs to ensure employees receive appropriate training and updates on evolving cyber trends.
Removed
The Company intends to progress these efforts throughout 2024.
Added
Certain Board members have received training to understand cybersecurity risks and their role in overseeing cybersecurity. • Reporting and Communication: The Board receives periodic updates from management, responsible staff, and the Audit & Risk Committee regarding the Company's cybersecurity posture, incidents, and risk management efforts.
Added
Management and the Board maintain a communication strategy for addressing cybersecurity disclosures with stakeholders, including customers, employees, and the public. • Performance Evaluation: The Board's annual evaluation of the Chief Executive Officer's performance includes assessing the effectiveness of cybersecurity policy implementation and ensuring that cybersecurity policies and practices are effective and aligned with organizational goals. • Cybersecurity Culture: The Board fosters a cybersecurity-aware culture throughout the organization, supporting management's efforts to integrate risk management, including cybersecurity, into the operating culture.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company also leases a 3,208 square foot facility in Salt Lake City, Utah, under a lease expiring in June 2025, that houses our Ion software development team. Additionally, we lease a 1,632 square foot facility located in Anaheim, California, with the lease expiring in June 2025. Bressner leases space in Germany comprising 11,836 square feet on a month-to-month basis.
Biggest changeThis lease expired on June 30, 2025, and the Company extended the lease for an additional 12 months, with the lease commencing in July 2025 and expiring in June 2026. In the lease extension, the leased space was reduced from 3,208 square feet to 925 square feet. Additionally, we leased a 1,632 square foot facility located in Anaheim, California.
ITEM 2. PRO PERTIES. The Company leases its offices, manufacturing, and warehouse facility in San Diego County under a non-cancelable operating lease. Our corporate headquarters are in a leased space comprising approximately 29,342 square feet in Escondido, California under a lease that was last modified and extended in September 2023 and expires in August 2030.
ITEM 2. PRO PERTIES. The Company leases its offices, manufacturing, and warehouse facility in San Diego County under a non-cancelable operating lease that expires in August 2030. This approximately 29,342 square foot space in Escondido, California houses our headquarters. The Company also leases a facility in Salt Lake City, Utah that houses our Ion software development team.
In June 2024, Bressner leased an additional 2,500 square feet of office space in Germany on a month-to-month basis with payments of approximately $5,950 per month, beginning in October 2024. We believe our existing facilities and equipment are in good operating condition and are suitable for the conduct of our business.
The Bressner business, which has been classified as discontinued operations and was sold on December 30, 2025, leased an 11,836 square foot space in Germany on a month-to-month basis. In June 2024, Bressner leased an additional 2,500 square feet of office space in Germany on a month-to-month basis with payments of approximately $5,950 per month, beginning in October 2024.
Added
This lease expired on July 31, 2025, and the Company extended the lease through January 31, 2026. Upon expiration of the lease on January 31, 2026, the Company did not renew the lease and vacated the facility.
Added
In May 2025, Bressner entered into a lease agreement for approximately 15,629 square feet of office and warehouse space in Germany, with an initial lease term ending on June 30, 2030. The lease has an option to renew for an additional five-year term that the Company was reasonably certain to exercise.
Added
Upon transition of operations into the new facility in December 2025, the month-to-month lease on the other facility was discontinued. All lease commitments related to the Bressner business transferred to the buyer upon sale of the business on December 30, 2025 and are no longer an obligation of the Company.
Added
We believe our existing facilities and equipment are in good operating condition and are suitable for the conduct of our business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEG AL PROCEEDINGS. We are subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of our business. See footnote No. 12 “Commitments and Contingencies” in the accompanying consolidated financial statements. ITEM 4. MINE SAFETY DISCLOSURES. Not Applicable 47 PART II
Biggest changeITEM 3. LEG AL PROCEEDINGS. We are subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of our business. See footnote No. 12 “Commitments and Contingencies” in the accompanying consolidated financial statements. 44 ITEM 4. MINE SAFETY DISCLOSURES. Not Applicable 45 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 47 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 48 Item 6. [Reserved] 48 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 49
Biggest changeItem 4. Mine Safety Disclosures 45 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 Item 6. [Reserved] 46 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 47

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHigh Low First Quarter (through March 5, 2025) $ 4.39 $ 2.82 * * On March 5, 2025, the closing price was $2.92 per share. 2024 2023 Year ended December 31, 2024 and 2023: High Low High Low First Quarter $ 4.58 $ 1.79 $ 3.71 $ 2.44 Second Quarter $ 3.50 $ 2.00 $ 3.42 $ 2.33 Third Quarter $ 3.09 $ 1.82 $ 3.40 $ 1.56 Fourth Quarter $ 3.80 $ 2.20 $ 2.34 $ 1.82 Holders As of March 5, 2025, there were 21,323,261 shares of our common stock outstanding held by approximately 5,800 holders of record of our common stock.
Biggest changeHigh Low First Quarter (through March 5, 2026) $ 11.69 $ 6.44 * * On March 5, 2026, the closing price was $8.48 per share. 2025 2024 Year ended December 31, 2025 and 2024: High Low High Low First Quarter $ 4.39 $ 2.32 $ 4.58 $ 1.79 Second Quarter $ 4.59 $ 1.93 $ 3.50 $ 2.00 Third Quarter $ 6.86 $ 3.85 $ 3.09 $ 1.82 Fourth Quarter $ 7.84 $ 4.34 $ 3.80 $ 2.20 Holders As of March 5, 2026, there were 24,737,191 shares of our common stock outstanding held by approximately 5,800 holders of record of our common stock.
