08/15/2022 | Press release | Distributed by Public on 08/15/2022 15:41
(Mark One)
|
|||
☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30, 2022
|
||
or
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|||
☐
|
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 001-14785
|
GSE Systems, Inc.
|
(Exact name of registrant as specified in its charter)
|
Delaware
|
52-1868008
|
|
(State of incorporation)
|
(I.R.S. Employer Identification Number)
|
6940 Columbia Gateway Dr., Suite 470, ColumbiaMD
|
21046
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant's telephone number, including area code: (410) 970-7800
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
Non-accelerated filer ☒
|
Smaller reporting company ☒
|
Emerging growth company ☐
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
Common Stock, $0.01 Par Value
|
GVP
|
The NASDAQ Capital Market
|
Page
|
||
PART I.
|
FINANCIAL INFORMATION
|
3
|
Item 1.
|
Financial Statements (unaudited)
|
|
Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021
|
3
|
|
Unaudited Consolidated Statements of Operations for the Six Months Ended June 30, 2022 and 2021
|
4
|
|
Unaudited Consolidated Statements of Comprehensive (Loss) Income for the Six Months Ended June 30, 2022 and 2021
|
5
|
|
Unaudited Consolidated Statements of Changes in Stockholders' Equity for the Six Months Ended June 30, 2022 and 2021
|
6
|
|
Unaudited Consolidated Statements of Cash Flows for Six Months Ended June 30, 2022 and 2021
|
8
|
|
Notes to the Consolidated Financial Statements (unaudited)
|
9
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
23
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
36
|
Item 4.
|
Controls and Procedures
|
37
|
PART II.
|
OTHER INFORMATION
|
38 |
Item 1.
|
Legal Proceedings
|
38 |
Item 1A.
|
Risk Factors
|
38
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
38
|
Item 3
|
Defaults Upon Senior Securities
|
38
|
Item 4
|
Mine Safety Disclosures
|
38
|
Item 5.
|
Other Information
|
38
|
Item 6.
|
Exhibits
|
39
|
June 30, 2022
|
December 31, 2021
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
5,364
|
$
|
3,550
|
||||
Restricted cash, current
|
632 | - | ||||||
Contract receivables, net
|
9,535
|
11,257
|
||||||
Prepaid expenses and other current assets
|
2,512
|
5,262
|
||||||
Total current assets
|
18,043
|
20,069
|
||||||
Equipment, software and leasehold improvements, net
|
829
|
839
|
||||||
Software development costs, net
|
571
|
532
|
||||||
Goodwill
|
13,339
|
13,339
|
||||||
Intangible assets, net
|
2,529
|
3,020
|
||||||
Restricted cash - long term | 951 | - | ||||||
Operating lease right-of-use assets, net
|
880
|
1,200
|
||||||
Other assets
|
51
|
52
|
||||||
Total assets
|
$
|
37,193
|
$
|
39,051
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Line of credit
|
$
|
-
|
$
|
1,817
|
||||
Current portion of long-term note
|
1,895
|
-
|
||||||
Accounts payable
|
1,156
|
1,179
|
||||||
Accrued expenses
|
1,471
|
1,358
|
||||||
Accrued compensation
|
1,715
|
1,452
|
||||||
Billings in excess of revenue earned
|
4,410
|
5,029
|
||||||
Accrued warranty
|
507
|
667
|
||||||
