Exhibit 99.2

 

 

 

 

 

 

Bressner Technology GmbH

FINANCIAL STATEMENTS AND INDEPENDENT ACCOUNTANT’S REVIEW REPORT

AS OF SEPTEMBER 30, 2018 AND FOR THE NINE MONTH

PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

 


Bressner Technology GmbH

Table of Contents

 

1.

Accountant’s Review Report

3

2.

Balance Sheet according to local GAAP (unaudited)

5

3.

Statements of Income according to local GAAP (unaudited)

6

4.

Notes according to local GAAP (unaudited)

7

5.

German GAAP / US-GAAP reconciliation of the balance sheet as of September 30, 2018 (unaudited)

9

6.

German GAAP / US-GAAP reconciliation of the income statement for the nine months ended September 30, 2018 (unaudited)

11

7.

German GAAP / US-GAAP reconciliation of the income statement for the nine months ended September 30, 2017 (unaudited)

12

8.

Statements of Cash Flows for the nine months ended September 30, 2018 (unaudited)

13

9.

Statements of Cash Flows for the nine months ended September 30, 2017 (unaudited)

14

10.

Statement of Stockholders’ Equity for the nine months ended of September 30, 2018 (unaudited)

14

 

 

 

 

2


 

 

1.

Accountant’s Review Report

INDEPENDENT ACCOUNTANT’S REVIEW REPORT

One Stop Systems, Inc.

2235 Enterprise Street #110

Escondido, CA 92029

United States of America

Bressner Technology GmbH

Industriestr. 51

82194 Gröbenzell

Germany

We have reviewed the accompanying financial statements of Bressner Technology GmbH (the “Company”) which comprise the balance sheet as of September 30, 2018, and the related statements of income for the nine month periods ended September 30, 2018 and 2017, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements, which, as described in Note 4 to the financial statements, have been prepared in accordance with accounting principles generally accepted in the Federal Republic of Germany; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error.

Accountant’s Responsibility

Our responsibility is to conduct the review engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the Federal Republic of Germany. We believe that the results of our procedures provide a reasonable basis for our conclusion.

Accountant’s Conclusion

3


 

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the Federal Republic of Germany.

Emphasis of Matter – Basis of Accounting

We draw attention to Note 4 of the financial statements, which describes the basis of accounting. The financial statements are prepared in accordance with accounting principles generally accepted in the Federal Republic of Germany (“Local GAAP”), which is a basis of accounting other than accounting principles generally accepted in the United States of America (“US GAAP”). Therefore, we draw attention to Notes 5-10, which reconcile the results for the periods from Local GAAP to US GAAP, due to differences that exist between the two. Our conclusion is not modified with respect to this matter.

Emphasis of Matter – Acquisition of the Company

On October 31, 2018, the Company was acquired by One Stop Systems, Inc., a publicly-traded company.

Munich/Germany, 13 December 2018

BDO AG

Wirtschaftsprüfungsgesellschaft

 

/s/ Uwe Braunschläger

 

/s/ Frank Werner

 

Uwe Braunschläger

 

Frank Werner

 

Wirtschaftsprüfer, CPA

 

Wirtschaftsprüfer

 

(German Public Auditor)

 

(German Public Auditor)

 

 


4


 

 

2.

Balance Sheets according to local GAAP (unaudited)

 

 

 

 

30.09.2018

 

 

 

 

A.

 

FIXED ASSETS

 

 

I.

 

Intangible assets

 

 

1.

 

Software

 

149.399

2.

 

Prepayment for software

 

-

II.

 

Property, plant and equipment

 

 

 

 

Fixtures, fittings and equipment

 

90.950

 

 

Total fixed assets

 

240.349

B.

 

CURRENT ASSETS

 

 

I.

 

Inventories

 

 

1.

 

Finished goods

 

3.543.792

2.

 

Advance payment

 

38.213

 

 

 

 

3.582.005

II.

 

Accounts receivable and other assets

 

 

1.

 

Accounts receivable from trading

 

1.667.128

2.

 

Other assets

 

235.312

 

 

Total current assets

 

1.902.440

III.

 

Cash on hand and cash in banks

 

96.761

C.

 

DEFERRED CHARGES AND PREPAID EXPENSES

 

19.716

 

 

 

 

5.841.271

 

 

 

 

30.09.2018

 

 

 

 

A.