Below is our quarterly information with respect to the high and low sale prices for our common stock for such time periods.
Below is our quarterly information with respect to the high and low closing sale prices for our common stock for such time periods.
Unregistered Sales of Equity Securities During the year ended December 31, 2024, there were no unregistered sales of our securities that were not reported in a Current Report on Form 8-K or our Quarterly Reports on Form 10-Q. Issuer Repurchases of Equity Securities None.
Unregistered Sales of Equity Securities During the year ended December 31, 2025, there were no unregistered sales of our securities that were not reported in a Current Report on Form 8-K or our Quarterly Reports on Form 10-Q. Issuer Repurchases of Equity Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the Year Ended December 31, 2024 2023 Net loss $ (13,634,333 ) $ (6,716,176 ) Depreciation 1,041,837 1,035,362 Amortization of intangibles - 42,154 Amortization of right-of-use assets net of change in lease liability 29,885 22,592 Stock-based compensation expense 1,988,125 2,345,358 Interest expense 74,116 117,774 Interest income (477,745 ) (544,958 ) Impairment of goodwill - 5,630,788 Employee retention credit (ERC) - (1,716,727 ) Provision for income taxes 726,502 927,128 Adjusted EBITDA $ (10,251,613 ) $ 1,143,296 Adjusted EPS Adjusted EPS excludes the impact of certain items and, therefore, has not been calculated in accordance with GAAP.
Biggest changeAdjusted EBITDA associated with our continuing operations for the years ended December 31, 2025 and 2024 was as follows: For the Year Ended December 31, 2025 2024 Loss from continuing operations $ (3,097,848 ) $ (15,168,287 ) Depreciation 771,552 927,282 Amortization of right-of-use assets net of change in lease liability (11,438 ) 31,730 Stock-based compensation expense 1,820,705 1,856,417 Interest expense 2,523 4,027 Interest income (278,788 ) (477,745 ) Provision for income taxes 11,310 2,560 Adjusted EBITDA $ (781,984 ) $ (12,824,016 ) Adjusted EBITDA associated with discontinued operations, excluding the impact of the gain on sale net of transaction costs, for the years ended December 31, 2025 and 2024 was as follows: For the Year Ended December 31, 2025 2024 Income from discontinued operations, net of income taxes $ 8,185,542 $ 1,533,954 Gain on sale, net of transaction expenses (6,707,021 ) - Depreciation 221,741 114,555 Amortization of right-of-use assets net of change in lease liability 54,873 (1,845 ) Stock-based compensation expense 132,331 131,708 Interest expense 50,374 70,089 Interest income - - Provision for income taxes 651,658 723,942 Adjusted EBITDA $ 2,589,498 $ 2,572,403 Consolidated adjusted EBITDA from continuing and discontinued operations, excluding the impact of the gain of sale net of transaction costs, for the years ended December 31, 2025 and 2024 was as follows: For the Year Ended December 31, 2025 2024 Net income (loss) $ 5,087,694 $ (13,634,333 ) Gain on sale, net of transaction expenses (6,707,021 ) - Depreciation 993,293 1,041,837 Amortization of right-of-use assets net of change in lease liability 43,435 29,885 Stock-based compensation expense 1,953,036 1,988,125 Interest expense 52,897 74,116 Interest income (278,788 ) (477,745 ) Provision for income taxes 662,968 726,502 Adjusted EBITDA $ 1,807,513 $ (10,251,613 ) 60 Adjusted EPS Adjusted EPS excludes the impact of certain items and, therefore, has not been calculated in accordance with GAAP.
The Company allocates the transaction price to each distinct product and service based on its relative standalone selling price. The standalone selling price for products primarily involves the cost to produce the deliverable plus the anticipated margin and for services is estimated based on the Company’s approved list price.
The Company allocates the transaction price to each distinct product and service based on its relative standalone selling price. The standalone selling price for products and services primarily involves the cost to produce the deliverable plus the anticipated margin and is estimated based on the Company’s approved list price.
The Company’s contracts are executed through a combination of written agreements along with purchase orders with all customers including certain general terms and conditions. Generally, purchase orders entail products, quantities and prices, which define the performance obligations of each party and are approved and accepted by the Company. The Company’s contracts with customers do not include extended payment terms.
The Company’s contracts are executed through a combination of written agreements along with purchase orders with all customers including certain general terms and conditions. Generally, purchase orders entail products, quantities 56 and prices, which define the performance obligations of each party and are approved and accepted by the Company. The Company’s contracts with customers do not include extended payment terms.
Management is also committed to conserving cash and securing debt and/or equity financing, as required, for liquidity to meet our near-term cash requirements. In April 2022, the Company obtained a domestic revolving line of credit of $2,000,000 at Torrey Pines Bank.
Management is committed to conserving cash and securing debt and/or equity financing, as required, for liquidity to meet our near-term cash requirements. In April 2022, the Company obtained a domestic revolving line of credit of $2,000,000 at Torrey Pines Bank (the "Line of Credit").
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. 63 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 and unusual items.
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. 59 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 and unusual items.
Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, monetary assets and liabilities are translated using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates.
Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, monetary assets and liabilities are remeasured using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates.