Income taxes payable
|
1,701
|
1,654
|
||||||
Derivative liabilities
|
916 | - | ||||||
Other current liabilities
|
1,512
|
1,883
|
||||||
Total current liabilities
|
15,283
|
15,039
|
||||||
Long-term note, less current portion
|
2,243
|
-
|
||||||
Operating lease liabilities noncurrent
|
214
|
790
|
||||||
Other noncurrent liabilities
|
348
|
179
|
||||||
Total liabilities
|
18,088
|
16,008
|
||||||
Commitments and contingencies (Note 16)
|
||||||||
Stockholders' equity:
|
||||||||
Preferred stock $0.01par value; 2,000,000shares authorized; noshares issued and outstanding
|
-
|
-
|
||||||
Common stock $0.01par value; 60,000,000shares authorized, 22,849,972and 22,533,005shares issued, 21,251,061and 20,934,094shares outstanding, respectively
|
228
|
225
|
||||||
Additional paid-in capital
|
81,324
|
80,505
|
||||||
Accumulated deficit
|
(59,419
|
)
|
(54,584
|
)
|
||||
Accumulated other comprehensive income (loss)
|
(29
|
)
|
(104
|
)
|
||||
Treasury stock at cost, 1,598,911shares
|
(2,999
|
)
|
(2,999
|
)
|
||||
Total stockholders' equity
|
19,105
|
23,043
|
||||||
Total liabilities and stockholders' equity
|
$
|
37,193
|
$
|
39,051
|
Three months ended
|
Six months ended
|
|||||||||||||||
June 30,
2022
|
June 30,
2021
|
June 30,
2022
|
June 30,
2021
|
|||||||||||||
Revenue
|
$
|
12,745
|
$
|
13,522
|
$
|
25,020
|
$
|
26,626
|
||||||||
Cost of revenue
|
9,573
|
10,833
|
19,421
|
21,009
|
||||||||||||
Gross profit
|
3,172
|
2,689
|
5,599
|
5,617
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Selling, general and administrative
|
4,410
|
3,522
|
8,917
|
7,256
|
||||||||||||
Research and development
|
182
|
154
|
324
|
311
|
||||||||||||
Restructuring charges
|
-
|
-
|
-
|
808
|
||||||||||||
Depreciation
|
72
|
71
|
144
|
147
|
||||||||||||
Amortization of intangible assets
|
231
|
303
|
491
|
643
|
||||||||||||
Total operating expenses
|
4,895
|
4,050
|
9,876
|
9,165
|
||||||||||||
Operating loss
|
(1,723
|
)
|
(1,361
|
)
|
(4,277
|
)
|
(3,548
|
)
|
||||||||
Interest expense, net
|
(358
|
)
|
(49
|
)
|
(506
|
)
|
(103
|
)
|
||||||||
Change in fair value of derivative instruments, net
|
695
|
-
|
114
|
-
|
||||||||||||
Other (loss) income, net
|
(72
|
)
|
4,637
|
(56
|
)
|
4,638
|
||||||||||
(Loss) income before income taxes
|
(1,458
|
)
|
3,227
|
(4,725
|
)
|
987
|
||||||||||
(Benefit from) provision for income taxes
|
(57
|
)
|
(4
|
)
|
110
|
(39
|
)
|
|||||||||
Net (loss) income
|
$
|
(1,401
|
)
|
$
|
3,231
|
$
|
(4,835
|
)
|
$
|
1,026
|
||||||
Net (loss) income per common share - basic and diluted
|
$
|
(0.07
|
)
|
$
|
0.16
|
$
|
(0.23
|
)
|
$
|
0.05
|
||||||
Weighted average shares outstanding used to compute net (loss) income per share - basic
|
21,033,447
|
20,647,426
|
21,006,910
|
20,638,116
|
||||||||||||
Weighted average shares outstanding used to compute net (loss) income per share - diluted
|
21,033,447 | 20,702,003 | 21,006,910 | 20,638,116 |
Three months ended
|
Six months ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Net (loss) income
|
$
|
(1,401
|
)
|
$
|
3,231
|
$
|
(4,835
|
)
|
$
|
1,026
|
||||||
Cumulative translation adjustment
|
(106
|
)
|
