Company Quick10K Filing
One Stop Systems
Price2.99 EPS-0
Shares16 P/E-25
MCap49 P/FCF126
Net Debt-1 EBIT-1
TEV48 TEV/EBIT-36
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-12
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8-K 2018-02-02
8-K 2018-02-01

OSS 10Q Quarterly Report

Part 1 - Financial Information
Item 1. Financial Statements.
Note 1 - The Company and Basis of Presentation
Note 2 - Significant Accounting Policies
Note 3 - Accounts Receivable
Note 4 - Inventories
Note 5 - Long - Lived Intangile Assets
Note 6 - Accrued Expenses and Other Liabilities
Note 7 - Debt
Note 8 - Stockholders' Equity
Note 9 - Commitments and Contingencies
Note 10 - Related Party Transactions
Note 11 - Net Loss per Share
Note 12 - Revenue, Segment and Geographic Information
Note 13 - Subsequent Events
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 oss-ex311_9.htm
EX-31.2 oss-ex312_6.htm
EX-32.1 oss-ex321_8.htm
EX-32.2 oss-ex322_7.htm

One Stop Systems Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
40322416802016201720182020
Assets, Equity
1511851-12016201720182020
Rev, G Profit, Net Income
1511730-42016201720182020
Ops, Inv, Fin

10-Q 1 oss-10q_20200930.htm 10-Q oss-10q_20200930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

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: 001-38371

 

One Stop Systems, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

33-0885351

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

2235 Enterprise Street #110

Escondido, California  92029

(Address of principal executive offices including Zip Code

 

(760) 745-9883

(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

Common Stock, $0.0001 par value per share

OSS

The Nasdaq Capital Market

 

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.                   Yes  No 

 

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).                                                                     Yes   No 

 

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

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                    Yes     No 

As of October 31, 2020, the registrant had 16,620,908 shares of common stock (par value $0.0001) outstanding.

 

 


Table of Contents

 

 

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

Unaudited Consolidated Balance Sheets

 

3

 

 

Unaudited Consolidated Statements of Operations

 

4

 

 

Unaudited Consolidated Statements of Comprehensive Income (Loss)

 

5

 

 

Unaudited Consolidated Statement of Stockholders’ Equity

 

6

 

 

Unaudited Consolidated Statements of Cash Flows

 

8

 

 

Notes to Unaudited Consolidated Financial Statements

 

10

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

41

Item 4.

 

Controls and Procedures

 

41

 

 

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

 

Legal Proceedings

 

42

Item 1A.

 

Risk Factors

 

42

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

44

Item 3.

 

Defaults Upon Senior Securities

 

44

Item 4.

 

Mine Safety Disclosures

 

44

Item 5.

 

Other Information

 

44

Item 6.

 

Exhibits

 

45

 

 

Signatures

 

47

 

2


PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements.

ONE STOP SYSTEMS, INC. (OSS)

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash  and cash equivalents

 

$

5,519,829

 

 

$

5,185,321

 

Accounts receivable, net

 

 

9,744,171

 

 

 

11,667,157

 

Inventories, net

 

 

9,999,680

 

 

 

7,369,356

 

Prepaid expenses and other current assets

 

 

720,070

 

 

 

453,938

 

Total current assets

 

 

25,983,750

 

 

 

24,675,772

 

Property and equipment, net

 

 

3,567,582

 

 

 

3,568,564

 

Deposits and other

 

 

81,711

 

 

 

47,146

 

Deferred tax assets, net

 

 

3,939,546

 

 

 

3,019,823

 

Goodwill

 

 

7,120,510

 

 

 

7,120,510

 

Intangible assets, net

 

 

826,157

 

 

 

1,346,192

 

 

 

$

41,519,256

 

 

$

39,778,007

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,680,192

 

 

$

4,115,977

 

Accrued expenses and other liabilities

 

 

3,758,109

 

 

 

4,607,432

 

Current portion of notes payable, net of debt discount of $3,802 and

   $7,019, respectively  (Note 7)

 

 

1,433,200

 

 

 

1,377,751

 

Current portion of related-party notes payable, net of debt discount

   of $12,491 and $23,060, respectively  (Note 7)

 

 

345,586

 

 

 

561,441

 

Senior secured convertible note, net of discounts of $337,247 (Note 7)

 

 

1,299,117

 

 

 

-

 

Total current liabilities

 

 

10,516,204

 

 

 

10,662,601

 

Notes payable, net of current portion and debt discount of $0 and  $2,047,

   respectively  (Note 7)

 

 

-

 

 

 

149,301

 

Related-party notes payable, net of current portion and debt discount

   of $0 and $6,726 , respectively  (Note 7)

 

 

-

 

 

 

199,943

 

Senior secured convertible note, net of discounts of $51,707 (Note 7)

 

 

902,839

 

 

 

-

 

Paycheck protection plan note payable  (Note 7)

 

 

1,499,360

 

 

 

-

 

Total liabilities

 

 

12,918,403

 

 

 

11,011,845

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, $.0001 par value; 50,000,000 shares authorized;

   16,620,908 and 16,121,747 shares issued and outstanding, respectively

 