Alternatively, if actual demand, product mix and alternative usage are more favorable than those we estimated at the time of such a write-down, our gross margin could be favorably impacted in future periods. 61 Income Taxes The determination of income tax expense requires us to make certain estimates and judgments concerning the calculation of deferred tax assets and liabilities, as well as the deductions and credits that are available to reduce taxable income.
Alternatively, if actual demand, product mix and alternative usage are more favorable than those we estimated at the time of such a write-down, our gross margin could be favorably impacted in future periods. 57 Income Taxes The determination of income tax expense requires us to make certain estimates and judgments concerning the calculation of deferred tax assets and liabilities, as well as the deductions and credits that are available to reduce taxable income.
Consequently, changes in the exchange rates of the currencies may impact the translation of the foreign subsidiaries’ statements of operations into U.S. dollars, which may in turn affect our consolidated statement of operations. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income in the consolidated statement of comprehensive income.
Consequently, changes in the exchange rates of the currencies may impact the translation of the foreign subsidiaries’ statements of operations into U.S. dollars, which may in turn affect our consolidated statement of operations. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in the consolidated balance sheets.
Our derivatives are designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). We hedge a portion of the exchange risk involved in anticipation of highly probable foreign currency-denominated transactions.
We do not use derivatives for trading or speculative purposes. Our derivatives are designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). We hedge a portion of the exchange risk involved in anticipation of highly probable foreign currency-denominated transactions.
As of December 31, 2024, the Company had $2,815,399 of cash in our accounts that exceeded the insurance limits. The Company has not experienced any such losses in these accounts, and believes that the financial institutions at which such amounts are held are stable; however, no assurances can be provided.
As of December 31, 2025, the Company had $33,124,976 of cash in our accounts that exceeded the insurance limits. The Company has not experienced any such losses in these accounts, and believes that the financial institutions at which such amounts are held are stable; however, no assurances can be provided.
Marketing and Selling 51 Marketing and Selling expense consists primarily of employee compensation and related expenses, sales commissions, marketing programs, travel, and entertainment expenses as well as allocated overhead. Marketing programs consist of advertising, tradeshows, events, corporate communications, and brand-building activities.
Marketing and Selling Marketing and Selling expense consists primarily of employee compensation and related expenses for marketing and sales functions, sales commissions, marketing programs, travel, and entertainment expenses, as well as certain overhead expenses which are allocated to marketing and selling expense. Marketing programs consist of advertising, tradeshows, events, corporate communications, and brand-building activities.
The effective tax rate for the years ended December 31, 2024 and 2023 differed from the statutory rate mainly due to permanent non-deductible goodwill amortization for Bressner, change in valuation allowance, deductions related to expenses of OSS stock options, research and development credits, and changes in reserves for uncertain tax positions, as well as projecting federal, foreign and state tax liabilities for the year.
The effective tax rate for the years ended December 31, 2025 and 2024 differed from the statutory rate mainly due to changes in the valuation allowance, deductions related to expenses of OSS stock options, research and development credits, and changes in reserves for uncertain tax positions, as well as projecting federal and state tax liabilities.
Operating expenses Our operating expenses consist of general and administrative, sales and marketing, and research and development expenses. Salaries and personnel-related costs, benefits, and stock-based compensation expense, are the most significant components of each category of operating expenses. Operating expenses also include allocated overhead costs for facilities and utility costs.
Salaries and personnel-related costs, benefits, and stock-based compensation expense are the most significant components of each category of operating expenses. Operating expenses also include allocated overhead costs for facilities and utility costs.
The Board shall make a decision with respect to whether to accept or reject the director’s resignation within 90 days following the applicable meeting of stockholders, which decision, once made by the Board, shall promptly be disclosed via a press release. Components of Results of Operations Revenue The Company recognizes revenue under accounting standard ASC 606.
The Board shall make a decision with respect to whether to accept or reject the director’s resignation within 90 days following the applicable meeting of stockholders, which decision, once made by the Board, shall promptly be disclosed via a press release.
We perform ongoing credit evaluations of our customers’ financial condition and limit the amount of credit extended when deemed necessary. Foreign currency risk We operate in the United States and Germany. Our primary reporting currency is the United States dollar. Foreign sales of products and services are primarily denominated in U.S. dollars.
We provide credit to our customers in the normal course of business. We perform ongoing credit evaluations of our customers’ financial condition and limit the amount of credit extended when deemed necessary. 58 Foreign currency risk We operate primarily in the United States. Foreign sales of products and services are primarily denominated in U.S. dollars.
With the Company's shifted focus to the development and sale of edge computing, we have significantly increased our efforts to penetrate the military and defense sectors in particular, which typically have protracted sales cycles, significant contracting requirements, and multi-year deliverables.
With our shifted focus to the development and sale of edge computing products, we have significantly increased our efforts to penetrate the military and defense sectors in particular. These sectors typically have protracted sales cycles, significant contracting requirements, and multi-year deliverables. Our pipeline is effected by the procurement habits and timing of the military and defense sector.
There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be fully recovered. These increasing costs are being aggressively managed by the Company and actions are being taken to minimize the impact to the Company, particularly in the purchase of inventories to minimize price increases.
There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be fully recovered. These increasing costs are being aggressively managed by the Company and actions are being taken to minimize the impact to the Company. Inflation affects the Company’s manufacturing costs, distribution costs, and operating expenses. U.S.
