UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ________________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices including Zip Code
(
(Registrant’s telephone number, including area code)
(Former Name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading symbol |
Name of exchange on which registered |
The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 31, 2024, the registrant had
Table of Contents
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Item 1. |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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26 |
Item 3. |
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Item 4. |
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Item 1. |
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Item 1A |
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Item 2. |
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42 |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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42 |
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45 |
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2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations, and cash flows for the interim periods presented. We have presented financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these unaudited consolidated financial statements, management has evaluated events and transactions for potential recognition or disclosure through the date the unaudited consolidated financial statements were issued by filing with the SEC.
This Quarterly Report on Form 10-Q for the three month and nine month periods ended September 30, 2024 (this "Quarterly Report"), should be read in conjunction with our audited financial statements for the year ended December 31, 2023, included in our Annual Report on Form 10-K, filed with the SEC on March 21, 2024.
The results of operations for the three month and nine months periods ended September 30, 2024, are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2024.
3
ONE STOP SYSTEMS, INC. (OSS)
CONSOLIDATED BALANCE SHEETS
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Unaudited |
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Audited |
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September 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments (Note 3) |
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Accounts receivable, net (Note 4) |
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Inventories, net (Note 5) |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of use assets |
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Deposits and other |
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Deferred tax asset, net |
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- |
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Goodwill |
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Total Assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other liabilities (Note 6) |
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Current portion of operating lease obligation (Note 9) |
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Current portion of notes payable (Note 7) |
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Total current liabilities |
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Deferred tax liability, net |
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- |
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Operating lease obligation, net of current portion (Note 9) |
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Total liabilities |
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Stockholders’ equity |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total Liabilities and Stockholders' Equity |
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$ |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
4
ONE STOP SYSTEMS, INC. (OSS)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue: |
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Product |
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$ |
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$ |
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$ |
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$ |
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Customer funded development |
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Cost of revenue: |
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Product |
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Customer funded development |
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Gross (loss) profit |
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( |
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Operating expenses: |
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General and administrative |
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Impairment of goodwill |
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- |
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- |
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Marketing and selling |
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Research and development |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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Other income (expense), net: |
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Interest income |
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Interest expense |
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( |
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( |
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( |
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( |
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Employee retention credit (ERC) (Note 2) |
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- |
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- |
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Other income (expense), net |
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( |
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Total other income, net |
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Loss before income taxes |
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( |
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( |
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( |
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Provision for income taxes |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Net loss per share: |
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Basic |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes to unaudited consolidated financial statements.
5
ONE STOP SYSTEMS, INC. (OSS)
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net loss |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive (loss) income: |
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Net unrealized (loss) income on short-term investments |
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( |
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( |
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Currency translation adjustment |
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( |
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( |
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Total other comprehensive (loss) income |
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( |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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See accompanying notes to unaudited consolidated financial statements.
6
ONE STOP SYSTEMS, INC. (OSS)
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Three and Nine Month Periods Ended September 30, 2024
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Common Stock |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Additional |
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Comprehensive |
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(Deficit) Earnings |
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Stockholders' |
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Balance, January 1, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Exercise of stock options, RSUs and warrants |
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- |
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- |
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Taxes paid on net issuance of employee stock options |
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- |
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- |
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( |
) |
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- |
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- |
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( |
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Currency translation adjustment |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Net unrealized loss on short-term investments |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Net loss |
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- |
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- |
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- |
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- |
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( |
) |
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( |
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Balance, June 30, 2024 |
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( |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Exercise of stock options, RSUs and warrants |
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- |
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- |
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Taxes paid on net issuance of employee stock options |
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- |
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- |