26
|
75
|
1,132
|
|||||||||||
Comprehensive (loss) income
|
$
|
(1,507
|
)
|
$
|
3,257
|
$
|
(4,760
|
)
|
$
|
2,158
|
|
Common Stock
|
|
Accumulated |
Treasury Stock
|
||||||||||||||||||||||||||||
Six Months Ended
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Other
Comprehensive Loss
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||||
Balance, January 1, 2022
|
22,533
|
$
|
225
|
$
|
80,505
|
$
|
(54,584
|
)
|
$
|
(104
|
)
|
(1,599
|
)
|
$
|
(2,999
|
)
|
$
|
23,043
|
||||||||||||||
Stock-based compensation expense
|
-
|
-
|
1,025
|
-
|
-
|
-
|
-
|
1,025
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
317
|
3
|
(3
|
)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
-
|
(203
|
)
|
-
|
-
|
-
|
-
|
(203
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
75
|
-
|
-
|
75
|
||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
(4,835
|
)
|
-
|
-
|
-
|
(4,835
|
)
|
||||||||||||||||||||||
Balance, June 30, 2022
|
22,850
|
$
|
228
|
$
|
81,324
|
$
|
(59,419
|
)
|
$
|
(29
|
)
|
(1,599
|
)
|
$
|
(2,999
|
)
|
$
|
19,105
|
||||||||||||||
Balance, January 1, 2021
|
22,193
|
$
|
222
|
$
|
79,687
|
$
|
(65,191
|
)
|
$
|
(1,214
|
)
|
(1,599
|
)
|
$
|
(2,999
|
)
|
$
|
10,505
|
||||||||||||||
Stock-based compensation expense
|
-
|
-
|
501
|
-
|
-
|
-
|
-
|
501
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
268
|
3
|
(3
|
)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
-
|
(161
|
)
|
-
|
-
|
-
|
-
|
(161
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
1,132
|
-
|
-
|
1,132
|
||||||||||||||||||||||||
Net income
|
-
|
-
|
-
|
1,026
|
-
|
-
|
-
|
1,026
|
||||||||||||||||||||||||
Balance, June 30, 2021
|
22,461
|
$
|
225
|
$
|
80,024
|
$
|
(64,165
|
)
|
$
|
(82
|
)
|
(1,599
|
)
|
$
|
(2,999
|
)
|
$
|
13,003
|
|
Common Stock
|
|
Accumulated |
Treasury Stock
|
||||||||||||||||||||||||||||
Three Months Ended
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Other
Comprehensive Loss
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||||
Balance, April 1, 2022
|
22,609
|
$
|
226
|
$
|
80,777
|
$
|
(58,018
|
)
|
$
|
77
|
(1,599
|
)
|
$
|
(2,999
|
)
|
$
|
20,063
|
|||||||||||||||
Stock-based compensation expense
|
-
|
-
|
666
|
-
|
-
|
-
|
-
|
666
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
241
|
2
|
(2
|
)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
-
|
(117
|
)
|
-
|
-
|
-
|
-
|
(117
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
(106
|
)
|
-
|
-
|
(106
|
)
|
||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
(1,401
|
)
|
-
|
-
|
-
|
(1,401
|
)
|
||||||||||||||||||||||
Balance, June 30, 2022
|
22,850
|
$
|
228
|
$
|
81,324
|
$
|
(59,419
|
)
|
$
|
(29
|
)
|
(1,599
|
)
|
$
|
(2,999
|
)
|
$
|
19,105
|
||||||||||||||
Balance, April 1, 2021
|
22,234
|
$
|
222
|
$
|
79,697
|
$
|
(67,396
|
)
|
$
|
(108
|
)
|
(1,599
|
)
|
$
|
(2,999
|
)
|
$
|
9,416
|
||||||||||||||
Stock-based compensation expense
|
-
|
-
|
463
|
-
|
-
|
-
|
-
|
463
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
227
|
3
|
(2
|
)
|
-
|
-
|
-
|
-
|
1
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
-
|
(134
|
)
|
-
|
-
|
-
|
-
|
(134