We are exposed to the impact of interest rate changes primarily through our borrowing activities for our variable rate borrowings. 62 Concentration of credit risk At times, deposits held with financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation (“FDIC”) and Securities Investor Protection Corporation (“SIPC”), of which both provide basic deposit coverage with limits up to $250,000 per owner.
Concentration of credit risk At times, deposits held with financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation (“FDIC”) and Securities Investor Protection Corporation (“SIPC”), of which both provide basic deposit coverage with limits up to $250,000 per owner.
To access this line of credit, the Company must maintain a minimum cash balance of $2,500,000 with the bank and maintain a maximum debt to tangible net worth of ratio of 1.00. The line of credit is also collateralized by the assets of the Company. No balance was outstanding on December 31, 2024 and 2023, respectively.
To access the Line of Credit, the Company must maintain a minimum cash balance of $2,500,000 with the bank and maintain a maximum debt to tangible net worth of ratio of 1.00. The Line of Credit is also collateralized by the assets of the Company. The maturity and renewal date for the Line of Credit is September 11, 2026.
General and Administrative General and administrative expense consists primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, and fees for third-party professional services, as well as allocated overhead. We expect our general and administrative expense to increase in absolute dollars as we continue to invest in growing the business.
General and Administrative General and administrative expense consists primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, and fees for third-party professional services, as well as certain overhead expenses which are allocated to general and administrative expense.
Overall, total research and development expense as a percentage of revenue increased to 7.5% during the year ended December 31, 2024, as compared to 7.1% during the same period in 2023. Interest income Interest income decreased $67,213 for the year ended December 31, 2024, as compared to the same period in 2023.
Research and development expense as a percentage of revenue increased to 16.9% for the year ended December 31, 2025, as compared to 14.1% for the same period in 2024. Interest income Interest income decreased $198,957 for the year ended December 31, 2025, as compared to the same period in 2024.
Research and Development Research and development expense consists primarily of employee compensation and related expenses, prototype expenses, depreciation associated with assets acquired for research and development, third-party engineering and contractor support costs, as well as allocated overhead. We expect our research and development expenses to increase in absolute dollars as we continue to invest in new and existing products.
Research and Development Research and development expense consists primarily of employee compensation and related expenses for research and development functions, certain prototype expenses, depreciation associated with assets acquired for research and development, third-party engineering and contractor support costs, as well as certain overhead expenses which are allocated to research and development expense.
We do not have any majority-owned subsidiaries that are not consolidated in the financial statements. Additionally, we do not have an interest in, or relationships with, any special purpose entities.
We do not have any majority-owned subsidiaries that are not consolidated in the financial statements. Additionally, we do not have an interest in, or relationships with, any special purpose entities. Stockholder transactions See Note 10 to the accompanying financial statements for a discussion regarding our stockholder transactions for the relevant periods.
These decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In making these decisions, management applies its judgment based on its understanding and analysis of the relevant circumstances and our historical experience.
In making these decisions, management applies its judgment based on its understanding and analysis of the relevant circumstances and our historical experience.
We believe that we are uniquely positioned as a specialized provider to address the needs of this market, providing custom servers, data acquisition platforms, compute accelerators, solid-state storage arrays, system I/O expansion systems, as well as edge optimized industrial and panel PCs, tablets, and handheld compute devices.
We believe that we are uniquely positioned as a specialized provider to address the needs of this market, providing custom servers, data acquisition platforms, compute accelerators, solid-state storage arrays, and system I/O expansion systems. Our systems also offer industry leading capabilities that occupy less physical space and require less power consumption.
Stockholder transactions See Note 10 to the accompanying financial statements for a discussion regarding our stockholder transactions for the relevant periods. 59 Critical accounting policies and estimates In preparing our consolidated financial statements in conformity with U.S. generally accepted accounting principles, management must make a variety of decisions which impact the reported amounts and the related disclosures.
Critical accounting policies and estimates In preparing our consolidated financial statements in conformity with U.S. generally accepted accounting principles, management must make a variety of decisions which impact the reported amounts and the related disclosures. These decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates.
In addition, as part of our business strategy, we occasionally evaluate potential acquisitions of businesses, products and technologies. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products or businesses. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing.
In addition, as part of our business strategy, we are evaluating potential acquisitions of businesses, products and technologies or other strategic acquisitions. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products or businesses.
Provision for Income Taxes Provision for income taxes consists of estimated income taxes due to the United States and German governments, as well as state tax authorities in jurisdictions in which we conduct business, along with the change in our deferred income tax assets and liabilities. 52 Results of Operations The following tables set forth our results of operations for the years ended December 31, 2024 and 2023, respectively, presented in dollars and as a percentage of revenue.
Provision for Income Taxes Provision for income taxes consists of estimated income taxes due to the United States and foreign governments, as well as state tax authorities in jurisdictions in which we conduct business, along with the change in our deferred income tax assets and liabilities.
We also conduct business outside the United States through Bressner, our foreign subsidiary in Germany, where business is largely transacted in non-U.S. dollar currencies, particularly the Euro, which is subject to fluctuations due to changes in foreign currency exchange rates. Accordingly, we are subject to exposure from changes in the exchange rates of local currencies.
We have also conducted business outside the United States, primarily through Bressner, our foreign subsidiary in Germany, which was sold on December 30, 2025 and is classified as discontinued operations. Bressner's business was largely transacted in non-U.S. dollar currencies, particularly the Euro, which is subject to fluctuations due to changes in foreign currency exchange rates.