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( |
) |
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- |
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- |
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( |
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Currency translation adjustment |
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- |
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- |
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- |
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- |
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Net unrealized loss on short-term investments |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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( |
) |
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( |
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Balance, September 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
7
ONE STOP SYSTEMS, INC. (OSS)
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Three and Nine Month Periods Ended September 30, 2023
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Common Stock |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Additional |
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Comprehensive |
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(Deficit) Earnings |
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Stockholders' |
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Balance, January 1, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Exercise of stock options, RSUs and warrants |
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- |
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- |
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Taxes paid on net issuance of employee stock options |
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- |
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- |
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( |
) |
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- |
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- |
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( |
) |
Currency translation adjustment |
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- |
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- |
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- |
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- |
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Net unrealized gain on short-term investments |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balance, June 30, 2023 |
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( |
) |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Exercise of stock options, RSUs and warrants |
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- |
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- |
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Taxes paid on net issuance of employee stock options |
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- |
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- |
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( |
) |
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- |
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- |
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( |
) |
Currency translation adjustment |
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- |
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- |
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- |
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( |
) |
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- |
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( |
) |
Net unrealized gain on short-term investments |
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- |
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- |
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- |
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( |
) |
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- |
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( |
) |
Net loss |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balance, September 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
8
ONE STOP SYSTEMS, INC. (OSS)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Nine Months Ended September 30, |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Deferred income taxes |
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( |
) |
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- |
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Loss (gain) on disposal of property and equipment |
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( |
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Provision for bad debt |
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Impairment of goodwill |
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- |
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Warranty reserves |
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( |
) |
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( |
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Amortization of intangibles |
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- |
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Depreciation |
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Amortization of right-of-use assets |
|
|
|
|
|
|
||
Inventory reserves |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Employee retention credit |
|
|
- |
|
|
|
( |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
|
|
Inventories |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
( |
) |
|
Accrued expenses and other liabilities |
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Redemption of short-term investment grade securities |
|
|
|
|
|
|
||
Purchases of property and equipment, including capitalization of labor |
|
|
( |
) |
|
|
( |
) |
Net cash provided by investing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from exercise of stock options and warrants |
|
|
|
|
|
|
||
Payment of payroll taxes on net issuance of employee stock options |
|
|
( |
) |
|
|
( |
) |
Repayments on notes payable |
|
|
( |
) |
|
|
( |
) |
Employee retention credit benefit |
|
|
- |
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
Net change in cash and cash equivalents |
|
|
|
|
|
|
||
Effect of exchange rates on cash |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
See accompanying notes to unaudited consolidated financial statements.
9
ONE STOP SYSTEMS, INC. (OSS)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid during the period for interest |
|
$ |
|
|
$ |
|
||
Cash paid during the period for income taxes |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of non-cash flow transactions: |
|
|
|
|
|
|
||
Reclassification of inventories to property and equipment |
|
$ |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
||
See accompanying notes to unaudited consolidated financial statements.
10
ONE STOP SYSTEMS, INC. (OSS)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Month Periods Ended September 30, 2024 and 2023
NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION
Nature of Operations
One Stop Systems, Inc. (“we,” “our,” “OSS,” or the “Company”) was originally incorporated as a California corporation in 1999, after initially being formed as a California limited liability company in 1998. On December 14, 2017, the Company was reincorporated as a Delaware corporation in connection with its initial public offering. The Company designs, manufactures, and markets specialized rugged high-performance compute, high speed switch fabrics and storage systems, which are designed to target edge applications for artificial intelligence (“AI”)/machine learning (“ML”), sensor processing, sensor fusion and autonomy. The Company markets its products to manufacturers of equipment used for autonomous vehicles, medical, industrial, and military applications, with special focus on platforms that move, such as planes, trucks, ships, submarines and mobile datacenters or command posts where sensor processing, sensor fusion, AI and ML are integrated to support such applications.
During the year ended December 31, 2015, the Company formed a wholly owned subsidiary in Germany, One Stop Systems, GmbH (“OSS GmbH”). In July 2016, the Company acquired Mission Technologies Group, Inc. (“Magma”) and its operations that complemented OSS' manufacture of custom high-performance compute servers.
On August 31, 2018, the Company acquired Concept Development Inc. (“CDI”) 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 the Company as of September 1, 2020.
On October 31, 2018, OSS GmbH acquired
The Company completed and fulfilled all remaining orders associated with its long-term media and entertainment customer during the year ended December 31, 2023, and does not anticipate further business from this customer in the future. This resulted from an acceleration in the customer’s investment in cloud technology and a drive towards less intelligent compute capability at the edge to reduce the costs of their componentry. This customer’s transition to cloud solutions had a negative impact on the Company’s results of operations for the year ended December 31, 2023 and for the nine months ended September 30, 2024.
With the Company's shift in focus to the development and sale of AI Transportables, we have significantly increased our efforts to penetrate the military and defense sectors. With the hiring of Michael Knowles and Robert Kalebaugh in mid-2023, each of whom has extensive experience in contracting in the defense industry, as our new president and chief executive officer, and vice president of sales, respectively, we further increased our emphasis and focus on the pursuit of revenue opportunities with major defense contractors and the military. We have also added relevant defense market experience to our board of directors through the appointment of Mr. Knowles, Vice Admiral Dumont and Mitch Herbets as directors.