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
26
|
-
|
-
|
26
|
||||||||||||||||||||||||
Net income
|
-
|
-
|
-
|
3,231
|
-
|
-
|
-
|
3,231
|
||||||||||||||||||||||||
Balance, June 30, 2021
|
22,461
|
$
|
225
|
$
|
80,024
|
$
|
(64,165
|
)
|
$
|
(82
|
)
|
(1,599
|
)
|
$
|
(2,999
|
)
|
$
|
13,003
|
Six months ended
|
||||||||
June 30, 2022
|
June 30, 2021
|
|||||||
Cash flows from operating activities:
|
||||||||
Net (loss) income
|
$
|
(4,835
|
)
|
$
|
1,026
|
|||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||
Depreciation
|
144
|
147
|
||||||
Amortization of intangible assets
|
491
|
643
|
||||||
Amortization of capitalized software development costs
|
167
|
204
|
||||||
Amortization of deferred financing costs
|
7
|
5
|
||||||
Amortization of debt discount
|
482 | - | ||||||
Stock-based compensation expense
|
1,101
|
501
|
||||||
Bad debt expense (recovery)
|
97
|
(133
|
)
|
|||||
Change in fair value of derivative instruments, net
|
(114
|
)
|
-
|
|||||
Deferred income taxes
|
77 | - | ||||||
Changes in assets and liabilities:
|
||||||||
Contract receivables, net
|
1,578
|
(727
|
)
|
|||||
Prepaid expenses and other assets
|
3,020
|
(5,690
|
)
|
|||||
Accounts payable, accrued compensation and accrued expenses
|
379
|
1,510
|
||||||
Billings in excess of revenue earned
|
(588
|
)
|
(599
|
)
|
||||
Accrued warranty
|
(138
|
)
|
(179
|
)
|
||||
Other liabilities
|
(229
|
)
|
2,163
|
|||||
Net cash provided by (used in) operating activities
|
1,639
|
(1,129
|
)
|
|||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(134
|
)
|
(322
|
)
|
||||
Capitalized software development costs
|
(206
|
)
|
(149
|
)
|
||||
Net cash used in investing activities
|
(340
|
)
|
(471
|
)
|
||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Proceeds from line of credit
|
- | 800 | ||||||
Repayment of line of credit
|
(1,817
|
)
|
(1,489
|
)
|
||||
Repayment of insurance premium
|
(594
|
)
|
(406
|
)
|
||||
Proceeds from issuance of long-term note and warrants, net of debt issuance cost and original issue discount
|
4,782
|
-
|
||||||
Shares withheld to pay taxes
|
(203
|
)
|
(161
|
)
|
||||
Net cash provided by (used in) financing activities
|
2,168
|
(1,256
|
)
|
|||||
Effect of exchange rate changes on cash
|
(70
|
)
|
(17
|
)
|
||||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
3,397
|
(2,873
|
)
|
|||||
Cash, cash equivalents and restricted cash at beginning of the period
|
3,550
|
6,702
|
||||||
Cash, cash equivalents and restricted cash at the end of the period
|
$
|
6,947
|
$
|
3,829
|
Cash and cash equivalents |
$ | 5,364 | $ | 3,829 | ||||
Restricted cash, current |
632 | - | ||||||
Restricted cash included in other long-term assets |
951 | - | ||||||
Total cash, cash equivalents and restricted cash |
$ | 6,947 | $ | 3,829 |
Supplemental cash flow disclosures: |
||||||||
Non-cash financing activities
|
||||||||
Discount on issuance of Convertible Note
|
$ | 750 | $ | - |
(in thousands, except for share data)
|
Three months ended
|
Six months ended
|
||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net (loss) income attributed to common stockholders
|
$