In the event that we need additional financing, we may choose to consummate an offering of our securities under the registration statement on S-3 in order to raise capital. Management believes that we have sufficient liquidity to satisfy our anticipated working capital requirements for our ongoing operations and obligations for at least the next twelve months.
In the event that we need additional financing, we may choose to consummate an offering of our securities under the registration statement on S-3 in order to raise capital.
This change is basically attributable to an increase in the number of short-term investments redeemed in the current period as compared to the prior period as well as by a year over year reduction in capital expenditures due to lower expenditures for ERP enhancements and for test equipment.
This change is attributable to a decrease in the number of short-term investments redeemed in the current year as compared to the prior year and to cash expenditures related to patent filing costs, partially offset by lower capital expenditures for demonstration assets and test equipment.
Contractual obligations and commitments The following table sets forth our non-cancellable contractual obligations as of December 31, 2024: Contractual Obligations: Total 1-3 years 3-5 years > 5 Years Notes payable $ 1,035,050 $ 1,035,050 $ - $ - $ - Operating leases 1,799,621 285,937 851,101 662,583 Non-cancellable purchase orders 2,822,062 2,822,062 Total $ 5,656,733 $ 4,143,049 $ 851,101 $ 662,583 $ - We have made certain indemnities, under which we may be required to make payments to an indemnified party, in relation to certain transactions.
Contractual obligations and commitments The following table sets forth our non-cancellable contractual obligations as of December 31, 2025: Contractual Obligations: Total 1-3 years 3-5 years > 5 Years Operating leases $ 1,468,959 $ 219,097 $ 964,030 $ 285,832 $ - Non-cancellable purchase orders 3,168,828 1,799,327 - 1,369,501 - Total $ 4,637,787 $ 2,018,424 $ 964,030 $ 1,655,333 $ - We have made certain indemnities, under which we may be required to make payments to an indemnified party, in relation to certain transactions.
Other Income (Expense), net Other income consists of miscellaneous income and income received for activities outside of our core business. Other expense includes expenses for activities outside of our core business.
We expect variability in our research and development expenses due to the timing of new product development and introductions. Other Income (Expense), net Other income consists of miscellaneous income and income received for activities outside of our core business. Other expense includes expenses for activities outside of our core business.
Performance will often extend over long periods of time, and our right to receive future payment depends on our future performance in accordance with the agreement. 60 The percentage-of-completion methodology involves recognizing probable and reasonably estimable revenue using the percentage of services completed, on a current cumulative cost to estimated total cost basis, using a reasonably consistent profit margin over the performance period.
The percentage-of-completion methodology involves recognizing probable and reasonably estimable revenue using the percentage of services completed, on a current cumulative cost to estimated total cost basis, using a reasonably consistent profit margin over the performance period. Due to the long-term nature of these projects, developing the estimates of costs often requires significant judgment.
Overall, total general and administrative expense increased as a percentage of revenue to 16.4% for the year ended December 31, 2024, as compared to 15.2% during the same period in 2023.
General and administrative expense decreased as a percentage of revenue to 22.8% in 2025, as compared to 29.3% in 2024. Marketing and selling expense Marketing and selling expense increased $949,997, or 16.9%, for the year ended December 31, 2025, as compared to the same period in 2024.
As discussed elsewhere in this Annual Report, risks to the U.S. and German economies could result in further economic uncertainty and volatility in the capital markets in the near term and could negatively affect our operations. 56 We intend to continue to monitor the effects of inflation, global supply chain shortages, and general economic conditions, and, if appropriate, we may alter our plans to address such concerns as they may arise.
We intend to continue to monitor the effects of inflation, global supply chain shortages, and general economic conditions, and, if appropriate, we may alter our plans to address such concerns as they may arise.
Management’s plans are to focus on acquiring new customer orders to replace lost revenue attributable to our previous media customer, to further grow and expand our business in both commercial and military markets, and to respond to the changing economic landscape by continuing to control hiring and operating costs, conserve cash, and focus on growth and margin expansion.Our results of operations for the years ended December 31, 2024 and 2023, partially benefited from such actions, particularly those resulting from a reduction in force in April 2023.
Management’s plans are to focus on acquiring new customer orders, to further grow and expand our business in both commercial and military markets, and to respond to the changing economic landscape by continuing to contlrol hiring and operating costs, conserve cash, and focus on growth and margin expansion.
If cash generated from operations is insufficient to satisfy our capital requirements, we may borrow up to $2,000,000 from our revolving line of credit with our bank (subject to satisfaction of certain borrowing conditions), may have to sell additional equity or debt securities, or may obtain expanded credit facilities to fund our operating expenses, pay our obligations, diversify our geographical reach, and grow the Company.
If cash generated from operations is insufficient to satisfy our capital requirements, we may borrow up to $2,000,000 from the Line of Credit (subject to satisfaction of certain borrowing conditions).
Research and development expense Research and development expense decreased $233,794, or 5.4%, for the year ended December 31, 2024, as compared to the same period in 2023. OSS saw a decrease of $347,383, or 9.1%.
Research and development expense Research and development expense increased $1,971,460, or 56.9%, for the year ended December 31, 2025, as compared to the same period in 2024.
The decrease is attributable to lower investment balances, partially offset by higher interest rates. Interest expense 55 Interest expense decreased $43,658 for the year ended December 31, 2024, as compared to the same period in 2023, as a result of the paydown of outstanding debt.