 

STOCKHOLDERS‘ EQUITY

 

 

I.

 

Capital subscribed

 

30.000

II.

 

Capital reserve

 

56.425

III.

 

Earnings reserves

 

485.000

IV

 

Retained earnings

 

2.408.708

 

 

Total stockholders‘ equity

 

2.980.133

B.

 

PROVISIONS AND ACCRUED LIABILITIES

 

 

1.

 

Accrued taxes

 

42.960

2.

 

Other provisions and accrued liabilities

 

549.117

 

 

 

 

592.077

C.

 

LIABILITIES

 

 

1.

 

Liabilities due to banks

 

1.446.344

2.

 

Advance payments received on account of orders

 

2.000

3.

 

Trade accounts payable

 

754.692

4.

 

Other liabilities

 

66.025

 

 

Total liabilities

 

2.861.138

 

 

 

 

5.841.271

 

 

 

 

 

 

5


 

 

3.

Statements of Income according to local GAAP (unaudited)

 

 

30.09.2018

 

30.09.2017

 

 

 

1. Sales

 

10.155.600

 

10.748.276

2. Other operating income

 

220.771

 

394.896

3. Cost of materials

 

 

 

 

a) Cost of supplies

 

-7.232.997

 

-7.905.727

b) Cost of purchased services

 

-

 

-3.674

4. Personnel expenses

 

 

 

 

a) Wages and salaries

 

-1.478.921

 

-1.398.415

b) Social security, pension and other benefit costs

 

-249.236

 

-255.127

5. Depreciation

 

-50.972

 

-34.332

6. Other operating expenses

 

-784.727

 

-1.026.046

7. Interest income

 

15

 

-

8. Interest and similar expenses

 

-14.957

 

-22.683

9. Taxes on income

 

-157.172

 

-136.648

10. Other taxes

 

-4.027

 

-1.122

11. Net income

 

403.377

 

359.398

12. Net income from prior years

 

2.005.331

 

1.563.859

13. Profit distributions

 

-

 

-250.000

14. Retained earnings

 

2.408.708

 

1.673.257

 


6


 

 

4.

Notes according to local GAAP (unaudited)

I. General disclosures to the financial statements

The financial statements as of 30 September 2018 and for the nine month periods ended 30 September 2018 and 2017 were prepared in accordance with the regulations of the German Commercial Code (HGB) and the Limited Liability Company Act (GmbHG).

In 2018 and 2017 the company is a small-sized corporation in accordance with § 267 HGB and exercises the exemptions for small-sized corporations as stipulated in § 288 HGB.

The Company's financial year corresponds to the calendar year. The reporting period for the review is from January 1 to September 30.

II. Disclosures to the accounting and valuation methods

a. General disclosures

The financial statements have been prepared subject to the general statement regulations set out in sections 246-251 HGB and also subject to the special statement regulations for corporations, sections 268-274a, 276-278, and subject to the general valuation regulations of sections 252-256 HGB.

The classification of the balance sheet and the income statement was made in accordance to §§ 266, 275 HGB and § 42 GmbHG. The income statement was prepared in accordance with the total cost method. The financial statements were prepared under the assumption of going concern in accordance with § 252 sec. 1 no. 2 HGB.

The accounting and valuation methods have been retained unchanged compared to the previous year, except where new knowledge required a diverging valuation.

b. Disclosures to individual balance sheet items

Intangible assets acquired in return for payment are recognized at cost and are subject to straight-line amortization over the course of their expected useful lives of 3 to 5 years.

Tangible assets are recognized at cost, less accumulated depreciation and are depreciated on a straight-line basis according to their expected useful lives of 3 to 13 years.

Low-cost assets with an individual acquisition cost of up to EUR 410 are depreciated immediately. It is assumed that they are disposed of within the fiscal year.

Inventories are recognized at acquisition or at manufacturing cost according to § 255 sec. 2 HGB. Appropriate valuation allowances were made for inventory risks resulting from the duration of storage and marketability.

7


 

Receivables and other assets are stated at their nominal value or present value. Appropriate individual value adjustments were made for recognizable risks. The general credit risk inherent in trade receivables is covered by a general allowance taken on the net receivables that have not been individually adjusted for specific circumstances already.

Cash in hand and bank balances are recognized at nominal value.

The Company‘s subscribed capital amounts to EUR 30.000 and remains unchanged compared to the previous year.