|
(1,401
|
)
|
$
|
3,231
|
$
|
(4,835
|
)
|
$
|
1,026
|
||||||
Denominator:
|
||||||||||||||||
Weighted-average shares outstanding for basic earnings per share
|
21,033,447
|
20,647,426
|
21,006,910
|
20,638,116
|
||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Employee RSUs
|
-
|
54,577
|
-
|
-
|
||||||||||||
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share
|
21,033,447
|
20,702,003
|
21,006,910
|
20,638,116
|
||||||||||||
Shares related to potentially dilutive securities excluded because inclusion would be anti-dilutive
|
3,185,552
|
-
|
2,181,846
|
20,005
|
(in thousands)
|
June 30, 2022
|
December 31, 2021
|
||||||
Billed receivables
|
$
|
4,543
|
$
|
6,124
|
||||
Unbilled receivables
|
6,056
|
6,143
|
||||||
Allowance for doubtful accounts
|
(1,064
|
)
|
(1,010
|
)
|
||||
Total contract receivables, net
|
$
|
9,535
|
$
|
11,257
|
(in thousands)
|
As of June 30, 2022
|
|||||||||||
Gross Carrying Amount
|
Accumulated Amortization
|
Net
|
||||||||||
Amortized intangible assets:
|
||||||||||||
Customer relationships
|
$
|
8,628
|
$
|
(6,788
|
)
|
$
|
1,840
|
|||||
Trade names
|
1,689
|
(1,151
|
)
|
538
|
||||||||
Developed technology
|
471
|
(471
|
)
|
-
|
||||||||
Non-contractual customer relationships
|
433
|
(433
|
)
|
-
|
||||||||
Noncompete agreement
|
527
|
(467
|
)
|
60
|
||||||||
Alliance agreement
|
527
|
(435
|
)
|
92
|
||||||||
Others
|
167
|
(167
|
)
|
-
|
||||||||
Total
|
$
|
12,442
|
$
|
(9,912
|
)
|
$
|
2,530
|
(in thousands)
|
As of December 31, 2021
|
|||||||||||
Gross Carrying Amount
|
Accumulated Amortization
|
Net
|
||||||||||
Amortized intangible assets:
|
||||||||||||
Customer relationships
|
$
|
8,628
|
$
|
(6,432
|
)
|
$
|
2,196
|
|||||
Trade names
|
1,689
|
(1,108
|
)
|
581
|
||||||||
Developed technology
|
471
|
(471
|
)
|
-
|
||||||||
Non-contractual customer relationships
|
433
|
(433
|
)
|
-
|
||||||||
Noncompete agreement
|
527
|
(429
|
)
|
98
|
||||||||
Alliance agreement
|
527
|
(382
|
)
|
145
|
||||||||
Others
|
167
|
(167
|
)
|
-
|
||||||||
Total
|
$
|
12,442
|
$
|
(9,422
|
)
|
$
|
3,020
|
(in thousands)
|
||||
Years ended December 31:
|
||||
2022 remainder
|
$
|
419
|
||
2023
|
640
|
|||
2024
|
435
|
|||
2025
|
335
|
|||
2026
|
266
|
|||
Thereafter
|
435
|
|||
Total
|
$
|
2,530
|
(in thousands)
|
||||||||
June 30, 2022
|
December 31, 2021
|
|||||||
Computer and equipment
|
$
|
2,325
|
$
|
2,270
|
||||
Software
|
2,226
|
2,150
|
||||||
Leasehold improvements
|
659
|
659
|
||||||
Furniture and fixtures
|
839
|
839
|
||||||
6,049
|
5,918
|
|||||||
Accumulated depreciation
|
(5,220
|
)
|
(5,079
|
)
|
||||
Equipment, software and leasehold improvements, net
|
$
|
829
|
$
|
839
|
Exercise Price
|
$ | 1.94 | ||
Common Stock Price
|
$ |
1.25 |
||
Risk Free Rate
|
3.0% |
|
||
Volatility
|
65% |
|
||
Term (in years)
|
4.7 yrs |
(in thousands)
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
Significant
Other Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
||||||||||||
Derivative liability | $ | - | $ | - | $ | 204 | $ | 204 | ||||||||
Warrant liability |
- | - | 712 | 712 | ||||||||||||
Cash settled performance-vesting restricted stock units