 

1,662

 

 

 

1,612

 

Additional paid-in capital

 

 

30,480,405

 

 

 

30,537,015

 

Noncontrolling interest

 

 

-

 

 

 

500

 

Accumulated other comprehensive income (loss)

 

 

124,382

 

 

 

(17,773

)

Accumulated deficit

 

 

(2,005,596

)

 

 

(1,755,192

)

Total stockholders’ equity

 

 

28,600,853

 

 

 

28,766,162

 

 

 

$

41,519,256

 

 

$

39,778,007

 

 

See accompanying notes to consolidated financial statements

3


ONE STOP SYSTEMS, INC. (OSS)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

12,976,058

 

 

$

14,938,964

 

 

$

37,961,023

 

 

$

39,883,099

 

Cost of revenue

 

 

8,074,445

 

 

 

9,909,045

 

 

 

26,338,527

 

 

 

27,028,399

 

Gross profit

 

 

4,901,613

 

 

 

5,029,919

 

 

 

11,622,496

 

 

 

12,854,700

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

1,817,499

 

 

 

2,190,003

 

 

 

6,208,922

 

 

 

6,468,021

 

Impairment of goodwill

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,697,394

 

Marketing and selling

 

 

1,103,384

 

 

 

1,383,965

 

 

 

3,137,833

 

 

 

3,758,901

 

Research and development

 

 

1,001,288

 

 

 

1,036,394

 

 

 

3,213,339

 

 

 

3,523,515

 

Total operating expenses

 

 

3,922,171

 

 

 

4,610,362

 

 

 

12,560,094

 

 

 

15,447,831

 

Income (loss) from operations

 

 

979,442

 

 

 

419,557

 

 

 

(937,598

)

 

 

(2,593,131

)

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

143,931

 

 

 

10,149

 

 

 

267,911

 

 

 

23,424

 

Interest expense

 

 

(174,205

)

 

 

(52,182

)

 

 

(393,175

)

 

 

(111,463

)

Other income (expense), net

 

 

(33,625

)

 

 

116,326

 

 

 

(38,598

)

 

 

91,819

 

Total other income (expense), net

 

 

(63,899

)

 

 

74,293

 

 

 

(163,862

)

 

 

3,780

 

Income (loss) before income taxes

 

 

915,543

 

 

 

493,850

 

 

 

(1,101,460

)

 

 

(2,589,351

)

Provision (benefit) for income taxes

 

 

57,753

 

 

 

(51,051

)

 

 

(851,056

)

 

 

(594,890

)

Net income (loss)  attributable to common stockholders

 

$

857,790

 

 

$

544,901

 

 

$

(250,404

)

 

$

(1,994,461

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common

   stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

 

$

0.03

 

 

$

(0.02

)

 

$

(0.13

)

Diluted

 

$

0.05

 

 

$

0.03

 

 

$

(0.02

)

 

$

(0.13

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

16,585,773

 

 

 

15,777,158

 

 

 

16,469,457

 

 

 

14,825,351

 

Diluted

 

 

17,018,614

 

 

 

16,390,206

 

 

 

16,469,457

 

 

 

14,825,351

 

 

See accompanying notes to consolidated financial statements

4


ONE STOP SYSTEMS, INC. (OSS)

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income (loss) attributable to common stockholders

 

$

857,790

 

 

$

544,901

 

 

$

(250,404

)

 

$

(1,994,461

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustment

 

 

130,280

 

 

 

(68,316

)

 

 

142,155

 

 

 

(66,382

)

Total other comprehensive income (loss)

 

 

130,280

 

 

 

(68,316

)

 

 

142,155

 

 

 

(66,382

)

Comprehensive income (loss)

 

$

988,070

 

 

$

476,585

 

 

$

(108,249

)

 

$

(2,060,843

)

 

See accompanying notes to consolidated financial statements

 

5


ONE STOP SYSTEMS, INC. (OSS)

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For The Three and Nine Months Ended September 30, 2020

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in-Capital

 

 

Noncontrolling

Interest

 

 

Comprehensive

income (loss)

 

 

Accumulated

Deficit

 

 

Stockholders'

Equity

 

Balance, January 1, 2020

 

 

16,121,747

 

 

$

1,612

 

 

$

30,537,015

 

 

$

500

 

 

$

(17,773

)

 

$

(1,755,192

)

 

$

28,766,162

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

293,139

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

293,139

 

Exercise of stock options

 

 

376,870

 

 

 

37

 

 

 

64,430

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

64,467

 

Return of capital upon dissolution of SkyScale

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(500

)

 

 

-

 

 

 

-

 

 

 

(500

)

Taxes paid on net issuance of employee stock

   options

 

 

-

 

 

 

-

 

 

 

(670,599

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(670,599

)

Currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,875

 

 

 

-

 

 

 

11,875

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,108,194

)

 

 

(1,108,194

)

Balance, June 30, 2020

 

 

16,498,617

 

 

$

1,649

 

 

$

30,223,985

 

 

$

-

 

 

$

(5,898

)

 

$

(2,863,386

)

 