Provisions consider all identifiable contingent liabilities and are set up in the amount necessary for repayment in accordance with reasonable commercial judgment. Provisions due after more than one year are discounted at average market interest rates (published by the Federal Bank of Germany) in accordance with their residual term. In particular, other provisions take into account obligations from warranties and royalties.

Liabilities are recognized with the amount repayable.

Assets and liabilities denominated in foreign currencies are translated at the mean spot exchange rate prevailing on the balance sheet date following the principles of § 256a HGB.

III. Further comments on the balance sheet

Other assets contain items with a remaining term of more than one year in the amount of EUR 0 (prior year: EUR 22.604). All other receivables and other assets fall due within one year.

The balance sheet profit includes retained earnings in the amount of EUR 2.005.331.

Liabilities with a remaining term of up to one year amount to EUR 1.935.126 (prior year: EUR 2.660.629) while liabilities with a remaining term of more than one year and up to five years amount to EUR 173.650 (prior year: EUR: 298.033).

Other financial obligations in the amount of EUR 150.967 result from the rental contract for the office and storage units in Gröbenzell and from software updates.

Currency forwards were used for hedging foreign currency risks. Arising losses as of balance sheet date will be shown on the balance sheet.

IV. Other mandatory disclosures

In the financial year the company had an average of 24 employees.

The company is legally represented by:

Mr. Josef Bressner, Managing Director

Mr. Martin Stiborski, Managing Director

Gröbenzell, 13 December 2018

 

Josef Bressner

 

Martin Stiborski

8


 

 

5.

German GAAP / US-GAAP reconciliation of the balance sheet as of September 30, 2018 (unaudited)

 

Assets

 

 

 

 

 

 

 

 

 

 

German GAAP

 

Reconciliation

 

US-GAAP

 

Note

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

96.761

 

-

 

96.761

 

 

Accounts receivables, net

 

1.667.128

 

7.741

 

1.674.869

 

A

Inventories, net

 

3.543.792

 

-

 

3.543.792

 

 

Prepaid expenses and other assets

 

293.241

 

9.836

 

303.077

 

B

Total current assets

 

5.600.922

 

17.577

 

5.618.499

 

 

Property, plant and equipment, net

 

90.950

 

-

 

90.950

 

 

Internally developed software

 

-

 

117.436

 

117.436

 

C

Other intangible assets, net

 

149.399

 

-

 

149.399

 

 

Total assets

 

5.841.271

 

135.013

 

5.976.284

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

German GAAP

 

Reconciliation

 

US-GAAP

 

Note

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

754.692

 

-

 

754.692

 

 

Accrued expenses and other liabilities

 

68.025

 

-

 

68.025

 

 

Tax and other provisions

 

592.077

 

-

 

592.077

 

 

Current portion of long-term debt

 

147.694

 

-

 

147.694

 

 

Total current liabilities

 

1.562.488

 

 

 

1.562.488

 

 

Long-term debt

 

1.298.650

 

-

 

1.298.650

 

 

Deferred tax liability

 

-

 

41.400

 

41.400

 

D

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock

 

30.000

 

-

 

30.000

 

 

Additional paid-in capital

 

56.425

 

-

 

56.425

 

 

Retained earnings

 

2.893.708

 

93.613

 

2.987.321

 

E

Total stockholders’ equity

 

2.980.133

 

93.613

 

3.073.746

 

 

Total liabilities and stockholders’ equity

 

5.841.271

 

135.013

 

5.976.284

 

 

9


 

 

General Note:

 

 

 

 

 

 

 

The grouping of the balance sheet accounts under German GAAP differs from the US-GAAP classification of accounts. For the purpose of reconciliation, the balance sheet accounts for German GAAP have been re-grouped to follow the US-GAAP classification.

 

 

 

 

Note A:

 

 

 

 

 

 

 

In German-GAAP a general bad-debt provision in the amount of € 7.741 was recognized without regard to a specific risk or age of receivables.

 

 

 

 

Note B:

 

 

 

 

 

 

 

In addition to German GAAP the account contains unrealized gains on forward exchange contracts in the amount of € 9.836.