The decrease is primarily attributable to lower investment balances throughout the year. Interest expense Interest expense decreased $1,504 for the year ended December 31, 2025, as compared to the same period in 2024.
Cost of revenue also includes freight, allocated overhead costs and inventory write-offs and changes to our inventory and warranty reserves. Allocated overhead costs consist of certain facilities and utility costs. We expect cost of revenue to increase in absolute dollars with an improvement in margin, as product revenue increases.
Cost of revenue also includes freight, allocated overhead costs and inventory write-offs and changes to our inventory and warranty reserves. Allocated overhead costs consist of certain facilities and utility costs. Operating expenses Our operating expenses consist of general and administrative, sales and marketing, and research and development expenses.
Investing Activities During the year ended December 31, 2024, the Company generated cash of $4,190,787 from investing activities, as compared to $1,520,799 provided by investing activities during the prior year period in 2023, a net increase of $2,669,988.
Cash from Continuing Investing Activities During the year ended December 31, 2025, the Company generated cash of $3,028,561 from continuing investing activities, as compared to $4,325,278 provided by continuing investing activities during 2024, a net decrease of $1,296,717.
We cannot assure you that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, successfully integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot provide assurances that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all.
Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, successfully integrate acquired businesses into our current operations, or expand into new markets.
The change in the effective tax rate is primarily related to the effect of the valuation allowance for deferred tax assets initially recorded in 2024. Liquidity and capital resources Historically, our primary sources of liquidity have been provided by public and private offerings of our securities and revenues generated from our business operations.
Liquidity and capital resources Historically, our primary sources of liquidity have been provided by public and private offerings of our securities and revenues generated from our business operations. In 2025, we also received cash from the sale of our Bressner subsidiary.
Foreign currency transaction gains and losses are recorded in other income (expense), net in the consolidated statements of operations. OSS GmbH operates as an extension of OSS’ domestic operations and acquired Bressner Technology GmbH in October 2018. The functional currency of OSS GmbH is the Euro.
Foreign currency transaction gains and losses associated with discontinued operations are recorded in income from discontinued operations, net of income taxes in the consolidated statements of operations. The functional currency for the Bressner business was the Euro.
We expect to continue to incur expenses similar to the adjusted income from continuing operations and adjusted EPS financial adjustments 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. 64 The following table reconciles net loss to adjusted EPS and diluted earnings per share: For the Year Ended December 31, 2024 2023 Net loss $ (13,634,333 ) $ (6,716,176 ) Amortization of intangibles - 42,154 Impairment of goodwill - 5,630,788 Employee retention credit (ERC) - (1,716,727 ) Stock-based compensation expense 1,988,125 2,345,358 Non-GAAP net loss $ (11,646,208 ) $ (414,603 ) Non-GAAP net loss per share: Basic $ (0.56 ) $ (0.02 ) Diluted $ (0.56 ) $ (0.02 ) Weighted average common shares outstanding: Basic 20,953,397 20,854,777 Diluted 20,953,397 20,854,777 Free Cash Flow Free cash flow, a non-GAAP measure for reporting cash flow, is defined as cash provided by operating activities less capital expenditures for property and equipment, which includes capitalized software development costs.
The following table reconciles loss from continuing operations to adjusted EPS and diluted earnings per share: For the Year Ended December 31, 2025 2024 Loss from continuing operations $ (3,097,848 ) $ (15,168,287 ) Stock-based compensation expense 1,820,705 1,856,417 Non-GAAP net loss $ (1,277,143 ) $ (13,311,870 ) Non-GAAP net loss per share: Basic $ (0.06 ) $ (0.64 ) Diluted $ (0.06 ) $ (0.64 ) Weighted average common shares outstanding: Basic 22,403,267 20,953,397 Diluted 22,403,267 20,953,397 The following table reconciles loss from discontinued operations, net of income taxes to adjusted EPS and diluted earnings per share, which excludes the impact of the gain on sale net of transaction costs: For the Year Ended December 31, 2025 2024 Income from discontinued operations, net of income taxes $ 8,185,542 $ 1,533,954 Gain on sale, net of transaction expenses (6,707,021 ) - Stock-based compensation expense 132,331 131,708 Non-GAAP net income $ 1,610,852 $ 1,665,662 Non-GAAP net income per share: Basic $ 0.07 $ 0.08 Diluted $ 0.07 $ 0.08 Weighted average common shares outstanding: Basic 22,403,267 20,953,397 Diluted 23,205,705 21,432,890 61 The following table reconciles consolidated net income (loss) to adjusted EPS and diluted earnings per share, which excludes the impact of the gain on sale net of transaction costs: For the Year Ended December 31, 2025 2024 Net income (loss) $ 5,087,694 $ (13,634,333 ) Gain on sale, net of transaction expenses (6,707,021 ) - Stock-based compensation expense 1,953,036 1,988,125 Non-GAAP net income (loss) $ 333,709 $ (11,646,208 ) Non-GAAP net income (loss) per share: Basic $ 0.01 $ (0.56 ) Diluted $ 0.01 $ (0.56 ) Weighted average common shares outstanding: Basic 22,403,267 20,953,397 Diluted 23,205,705 20,953,397 Free Cash Flow Free cash flow, a non-GAAP measure for reporting cash flow, is defined as cash provided by operating activities less capital expenditures for property and equipment, which includes capitalized software development costs.