$

27,356,350

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

210,280

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

210,280

 

Exercise of stock options and warrants

 

 

122,291

 

 

 

13

 

 

 

59,987

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

60,000

 

Taxes paid on net issuance of employee stock

   options

 

 

-

 

 

 

-

 

 

 

(13,847

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(13,847

)

Currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

130,280

 

 

 

-

 

 

 

130,280

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

857,790

 

 

 

857,790

 

Balance, September 30, 2020

 

 

16,620,908

 

 

$

1,662

 

 

$

30,480,405

 

 

$

-

 

 

$

124,382

 

 

$

(2,005,596

)

 

$

28,600,853

 

 

See accompanying notes to consolidated financial statements

6


ONE STOP SYSTEMS, INC. (OSS)

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For The Three and Nine Months Ended September 30, 2019

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in-Capital

 

 

Noncontrolling

Interest

 

 

Comprehensive

Income (loss)

 

 

Accumulated

Deficit

 

 

Stockholders'

Equity

 

Balance, January 1, 2019

 

 

14,216,328

 

 

$

1,422

 

 

$

27,424,113

 

 

$

500

 

 

$

1,142

 

 

$

(854,855

)

 

$

26,572,322

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

325,283

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

325,283

 

Exercise of stock options, RSU's and Warrants

 

 

281,319

 

 

 

28

 

 

 

21,121

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

21,149

 

Relative fair value of warrants issued with notes

   payable and notes payable to related parties

 

 

-

 

 

 

-

 

 

 

60,158

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60,158

 

Taxes paid on net issuance of employee stock

   options

 

 

 

 

 

 

 

 

 

 

(112,879

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(112,879

)

Currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,934

 

 

 

-

 

 

 

1,934

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,539,363

)

 

 

(2,539,363

)

Balance, June 30, 2019

 

 

14,497,647

 

 

$

1,450

 

 

$

27,717,796

 

 

$

500

 

 

$

3,076

 

 

$

(3,394,218

)

 

$

24,328,604

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

164,857

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

164,857

 

Exercise of stock options, RSU's and Warrants

 

 

48,981

 

 

 

5

 

 

 

7,995

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,000

 

Taxes paid on net issuance of employee stock

   options

 

 

-

 

 

 

-

 

 

 

(19,138

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(19,138

)

Proceeds from issuance of stock, net of issuance

   costs of $212,566

 

 

1,554,832

 

 

 

155

 

 

 

2,487,993

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,488,148

 

Currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(122,220

)

 

 

-

 

 

 

(122,220

)

Gain on forward contract

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

53,904

 

 

 

-

 

 

 

53,904

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

544,901

 

 

 

544,901

 

Balance, September 30, 2019

 

 

16,101,460

 

 

$

1,610

 

 

$

30,359,503

 

 

$

500

 

 

$

(65,240

)

 

$

(2,849,317

)

 

$

27,447,056

 

 

See accompanying notes to consolidated financial statements

 

 

7


 

ONE STOP SYSTEMS, INC. (OSS)

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

For the Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(250,404

)

 

$

(1,994,461

)

Adjustments to reconcile net loss to net cash (used in) provided by operating

   activities:

 

 

 

 

 

 

 

 

Deferred benefit for income taxes

 

 

(910,959

)

 

 

(275,949

)

Loss on foreign currency transactions

 

 

-

 

 

 

18,647

 

Gain on disposal of property and equipment

 

 

(1,542

)

 

 

(89,168

)

Provision for bad debt

 

 

10,950

 

 

 

495

 

Impairment of goodwill

 

 

-

 

 

 

1,697,394

 

Warranty reserves

 

 

(723

)

 

 

3,982

 

Amortization of deferred gain

 

 

(53,838

)

 

 

(45,316

)

Depreciation

 

 

688,727

 

 

 

430,347

 

Amortization of intangibles

 

 

520,035

 

 

 

809,540

 

Inventory reserves

 

 

382,472

 

 

 

191,012

 

Amortization of debt discount

 

 

249,882

 

 

 

13,786

 

Stock-based compensation expense

 

 

503,419

 

 

 

490,140

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,971,324

 

 

 

1,220,504

 

Inventories

 

 

(2,872,108

)

 

 

(1,664,165

)

Prepaid expenses and other current assets

 

 

(294,475

)

 

 

(106,598

)

Accounts payable

 

 

(484,327

)

 

 

(60,607

)

Accrued expenses and other liabilities

 

 

(843,823

)

 

 

(251,236

)

Net cash (used in) provided by operating activities

 

 

(1,385,390

)

 

 

388,347

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment, including capitalization of labor

   costs for test equipment and ERP

 

 

(664,385

)

 

 

(2,061,762

)

Proceeds from sales of property and equipment

 

 

1,542

 

 

 

1,050

 

Net cash used in investing activities

 

 

(662,843

)

 

 

(2,060,712

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of stock and stock options exercised

 

 

124,467

 

 

 

29,149

 

Payment of payroll taxes on net issuance of employee stock options

 

 

(684,446

)

 

 

(132,017

)

Proceeds from issuance of common stock

 

 

-