 

 

 

 

Note C:

 

 

 

 

 

 

 

The requirement for capitalization of internally developed software was met under FASB ASC 985-20-25, Costs of Software to be Sold, Leased, or Marketed. The completion of development was determined to have occurred in January 2016, resulting in € 193.000 of labor costs capitalized. The adjustment amount at year-end is net of accumulated amortization during the year. Costs for research and development prior to achievement of technological feasibility, as well as costs associated with marketing and selling the software, have been expensed as incurred. The management estimates the duration of use to be seven years.

 

 

 

 

 

 

 

 

Note D:

 

 

 

 

 

 

 

The below outlines local GAAP to US-GAAP differences resulting in deferred tax impacts in the respective amounts, using an average tax rate of 30%:

 

 

 

 

Discounting of provisions

 

3.218

 

Self-developed software

 

35.231

 

Unrealized gains and losses

 

2.951

 

Total

 

41.400

 

 

Note E:

Difference is due to accumulated result of reconciliation adjustments impacting the Statements of Income.

10


 

 

6.

German GAAP / US-GAAP reconciliation of the income statement for the nine months ended September 30, 2018 (unaudited)

 

 

German GAAP

 

Reconciliation

 

US-GAAP

 

Note

 

 

 

 

 

 

Net revenue

 

10.155.600

 

 

10.155.600

 

 

Cost of sales

 

(7.633.871)

 

(20.724)

 

(7.654.595)

 

A

Gross profit

 

2.521.729

 

(20.724)

 

2.501.005

 

 

Selling and marketing

 

(999,407)

 

 

 

(999,407)

 

 

Administrative expenses

 

(913,792)

 

27.194

 

(886,598)

 

B

Research and development expenses

 

(223.903)

 

 

(223.903)

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

Other income

 

190.865

 

8.976

 

199.841

 

C

Interest expenses (income)

 

(14.943)

 

 

(14.943)

 

 

Income before provisions for income taxes

 

560.549

 

15.446

 

575.995

 

 

Income taxes

 

(157.172)

 

(4.459)

 

(161.631)

 

D

Net income

 

403.377

 

10.987

 

414.364

 

 

 

General Note:

 

 

 

 

 

 

 

 

 

The profit and loss statement under German GAAP follows the total cost accounting method, whereas US-GAAP requires the cost of sales method. The classification of the profit and loss statement under German GAAP as shown in the financial statements has been adjusted to the cost of sales method for the purpose of this reconciliation.

 

 

 

 

 

Note A:

 

 

 

 

 

 

 

 

 

The difference is due to depreciation of the internally developed software.

 

 

 

 

 

 

 

 

 

Note B:

 

 

 

 

 

 

 

 

 

The differences arise from unrealized gains and losses on forward exchange contracts, which are not realized under German GAAP but recognized through profit and loss under US-GAAP.

 

 

 

 

 

Note C:

 

 

 

 

 

 

 

 

 

The amount of € 8.976 reflects the adjustment of bad debt expenses during the year.

 

 

 

 

 

 

 

 

Note D:

 

 

 

 

 

 

 

 

 

The amount of € 4.459 reflects the income statement effect of the change in deferred taxes of the year.

 

11


 

 

7.

German GAAP / US-GAAP reconciliation of the income statement for the nine months ended September 30, 2017 (unaudited)

 

 

German GAAP

 

Reconciliation

 

US-GAAP

 

Note

 

 

 

 

 

 

Net revenue

 

10.748.276

 

 

10.748.276

 

 

Cost of sales

 

(8.269.616)

 

(20.724)

 

(8.290.340)

 

A

Gross profit

 

2.478.660

 

(20.724)

 

2.457.936

 

 

Selling and marketing

 

(1,019,872)

 

 

 

(1,019,872)

 

 

Administrative expenses

 

(1,084,111)

 

(65.234)

 

(1,149,345)

 

B

Research and development expenses

 

(220.417)

 

 

(220.417)

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

Other income

 

364.469

 

(1.127)

 

363.342

 

C

Interest expenses

 

(22.683)

 

 

(22.683)

 

 

Income before provisions for income taxes

 

496.046

 

(87.085)

 

408.961

 

 

Income taxes

 

(136.648)

 

25.820

 

(110.828)

 

D

Net income

 

359.398

 

(61.265)

 

298.133

 

 

 

General Note:

 

 

 

 

 

 

 

The profit and loss statement under German GAAP follows the total cost accounting method, whereas US-GAAP requires the cost of sales method. The classification of the profit and loss statement under German GAAP as shown in the financial statements has been adjusted to the cost of sales method for the purpose of this reconciliation.

