SCHEDULE 13D/A: Shareholder Activism Looms at One Stop Systems as Director Resigns Over Governance Disputes

A key director of One Stop Systems, Joseph M. Manko, Jr., has resigned citing significant disagreements with the company's corporate governance and board leadership, particularly the renomination of Chairman Kenneth Potashner despite prior shareholder opposition.

Summary

• Joseph M. Manko, Jr., a director of One Stop Systems, Inc., resigned from the Board effective April 16, 2025.
• His resignation stems from disagreements with the Issuer's governance practices and the composition and leadership of the Board, specifically regarding the renomination of Chairman Kenneth Potashner for the 2025 Annual Meeting.
• Mr. Manko noted that shareholders had voted against Chairman Potashner's re-election for two consecutive years prior to this renomination.
• Horton Capital Partners Fund, LP (HCPF) beneficially owns 1,174,899 shares, representing approximately 5.5% of the outstanding common stock.
• Joseph M. Manko, Jr. directly and indirectly beneficially owns 1,195,899 shares, representing approximately 5.6% of the outstanding common stock.
• The shares owned by HCPF were purchased with working capital for approximately $2,612,823, including brokerage commissions.
• Mr. Manko intends to remain a shareholder and reserves all rights to take actions deemed necessary to represent the best interests of all shareholders.

Sentiment

Score: 3

Explanation: The document reveals significant internal corporate governance issues and potential shareholder activism, which are generally negative signals for investors. While the shareholder expresses conviction in value, the immediate implications of board dissent are concerning.

Positives

• Joseph M. Manko, Jr., a significant shareholder, maintains conviction in the value potential of One Stop Systems, Inc., despite his resignation from the Board.
• The reporting persons have not entered into any transactions in the company's securities during the past sixty days, indicating a stable holding position.

Negatives

• A director, Joseph M. Manko, Jr., resigned due to fundamental disagreements with the company's corporate governance practices and board leadership.
• The Board's decision to renominate Chairman Kenneth Potashner for re-election, despite shareholders voting against him for two consecutive years, indicates a potential disconnect between the Board and shareholder sentiment.
• Mr. Manko explicitly stated that the Board's decision represents a "failure of the Board to represent the best interest of all shareholders."

Risks

• Corporate Governance Issues: Disagreements within the Board regarding leadership and governance practices could lead to instability and erode investor confidence.
• Shareholder Dissatisfaction: The Board's decision to renominate a Chairman previously rejected by shareholders suggests a risk of ongoing shareholder dissatisfaction and potential activism.
• Potential Shareholder Activism: Mr. Manko's stated intent to remain a shareholder and "reserve all rights to take any action that he deems necessary to represent the best interests of all of shareholders" indicates a high likelihood of future shareholder activism or proxy contests.
• Board Cohesion: The public nature of Mr. Manko's resignation and his stated reasons suggest a lack of cohesion or significant internal dissent within the Board.

Future Outlook

Joseph M. Manko, Jr. intends to remain a shareholder of One Stop Systems, Inc. and explicitly reserves all rights to take any action he deems necessary to represent the best interests of all shareholders, signaling potential future shareholder activism or engagement regarding corporate governance.

Management Comments

• "Mr. Manko cited certain disagreements with the Issuer's governance practices and the composition and leadership of the Board, particularly with respect to Chairman Kenneth Potashner."
• "The Board's decision to renominate the Chairman for election at the 2025 Annual Meeting, in Mr. Manko's opinion, represents a failure of the Board to represent the best interest of all shareholders."
• "Given Mr. Manko's conviction in the value potential of the Issuer, he disclosed in the Resignation Letter that he intends to remain a shareholder of the Issuer and reserves all rights to take any action that he deems necessary to represent the best interests of all of shareholders."

Industry Context

This filing highlights a growing trend of increased shareholder scrutiny and activism regarding corporate governance, particularly concerning board independence and accountability, which is prevalent across various industries, not specific to One Stop Systems' sector.

Comparison to Industry Standards

• The situation at One Stop Systems, where a board chairman is renominated despite repeated shareholder votes against his re-election, deviates significantly from best practices in corporate governance, which typically emphasize board responsiveness to shareholder sentiment.
• Companies like Apple Inc. or Microsoft Corp. often face shareholder proposals on governance, but their boards generally strive to align with significant shareholder votes to avoid public dissent and maintain investor confidence.
• The public resignation of a director citing governance failures and the intent to pursue further shareholder action is indicative of a breakdown in internal governance mechanisms, a scenario often seen in companies targeted by activist investors like Elliott Management or Starboard Value, who typically push for board changes and strategic overhauls.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Potential for increased shareholder activism and a proxy contest, which could lead to changes in board composition or strategic direction. Uncertainty regarding corporate governance could negatively impact investor confidence and share price.
• Management/Board: The public disagreement and resignation could create internal friction and distract management from operational focus. The Board's reputation may be negatively impacted.

Next Steps

• One Stop Systems, Inc. will proceed with its 2025 Annual Meeting of Shareholders, where Chairman Kenneth Potashner is nominated for re-election.
• Joseph M. Manko, Jr. intends to remain a shareholder and reserves all rights to take further action to represent the best interests of all shareholders, implying potential future engagement or activism.

Key Dates

Recommendation

Keywords

One Stop Systems, OSS, Schedule 13D, Shareholder Activism, Corporate Governance, Board Resignation, Joseph M. Manko Jr., Kenneth Potashner, Shareholder Rights, Investment Management, Horton Capital Partners