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, have contributed to economic uncertainty. Component shortages and increased lead times on materials sourced from Taiwan, coupled with rising political tensions in Taiwan, resulted in supply chain delays and shortages that negatively impacted the Bressner business during the most recent quarter. With the recent decrease in interest rates, economists now are anticipating a soft landing for both the U.S. and in Germany. Additionally, it is possible that U.S. policy changes and
11
uncertainty about such changes, including changes and uncertainty as a result of the upcoming U.S. presidential election, could increase market volatility and currency exchange rate fluctuations. 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.
Due to the Company’s shift in focus to the military and defense sector, deviations from management’s expectations with respect to product sales and advances in technology that rendered certain inventory obsolete, during the quarter ended September 30, 2024, and certain of the Company's inventory had to be written down. The Company determined to take an inventory charge of $
These global issues and concerns 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. During the quarter ended September 30, 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.
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. In addition, we may decide to postpone or abandon planned investments in our business in response to changes in our business, which may impact our ability to attract and retain customers and our rate of innovation, either of which could harm our business.
As a result of these global issues, as well as other factors discussed in these notes, it has been difficult to accurately forecast our revenues or financial results. In addition, while the potential impact and duration of these issues on the economy and our business may be difficult to assess or predict, these world events have resulted in, and may continue to result in, significant disruption of global financial markets, and may reduce our ability to access additional capital, which could negatively affect our liquidity in the future. Our results of operations could be materially below our forecasts as well, which could adversely affect our results of operations, disappoint analysts and investors, or cause our stock price to decline.
Management’s plans with respect to the above are to continue their efforts towards responding to the changing economic landscape, to continue to control costs, conserve cash, strengthen margins through the introduction of new product lines focusing on AI compute capabilities for military and industrial applications, autonomous truck driving and improve company-wide execution through increased investments in product marketing.
Basis of Presentation
The accompanying consolidated financial statements have been prepared on an accrual basis of accounting in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).
The unaudited consolidated financial statements herein have been prepared by the Company pursuant to the rules and regulations of the SEC. The accompanying interim unaudited consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest year ended December 31, 2023.
Accordingly, note disclosures which would substantially duplicate the disclosures contained in the December 31, 2023 audited consolidated financial statements have been omitted from these interim unaudited consolidated financial statements. The Company’s management has evaluated all subsequent events and transactions through the date of filing this Quarterly Report.
12
In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements. For further information, refer to the audited consolidated financial statements and notes for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 21, 2024.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current year presentation. In the current year, the Company began disclosing as a separate component of revenue and cost of sales, the amounts related to customer funded development revenue and costs. Customer funded development is revenue from customers for which the Company's performance obligations are satisfied over time and for which the customer receives benefits as the Company performs. Products revenue performance obligations are typically satisfied at a point in time, predominately upon shipment.
Gross versus net revenue
Accounting Standards Codification ("ASC") 606 provides guidance on proper recognition of principal versus agent considerations, which is used to determine gross versus net revenue recognition. Under ASC 606, the core objective of the guidance on gross versus net revenue recognition is to help determine whether the Company is a principal or an agent in a transaction. In general, the primary difference between these two is the performance obligation being satisfied by the company recognizing revenue. The principal has a performance obligation to provide the desired goods or services to the end customer, whereas the agent arranges for the principal to provide the desired goods or services. Additionally, a fundamental characteristic of a principal in a transaction is control. A principal substantively controls the goods and services before they are transferred to the customer as well as controlling the price of the good or service being provided.
The Company is an agent if the Company's performance obligation is to arrange for the delivery of the specified good or service by another party. An entity that is an agent does not control the specified good or service provided by another party before that good or service is transferred to the customer. During the three and nine month periods ended September 30, 2024, the Company recorded net agent consideration as revenue of $
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of OSS, which include the operating results of its wholly owned subsidiary, OSS GmbH, and its wholly owned subsidiary Bressner. Intercompany balances and transactions have been eliminated in consolidation.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
There have been no changes to our accounting policies disclosed in our audited consolidated financial statements and the related notes for the year ended December 31, 2023.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions.
On an ongoing basis, our management evaluates these estimates and assumptions, including those related to determination of standalone selling prices of our products and services, allowance for credit losses and sales reserves, income tax valuations, stock-based compensation, goodwill, intangible assets and inventory valuations and recoverability. We base our estimates on historical data and experience, as well as various other factors that our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities.