 

 

 

 

Note A:

 

 

 

 

 

 

 

The difference is due to depreciation of the internally developed software.

 

 

 

 

 

 

 

Note B:

 

 

 

 

 

 

 

The differences arise from unrealized gains and losses on forward exchange contracts, which are not realized under German GAAP but recognized through profit and loss under US-GAAP.

 

 

 

 

 

 

 

Note C:

 

 

 

 

 

 

 

The amount of € 1.127 reflects the adjustment of bad debt expenses during the year. The remaining difference arise from the forward exchange contracts.

 

 

 

 

Note D:

 

 

 

 

 

 

 

The amount of € 25.820 reflects the income statement effect of the change in deferred taxes of the year.

 

12


 

 

8.

Statements of Cash Flows for the nine months ended September 30, 2018 (unaudited)

 

 

01.01.2018 -

30.09.2018

Cash flows from operating activities:

 

Net income

 

414.364

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation and amortization

 

71.696

Provisions for bad debts

 

11.308

Changes in operating assets and liabilities:

 

 

Increase / Decrease in accounts receivables and other assets

 

196.433

Increase / Decrease in inventories

 

-866.874

Increase / Decrease in prepaid expenses and other expenses

 

-65.331

Increase / Decrease in accounts payables

 

722.727

Increase / Decrease in accrued expenses and other liabilities

 

-236.919

Increase / Decrease in deferred tax

 

4.459

Increase / Decrease in tax and other provisions

 

-13.685

Net cash provided by operating activities:

 

238.178

 

 

 

Cash flows from investing activities:

 

 

Purchase of property and equipment, intangible assets

 

-169.204

Net cash used in investing activities:

 

-169.204

 

 

 

Cash flows from financing activities:

 

 

Repayment of bank loan

 

-221.886

Net cash used in financing activities:

 

-221.886

 

 

 

Net change in cash

 

-152.912

Cash at the beginning period

 

249.673

Cash at the end of the period:

 

96.761

 

Note:

The cash flow statement is not required for German GAAP. The cash flow activities are prepared on US GAAP figures.

13


 

 

9.

Statements of Cash Flows for the nine months ended September 30, 2017 (unaudited)

 

 

01.01.2017 -

30.09.2017

Cash flows from operating activities:

 

Net income

 

298.133

Adjustments to reconcile net income to net cash used in operating activities:

 

 

Depreciation and amortization

 

55.056

Provisions for bad debts

 

32.516

Changes in operating assets and liabilities:

 

 

Increase / Decrease in accounts receivables and other assets

 

224.644

Increase / Decrease in inventories

 

-2.536.672

Increase / Decrease in prepaid expenses and other expenses

 

95.587

Increase / Decrease in accounts payables

 

734.231

Increase / Decrease in accrued expenses and other liabilities

 

-178.339

Increase / Decrease in deferred tax

 

-25.820

Increase / Decrease in tax and other provisions

 

412.052

Net cash used in operating activities:

 

-888.612

 

 

 

Cash flows from investing activities:

 

 

Purchase of property and equipment

 

-15.676

Net cash used in investing activities:

 

-15.676

 

 

 

Cash flows from financing activities:

 

 

Proceeds from bank loans

 

1.200.000

Repayment of bank loan

 

-139.469

Dividends paid

 

-250.000

Net cash provided by financing activities:

 

810.531

 

 

 

Net change in cash

 

-93.757

Cash at the beginning period

 

179.551

Cash at the end of the period:

 

85.794

 

Note:

The cash flow statement is not required for German GAAP. The cash flow activities are prepared on US GAAP figures.

 

10.

Statement of Stockholders’ Equity for the nine months ended September 30, 2018 (unaudited)

 

 

Common

Stock

 

Additional

paid-in

capital

 

Retained

earnings

 

Stockholders'

Equity

Balance, January 1, 2018

 

30.000

 

56.425

 

2.572.957

 

2.659.382

Stockholder distributions

 

 

 

 

Net income

 

 

 

414.364

 

414.364

Balance, September 30, 2018

 

30.000

 

56.425

 

2.987.321

 

3.073.746

 

The Statement of Stockholders’ Equity is not required for German GAAP. The statement activities are prepared on US GAAP figures.

14