|
- | 76 | - | 76 | ||||||||||||
Total liabilities | $ | - | $ | 76 | $ | 916 | $ | 992 |
(in thousands)
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
Significant
Other Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
||||||||||||
Money market funds
|
$
|
15
|
$
|
-
|
$
|
-
|
$
|
15
|
||||||||
Total assets
|
$
|
15
|
$
|
-
|
$
|
-
|
$
|
15
|
(in thousands)
|
Embedded
Redemption Features
|
Warrant |
Level 3 Total |
|||||||||
Balance at December 31, 2021
|
$
|
-
|
$ | - | $ | - | ||||||
Derivative liabilities at issuance date
|
306
|
- | 306 | |||||||||
Warrant liabilities at issuance date
|
- | 724 | 724 | |||||||||
Change in fair value included in gain on derivative instruments, net
|
(102
|
)
|
(12 | ) | (114 | ) | ||||||
Balance at June 30, 2022
|
$
|
204
|
$ | 712 | $ | 916 |
Amount
|
||||
Convertible Note issued
|
$
|
5,750
|
||
Debt discount
|
(750
|
)
|
||
Issuance cost:
|
||||
Commitment fee
|
(175
|
)
|
||
Balance of investor's counsel fees
|
(43
|
)
|
||
Net proceeds of Convertible Note
|
$
|
4,782
|
||
|
||||
Fair value of Warrant Liabilities on issuance |
(724 | ) | ||
Fair value of Conversion Feature on issuance |
(306 | ) | ||
Allocated OID costs to Convertible Note
|
(96 | ) | ||
Interest expense accrued on Convertible Note as of June 30, 2022 |
482 | |||
Balance of Convertible Note as of June 30, 2022 |
$ | 4,138 |
(in thousands)
|
||||
Balance at January 1, 2022
|
$
|
748
|
||
Current period recovery
|
(31
|
)
|
||
Current period claims
|
(98
|
)
|
||
Currency adjustment
|
(14
|
)
|
||
Balance at June 30, 2022
|
$
|
605
|
(in thousands)
|
Three months ended
|
Six months ended
|
||||||||||||||
June 30,
2022
|
June 30,
2021
|
June 30,
2022
|
June 30,
2021
|
|||||||||||||
Performance Improvement Solutions segment
|
||||||||||||||||
System Design and Build
|
$
|
2,042
|
$
|
1,227
|
$
|
3,443
|
$
|
3,089
|
||||||||
Over time
|
2,042
|
1,227
|
3,443
|
3,089
|
||||||||||||
Software and Support
|
1,178
|
766
|
1,937
|
1,579
|
||||||||||||
Point in time
|
87
|
127
|
175
|
222
|
||||||||||||
Over time
|
1,091
|
639
|
1,762
|
1,357
|
||||||||||||
Training and Consulting Services
|
4,733
|
4,869
|
8,970
|
9,275
|
||||||||||||
Point in time
|
727
|
16
|
1,145
|
84
|
||||||||||||
Over time
|
4,006
|
4,853
|
7,825
|
9,191
|
||||||||||||
Workforce Solutions |
||||||||||||||||
Training and Consulting Services
|
4,792
|
6,660
|
10,670
|
12,683
|
||||||||||||
Point in time
|
-
|
163
|
-
|
249
|
||||||||||||
Over time
|
4,792
|
6,497
|
10,670
|
12,434
|
||||||||||||
Total revenue
|
$
|
12,745
|
$
|
13,522
|
$
|
25,020
|
$
|
26,626
|
(in thousands)
|
Three months ended
|
Six months ended
|
||||||||||||||
June 30,
2022
|
June 30,
2021
|
June 30,
2022
|
June 30,
2021
|
|||||||||||||
Revenue recognized in the period from amounts included in billings in excess of revenue earned at the beginning of the period
|
$
|
1,036
|
$
|
1,115
|
$
|
2,492
|
$
|
3,304
|
(in thousands)
|
Three months ended
|
Six months ended
|
||||||||||||||
June 30,
2022
|
June 30,
2021
|
June 30,
2022
|
June 30,
2021
|
|||||||||||||
(Loss) income before income taxes