13
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually or when we deem that a triggering event has occurred. Management reviews the impairment of goodwill for impairment annually at year end.
In June 2023, management performed an interim impairment test of goodwill, as a result of the overall financial performance of OSS as compared to plan, the transition of and focus on our product strategy of AI Transportables and the defense industry, and deferment of certain orders. As a result of this interim evaluation, the Company recorded an impairment loss to goodwill of $
Due to the Ukraine war, the continuing conflicts between Israel and Hamas, inflationary pressures, other macroeconomic factors and the loss of our previous media and entertainment customer, there has been uncertainty and disruption in the global economy, financial markets and our ongoing operations. We are not aware of any specific event or circumstance that would require an update to our estimates or assumptions or a revision of the carrying value of our assets or liabilities as of the date of this Quarterly Report. These estimates and assumptions may change as new events occur and additional information is obtained. As a result, actual results could differ materially from these estimates and assumptions.
Recent Accounting Pronouncements
Two new Accounting Standard Updates ("ASU’s") have recently been issued, neither of which are currently expected to significantly impact the Company.
On November 27, 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 280): Improvements to reportable segment disclosures." This amendment enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable “investors to better understand an entity’s overall performance” and assess “potential future cash flows.” The adoption of this amendment is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Management does not anticipate any material impact on the consolidated financial statements.
ASU 2023-09: Income Taxes (Topic 740) — Improvements to Income Tax Disclosures (ASU 2023-09) enhances the disclosure requirements related to income taxes. The most significant changes are requiring additional disaggregation in the rate reconciliation disclosure (for public business entities) and income taxes paid disclosure (for all entities). The changes to the rate reconciliation disclosures require entities to disclose specific categories in the rate reconciliation by taxing jurisdiction for any individual reconciling item that exceeds 5% of pretax income multiplied by the statutory tax rate. The new guidance will be effective for public business entities for annual periods beginning after December 15, 2024. For all other entities, the guidance will be effective for annual periods beginning after December 15, 2025. Early adoption is permitted for all entities.
Employee Retention Credit
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") to provide certain relief as a result of the COVID-19 pandemic. The CARES Act provided tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit (“ERC”). The ERC was designed to encourage businesses to keep employees on the payroll during the COVID-19 pandemic. As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, we accounted for the ERC funding consistent with our accounting treatment and reporting of the forgiveness of our Paycheck Protection Program ("PPP") Loan.
The credit is based upon the number of employees in any given quarter in the years 2020 and 2021. For the year 2020, the maximum credit was based upon the lesser of
14
first three quarters of the year 2021, the maximum quarterly credit was based upon the lesser of
The Company applied for the ERC program and as of September 30, 2023, had received a total of $
NOTE 3 - SHORT-TERM INVESTMENTS
The Company’s short-term investments by significant investment category as of September 30, 2024, were as follows:
Description |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Accrued |
|
|
Estimated |
|
|||||
Level 1: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash alternatives |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||||
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
||||
The Company’s short-term investments by significant investment category as of December 31, 2023, were as follows:
Description |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Accrued |
|
|
Estimated |
|
|||||
Level 1: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash alternatives |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||||
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
||||
Cash alternatives represent cash balances in savings accounts and U.S. Treasury Bills that are temporarily on-hand that are immediately available for investments in accordance with the Company’s investment policy.
The Company typically invests in highly rated securities and its investment policy limits the amount of credit exposure to any
NOTE 4 -ACCOUNTS RECEIVABLE
Accounts receivable, net consisted of the following:
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Accounts receivable |
|
$ |
|
|
$ |
|
||
Less: allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
15
Provision (recovery) for bad debt expense related to accounts receivable was $
The following tables represent the changes in the allowance for credit losses associated with our trade receivables for the nine month periods ended September 30, 2024 and 2023.
|
|
For the Nine Months Ended September 30, |
|
|||||
Allowance for Credit Losses |
|
2024 |
|
|
2023 |
|
||
Balance on January 1, |
|
$ |
( |
) |
|
$ |
( |
) |
Provision charged to expense |
|
|
( |
) |
|
|
( |
) |
Receivables written-off |
|
|
- |
|
|
|
- |
|
Recoveries of receivables previously written-off |
|
|
- |
|
|
|
- |
|
Effects of change in exchange rates |
||||||||