Cash used in operating activities in the year ended December 31, 2024 was the result of three components: i) a net loss of $13,634,333, ii) adjustments to net loss of $10,789,479 for non-cash items, and iii) a net reduction of 57 working capital of $2,736,756.
Net cashed used in continuing operating activities for the year ended December 31, 2025 was the result of three components: i) net loss from continuing operations of $3,097,848, ii) net adjustments to net loss from continuing operations for non-cash items of $2,505,081, of which the largest components were stock based compensation expense of $1,820,705 and depreciation of $771,552, and iii) a net increase in working capital associated with continuing operations of $5,958,321.
However, there can be no assurance that management’s efforts will be effective or the forecasted cash flows will be achieved.
Management believes that we have sufficient liquidity to satisfy our anticipated working capital requirements for our ongoing operations and obligations for at least the next twelve months. However, there can be no assurance that management’s efforts will be effective or the forecasted cash flows will be achieved.
During the year ended December 31, 2024, we had loss from operations of $13,356,813, with cash used in operating activities of $108,098. During the year ended December 31, 2023, we had a loss from operations of $7,923,152, with cash used in operating activities of $439,679.
During the year ended December 31, 2025, we had loss from operations related to continuing operations of $3,379,112, with cash used in continuing operating activities of $6,551,087. 52 During the year ended December 31, 2024, we had a loss from operations related to continuing operations of $15,663,485, with cash used in continuing operating activities of $2,596,232.
Cash provided by net changes in working capital for the year ended December 31, 2024 was $2,736,756, as compared to cash usage of $3,184,851 from net changes in working capital in the prior year. In 2024, the working capital reduction was due to changes in inventory levels, accounts payable, and accrued expenses and other liabilities.
Cash used from net changes in working capital associated with continuing operations for the year ended December 31, 2025 was $5,958,321, compared to cash provided by net changes in working capital associated with continuing operations of $2,489,623 in 2024.
Other income (expense), net Other income (expense), for the year ended December 31, 2024, resulted in net other income of $45,353, as compared to net other expense of $9,807 in the same period in 2023, for a net change of $55,160.
Other income (expense), net Other income (expense), for the year ended December 31, 2025, resulted in net other income of $16,309, as compared to net other income of $24,040 in the same period in 2024, for a net decrease of $7,731. The decrease was primarily driven by lower credit card rebates associated with certain rewards programs.
The following table summarizes our cash flows for the years ended December 31, 2024 and 2023: For the Year Ended December 31, Cash flows: 2024 2023 Net cash used in operating activities $ (108,098 ) $ (439,679 ) Net cash provided by investing activities $ 4,190,787 $ 1,520,799 Net cash used in financing activities $ (1,183,952 ) $ (171,344 ) Operating Activities During the year ended December 31, 2024, we used $108,098 in cash from operating activities, a reduction of $331,581 when compared to the cash used by operating activities of $439,679 during the same period in 2023.
The following table summarizes our cash flows for the years ended December 31, 2025 and 2024: For the Year Ended December 31, Cash flows: 2025 2024 Net cash used in continuing operating activities $ (6,551,087 ) $ (2,596,232 ) Net cash provided by continuing investing activities $ 3,028,561 $ 4,325,278 Net cash provided by (used in) continuing financing activities $ 11,933,200 $ (229,013 ) Net cash provided by discontinued operations $ 17,866,932 $ 1,398,705 Cash from Continuing Operating Activities During the year ended December 31, 2025, we used $6,551,087 in cash from continuing operating activities, compared to $2,596,232 in cash used in continuing operating activities in the year ended December 31, 2024.
Derivative financial instruments We may employ derivatives to manage certain currency market risks through the use of foreign exchange forward contracts. We do not use derivatives for trading or speculative purposes.
With the divestiture of the Bressner business in 2025, cumulative currency translation adjustments associated with our Bressner business were released from accumulated other comprehensive income (loss) and recorded within income from discontinued operations, net of income taxes. Derivative financial instruments We may employ derivatives to manage certain currency market risks through the use of foreign exchange forward contracts.
OSS’ segment gross margin percentage for the year ended December 31, 2024, was 2.5% as compared to 35.6% for the year ended December 31, 2023.
These increases were partially offset by lower sales to commercial aerospace customers as compared to the prior year. Gross Profit and Gross Margin Gross profit increased $15,359,559 for the year ended December 31, 2025 as compared to the same period in 2024. Gross margin percentage was 49.6% for 2025, compared to 2.5% for 2024.
Removed
Our systems also offer industry leading capabilities that occupy less physical space and require less power consumption. We deliver this high-end technology to our customers through the sale of equipment and embedded software. One Stop Systems, Inc. was originally incorporated as a California corporation in 1999, after initially being formed as a California limited liability company in 1998.
Added
We deliver this high-end technology to our customers through the sale of equipment and embedded software.
Removed
On December 14, 2017, the Company was reincorporated as a Delaware corporation in connection with its initial public offering. During the year ended December 31, 2015, the Company formed a wholly owned subsidiary in Germany, OSS GmbH. Then, in July 2016, the Company acquired Magma and its operations that complemented OSS' manufacture of custom high-performance compute servers.
Added
Recent Developments Sale of Bressner Technology GmbH On December 30, 2025, the Company signed and closed a Shares Purchsase Agreement (“SPA”) pursuant to which the Company sold 100% of the issued and outstanding limited liability company interests of OSS GmbH, the sole owner of Bressner GmbH, to Hiper Euro GmbH (“Buyer”).