|
$
|
(1,458
|
)
|
$
|
3,227
|
$
|
(4,725
|
)
|
$
|
987
|
||||||
(Benefit from) provision for income taxes
|
(57
|
)
|
(4
|
)
|
110
|
(39
|
)
|
|||||||||
Effective tax rate
|
3.9
|
%
|
(0.1
|
)%
|
(2.3
|
)%
|
(4.0
|
)%
|
As of
|
||||||||||
Operating Leases
|
Classification
|
June 30, 2022
|
December 31, 2021
|
|||||||
Leased Assets
|
||||||||||
Operating lease - right of use assets
|
Long term assets
|
$
|
880
|
$
|
1,200
|
|||||
Lease Liabilities
|
||||||||||
Operating lease liabilities - Current
|
Other current liabilities
|
1,188
|
1,205
|
|||||||
Operating lease liabilities
|
Long term liabilities
|
214
|
790
|
|||||||
|
$ |
1,402
|
$
|
1,995
|
Three months ended
|
Six months ended
|
|||||||||||||||||
Lease Cost
|
Classification
|
June 30,
2022 |
June 30,
2021
|
June 30,
2022
|
June 30,
2021
|
|||||||||||||
Operating lease cost (1)
|
Selling, general and administrative expenses
|
$
|
174
|
$
|
177
|
$
|
360
|
$
|
369
|
|||||||||
Short-term leases costs (2)
|
Selling, general and administrative expenses
|
15
|
14
|
30
|
30
|
|||||||||||||
Sublease income (3)
|
Selling, general and administrative expenses
|
(19
|
)
|
(32
|
)
|
(37
|
)
|
(64
|
)
|
|||||||||
Net lease cost
|
$
|
170
|
$
|
159
|
$
|
353
|
$
|
335
|
(in thousands)
|
Gross Future
Minimum Lease
Payments
|
|||
2022 remainder
|
$
|
645
|
||
2023
|
673
|
|||
2024
|
122
|
|||
2025
|
10
|
|||
2026
|
3
|
|||
Thereafter |
- | |||
Total lease payments
|
$
|
1,453
|
||
Less: Interest
|
51
|
|||
Present value of lease payments
|
$
|
1,402
|
Lease Term and Discount Rate
|
June 30, 2022
|
December 31, 2021
|
||||||
Weighted-average remaining lease term (years)
|
|
|
||||||
Operating leases
|
1.36
|
1.80
|
||||||
Weighted-average discount rate
|
||||||||
Operating leases
|
5.00 | % | 5.00 | % |
(in thousands)
|
Six months ended
|
|||||||
Cash paid for amounts included in measurement of liabilities
|
June 30, 2022
|
June 30, 2021
|
||||||
Operating cash flows used in operating leases
|
$
|
642
|
$
|
639
|
Three months ended
|
Six months ended
|
|||||||||||||||
(in thousands)
|
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
||||||||||||
Revenue:
|
||||||||||||||||
Performance
|
$
|
7,953
|
$
|
6,862
|
$
|
14,350
|
$
|
13,943
|
||||||||
Workforce Solutions
|
4,792
|
6,660
|
10,670
|
12,683
|
||||||||||||
Total revenue
|
12,745
|
13,522
|
25,020
|
26,626
|
||||||||||||
Operating loss
|
||||||||||||||||
Performance
|
(1,713
|
)
|
(1,131
|
)
|
(4,108
|
)
|
(2,534
|
)
|
||||||||
Workforce Solutions
|
(10
|
)
|
(230
|
)
|
(169
|
)
|
(1,014
|
)
|
||||||||
Operating loss
|
(1,723
|
)
|
(1,361
|
)
|
(4,277
|
)
|
(3,548
|
)
|
||||||||
Interest expense, net
|
(358
|
)
|
(49
|
)
|
(506
|
)
|
(103
|
)
|
||||||||
Change in fair value of derivative instruments, net |
695
|
-
|
114
|
-
|
||||||||||||
Other (loss) income, net
|
(72
|
)
|
4,637
|
(56
|
)
|
4,638
|
||||||||||
(Loss) income before income taxes
|
$
|
(1,458
|
)
|
$
|
3,227
|
$
|
(4,725
|
)
|
$
|
987
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
• |
optimization of existing generation assets
|
|
• |
design support and deployment of advanced reactor designs
|
|
