One Stop Systems, Inc.

in the first quarter of 2022 increased $708,000 to $5.1 million. The gross margin for our core OSS business sequentially improved from 33.2% in Q4 2021 to 35.7%, but a decrease of 2.2 percentage points from the prior year due to continued growth and success of our media and entertainment customer. Bresner's gross margin percentage sequentially improved from 19.4% in Q4 2021 to 21%, but reduced from 24.9% in the prior year due to exchange rates and increases in material and transportation costs. overall gross margins for 30.1 percent for the quarter a sequential improvement from 28.3 percent in q4 2021 but a 3.2 percentage point decrease compared to the prior year of 33.3 much of these changes in margins were primarily attributable to the strength of the media and pressure business and due to the timing of shipments to our large military customers. Historically, the predominance of these shipments has occurred in Q3 and Q4 and will be consistent with our shipping schedule for this year. However, in the prior year, there were strong shipments in Q1 2021 due to deferred shipments from Q4 2020. Although the margin percentage is lower, profitability is higher. We are continuing to take action to improve margins through price increases, improve quoting capabilities reflecting real-time parts pricing, manufacturing efficiencies, introduction of higher value standard products, and management's focus on this company imperative. Quarterly revenues increased 28% with our overall quarterly operating expenses only increasing 8% to $4.5 million. Operating expenses as a percentage of revenue decreased to 26.3% compared to 31.1% in the same year-ago quarter. The marginal increase and operating expenses was primarily due to a return to a more normal business environment with fewer COVID-19 restrictions. As such, the company has returned to participating in trade shows, business travel, marketing activities, and adding certain strategic employee hires. GAAP net income totals $579,000 or 3 cents per basic and diluted share, increasing from net income of $41,000 or 0 cents per basic and diluted share. Now, on a non-GAAP basis, net income was $978,000 or 5 cents per basic and diluted share for the quarter, up from $643,000 or 3 cents per basic and diluted share. Adjusted EBITDA, a non-GAAP metric, was 1.4 million or 8.3% of quarterly revenue as compared to 1.1 million or 8% of quarterly revenue in the prior year. All three of these profitable metrics were company records for the first quarter of the year. Now, turning to our balance sheet. On March 31, 2022, cash and cash equivalents totaled $2.2 million, but short-term investments have $13.6 million, combining for $15.8 million. This compares to cash and cash equivalents and short-term investments totaling $19.6 million on December 31, 2021. While OSS is cash flow positive, we are purposely putting our strong cash position to work with carefully thought out inventory investments. Cash provides us stability and flexibility to be able to be responsive to changes in our business and to issues imposed by external global economic influences. This completes our financial review, and now I'd like to turn the call over to our Chief Sales and Marketing Officer, Jim Eisen. Jim?

Thank you, John, and good afternoon, everyone. In Q1, we generated six new major program wins, including four in autonomous trucking, further validating the value OSS brings to this market. We also added 10 new pending major programs during the quarter, which is the largest increase ever in a single quarter. Six of these 10 opportunities are AI transportable programs for autonomous trucks, military aircraft, and maritime applications. For reference, our pending major programs have a 60% or greater expectation of closing. Our current pipeline of pending major programs has expanded to a record 34, with 20 involving AI transportable applications because of our focused efforts on this market. Now, turning to our thought leader products, our flagship Rigel Edge supercomputer continues to provide pull in autonomous truck and military AI applications, adding opportunities at the high end where, according to our customers, only our products have both the AI performance and ability to survive at the edge. To complement our Rigel compute system, we have recently introduced the Centauri rugged storage accelerator designed in lockstep with the needs of our autonomous trucking customers. While an autonomous truck is on the road, vast amounts of data are generated from the numerous sensors deployed around the vehicle. including LIDAR, radar, telemetry, and video. This information is analyzed by the autonomous driving system to learn or improve its self-driving capabilities. Centauri is a rugged storage accelerator system that uses the highest performance PCI Express Gen 4 NVMe memory while providing high capacity in a compact, hot-swappable canister that slides into the Centauri chassis. Centauri connects to an OSS rugged SDS server in the truck cab via PCI Express Gen 4 and stores AI data. Since Centauri is designed to be remote mounted in an externally accessible compartment or the saddlebag of a long-haul autonomous truck, the data canister can be quickly removed, replaced, and transported to the truck depot, keeping the truck on the road as much as possible. The previously mentioned products are currently based on Gen 4 PCI Express technology, but we are well underway with the next generation. PCI Express Gen 5 will bring product advancements in 2022 to our core accelerator technology that allows us to bring the latest products to the rugged edge without compromise. PCI Express Gen 5 doubles the bandwidth of our current leading-edge Gen 4 products for compute, NVMe storage, and accelerator systems such as Rigel and Centauri. We recently posted through social media channels the industry's first known successful Gen 5 PCI Express over 2 meter copper cable data transfer test and look forward to official product releases, demonstrations, and product shipments of this leading edge technology throughout the year. Our ability to lead with technology like PCI Express Gen 5 is one of our differentiating capabilities that distinguishes us from the highly fragmented competitive landscape. Our talented engineering team is progressing on multiple advancements in system management, power, and disruptive liquid cooling technologies, allowing our products such as Rigel and our SDS product line to be deployed in more AI transportable applications. On the marketing front, we have exhibited at the Navy Sea Airspace Show and the AUVSI Exponential Autonomous Vehicle Conference this quarter, where we also moderated an expert autonomous truck panel. The panel addressed the challenges and market dynamics of the truck market. Many of the same challenges exist in our other AI transportable verticals, including mining, drones, and watercraft, where OSS can help customers in these markets generate an immediate and strong ROI. In all, I'm excited about our growing successes, breakthroughs, and increasing activity in AI transportables. Now I'd like to turn the call back over to Dave.

Thank you, John and Jim. As I believe we have demonstrated, we have continued to execute, providing solid results, primarily from our traditional customer base and applications. Although our value proposition in some of these historic businesses, like media and entertainment, as well as Breschner and Europe, may not generate the margin percentages that we seek in the future years, they generate positive margin dollars and income for OSS. We are pleased this part of the business continues to grow, and help pay for our AI transportable investments. We identified, put together a new strategic plan, and have more recently been able to validate this multi-billion dollar opportunity while remaining cash flow positive, profitable, and not taking on debt. We have done this during a crazy time in history, and our cash position has allowed us to invest in higher inventory levels to assure growth and prosperity