OSS Europes gross margin percentage improved 4.8 percentage points to 26.7%, as compared to 21.9%, due
to product mix, the sale of higher margin OSS Classic products, and having sought-after products readily sold at a premium.
Overall, quarterly operating
expenses increased 71.1% to $8.2 million, with operating expenses as a percentage of revenue increasing to 47.7% compared to 26.2%. The most significant component of this increase was a $2.7 million write-down attributable to an impairment
of goodwill resulting from the overall financial performance of OSS Classic as compared to plan, the companys increased focus on the defense industry, and the deferment of orders.
Another significant component was an increase of $1.3 million in general and administrative expenses, with $1.1 million attributable to increased
costs associated with the companys organizational restructuring and strategic transitioning of senior management and outside professional services.
The increase in operating expenses was partially offset by decreases of $241,000 in marketing and selling expenses and $297,000 in R&D expense.
Loss from operations totaled $3.4 million, compared to income from operations of $402,000 in the same period in 2022. This reduction was predominantly
attributable to lower revenue, the write-down attributable to an impairment of goodwill, and transition costs.
Net loss on a GAAP
basis was $2.4 million or $(0.12) per share, as compared to net income of $323,000 or $0.02 per share. Net loss in the second quarter also includes a one-time benefit of $1.3 million attributable to
receipt of COVID 19 funds under the governments employee retention credit program.
Non-GAAP net loss
was $84,000 or $(0.00) per share, versus non-GAAP net income of $871,000, or $0.04 per share.
Adjusted EBITDA, a non-GAAP metric, was $487,000 or 2.8% of revenue, a decrease from $1.2 million or 6.5% of revenue.
Each of these non-GAAP metrics excludes $2.7 million for the impairment of goodwill and $1.3 million for the employee retention credit.
On June 30, 2023, cash and cash equivalents totaled $6.1 million, with short-term investments of $9.3 million, for a combined total of
$15.4 million. This combined total represents an increase of $2.7 million as compared to the prior quarter. The increase is primarily due to the employee retention credit and a decrease in working capital requirements.
First Half 2023 Financial Summary
For the first half of
2023, consolidated revenue decreased 3.9% to $34.0 million. The decrease in revenue in the first half of 2023 is due to the reasons discussed in reference to Q2.
OSS Classic revenue decreased 20.6% to $16.9 million, with OSS Europe revenue increasing 21.5% to $17.1 million which was inclusive of
$2.4 million of OSS core product.
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