Removed
On August 31, 2018, the Company acquired Concept Development, Inc. ("CDI"), which was located in Irvine, California. CDI specialized in the design and manufacture of custom high-performance computing systems for airborne in-flight entertainment, flight safety equipment, and networking systems. CDI’s business was fully integrated into the core operations of OSS as of June 1, 2020.
Added
The consummation of this transaction represented a strategic shift and prioritization of the Company's core business developing and manufacturing deployable edge computing systems for mission critical applications. At closing, the Company recognized a gain of $6,707,021.This gain is net of transaction costs that were determined to be directly attributable to the sale transaction.
Removed
On October 31, 2018, OSS GmbH acquired 100% of the outstanding equity of Bressner Technology GmbH, a Germany limited liability company located near Munich, Germany ("Bressner"). Bressner designs and manufactures standard and customized servers, panel PCs, and PCIe expansion systems.
Added
The base purchase price and associated gain is subject to adjustment for (i) a comparison of actual closing net working capital to a target amount, (ii) closing cash relative to a minimum cash amount (iii) closing indebtedness and (iv) seller transaction expenses. The Buyer is required to deliver a closing statement within 90 days following the closing.
Removed
Bressner also provides manufacturing, test, sales, and marketing services for customers throughout the EMEA. 49 Recent Developments The negative impact on the global economy and capital markets resulting from the geopolitical instability caused in part by the ongoing military conflict between Russia and Ukraine and Israel and Hamas, inflation and Federal Reserve and European Central Bank interest rate policy, and the weakness in the European and more specifically the German economy have contributed to economic uncertainty, which has negatively affected our operations.
Added
Any disputes regarding the adjustment are subject to resolution by an independent accounting firm. Any amounts payable to the Buyer will be satisfied first from the escrow account, with any remaining escrow balance released to the Company following final determination of the adjustment.
Removed
The risk of a recession in the U.S. remains, and volatility and recessionary conditions in Europe, and in Germany in particular, are expected to remain a concern for the near term.
Added
All operations, assets, and liabilities of the divested business - including the gain recognized on the sale - have been classified as discontinued operations.
Removed
Additionally, it is possible that U.S. policy changes and uncertainty about such changes, including changes and uncertainty as a result of the US presidential administration change, could increase market volatility and currency exchange rate fluctuations.
Added
Registered Direct Offering of Common Stock 47 On September 29, 2025, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with institutional investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors in a registered direct offering (the “Offering”) 2,500,000 shares of the Company’s Common Stock (the “Common Stock”), par value $0.0001 per share.
Removed
As a result of the foregoing, there is continued economic uncertainty and volatility in the capital markets in the near term that could negatively affect our operations.
Added
The Common Stock was sold pursuant to a prospectus supplement, filed on October 1, 2025 to the Registration Statement on Form S-3, originally filed on August 18, 2023 with the SEC (File No. 333-274073), and declared effective by the SEC on August 25, 2023.
Removed
We are continuing to experience increased pricing, long lead-times, unavailability of certain products and limited supplies, protracted delivery dates, changes in minimum order quantities to secure product, and/or shortages of certain parts and supplies that are necessary components for the products and services we offer to our customers.
Added
Net proceeds of the offering were $11,565,146, which is comprised of gross proceeds of $12,500,000 less Offering expenses of $934,854. The Offering closed on October 1, 2025. Management and Board Changes During 2025, the composition of the Company's Board of Directors changed. On April 12, 2025, Ms.
Removed
This was particularly true for products and supplies sourced from Taiwan in the most recent year. As a result, the Company is continuing to carry increased inventory balances to ensure availability of necessary products and to secure pricing.
Added
Gioia Messinger notified the board of directors of her resignation from and decision to not stand for re-election for the board of directors, effective as of the date of the Annual Meeting on May 14, 2025 ("2025 Annual Meeting").
Removed
These global issues and concerns regarding general economic decline or recession are impacting our business as well as some of our customers, who are continuing to experience downturns or uncertainty in their own business operations and revenue, and as a result, these customers may need to decrease or delay their technology spending, request pricing concessions or payment extensions, or seek to renegotiate their contracts.
Added
Her decision to resign from the board of directors was not related to any disagreement with the Company on any matter relating to its operations, policies, or practices. On April 16, 2025, Mr. Joe Manko submitted a letter to the board of directors, resigning from the board of directors, effective April 16, 2025. In the resignation letter, Mr.
Removed
During the year ended December 31, 2024, the Company experienced delays in orders due to certain customers’ funding or program delays. If such decreases in orders or postponements continue in the future, or we experience cancellations of orders, our operating results will be further impacted, and our revenues may decline in future periods.
Added
Manko cited certain disagreements with the Company's governance practices and the composition and leadership of the board. On May 7, 2025, Mr. Ken Potashner notified the board of directors of his intent to not stand for re-election to the board of directors. He continued to serve until the end of his term at the 2025 Annual Meeting. Mr.
Removed
These global issues and events may also have the effect of heightening many risks associated with our customers and supply chain. We may take further actions that alter our operations from time to time, or which we determine are in our best interests.
Added
Potashner's decision to not stand for re-election was not the result of any disagreement with the Company on any matter relating to the Company's operations, policies, or practices. At the 2025 Annual Meeting, the Company's stockholders elected Mitch Herbets, Mike Dumont, Greg Matz, David Bassett, and Mike Knowles to serve on the board of directors.

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