• |
integration with renewable power sources
|
|
• |
Design engineering for plant mechanical, electrical, I&C, civil and structural, fire protection and cyber systems
|
|
• |
Engineering programs addressing ASME codes, balance of plant programs other regulatory programs and economic driven programs such as plant thermal performance
|
|
• |
Simulation engineering for nuclear, thermal and process plant training and virtual commissioning
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||||||||||||||||||
(in thousands)
|
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
||||||||||||||||||||||||||||
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
|||||||||||||||||||||
Revenue
|
$
|
12,745
|
100.0
|
%
|
$
|
13,522
|
100.0
|
%
|
$
|
25,020
|
100.0
|
%
|
$
|
26,626
|
100.0
|
%
|
||||||||||||||||
Cost of revenue
|
9,573
|
75.1
|
%
|
10,833
|
80.1
|
%
|
19,421
|
77.6
|
%
|
21,009
|
78.9
|
%
|
||||||||||||||||||||
Gross profit
|
3,172
|
24.9
|
%
|
2,689
|
19.9
|
%
|
5,599
|
22.4
|
%
|
5,617
|
21.1
|
%
|
||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Selling, general and administrative
|
4,410
|
34.6
|
%
|
3,522
|
26.0
|
%
|
8,917
|
35.6
|
%
|
7,256
|
27.3
|
%
|
||||||||||||||||||||
Research and development
|
182
|
1.4
|
%
|
154
|
1.1
|
%
|
324
|
1.3
|
%
|
311
|
1.2
|
%
|
||||||||||||||||||||
Restructuring charges
|
-
|
0.0
|
%
|
-
|
0.0
|
%
|
-
|
0.0
|
%
|
808
|
3.0
|
%
|
||||||||||||||||||||
Loss on impairment
|
-
|
0.0
|
%
|
-
|
0.0
|
%
|
-
|
0.0
|
%
|
-
|
0.0
|
%
|
||||||||||||||||||||
Depreciation
|
72
|
0.6
|
%
|
71
|
0.5
|
%
|
144
|
0.6
|
%
|
147
|
0.6
|
%
|
||||||||||||||||||||
Amortization of intangible assets
|
231
|
1.8
|
%
|
303
|
2.2
|
%
|
491
|
2.0
|
%
|
643
|
2.4
|
%
|
||||||||||||||||||||
Total operating expenses
|
4,895
|
38.4
|
%
|
4,050
|
30.0
|
%
|
9,876
|
39.5
|
%
|
9,165
|
34.4
|
%
|
||||||||||||||||||||
Operating loss
|
(1,723
|
)
|
(13.5
|
)%
|
(1,361
|
)
|
(10.1
|
)%
|
(4,277
|
)
|
(17.2
|
)%
|
(3,548
|
)
|
(13.4
|
)%
|
||||||||||||||||
Interest expense, net
|
(358
|
)
|
(2.8
|
)%
|
(49
|
)
|
(0.4
|
)%
|
(506
|
)
|
(2.0
|
)%
|
(103
|
)
|
(0.4
|
)%
|
||||||||||||||||
Change in fair value of derivative instruments, net
|
695
|
5.5
|
%
|
-
|
0.0
|
%
|
114
|
0.5
|
%
|
-
|
0.0
|
%
|
||||||||||||||||||||
Other (loss) income, net
|
(72
|
)
|
(0.6
|
)%
|
4,637
|
34.3
|
%
|
(56
|
)
|
(0.2
|
)%
|
4,638
|
17.4
|
%
|
||||||||||||||||||
(Loss) income before income taxes
|
(1,458
|
)
|
(11.4
|
)%
|
3,227
|
23.9
|
%
|
(4,725
|
)
|
(18.9
|
)%
|
987
|
3.7
|
%
|
||||||||||||||||||
(Benefit from) provision for income taxes
|
(57
|
)
|
(0.4
|
)%
|
(4
|
)
|
0.0
|
%
|
110
|
0.4
|
%
|
(39
|
)
|
(0.1
|
)%
|
|||||||||||||||||
Net (loss) income
|
$
|
(1,401
|
)
|
(11.0
|
)%
|
$
|
3,231
|
23.9
|
%
|
$
|
(4,835
|
)
|
(19.3
|
)%
|
$
|
1,026
|
3.9
|
%
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||||||||||||||||||
(in thousands)
|
June 30,
2022
|
June 30,
2021
|
Change
|
June 30,
2022
|
June 30,
2021
|
Change
|
||||||||||||||||||||||||||
Revenue:
|
$ |
|
%
|
$ |
|
%
|
||||||||||||||||||||||||||
Performance
|
$
|
7,953
|
$
|
6,862
|
1,091
|
16
|
%
|
$
|
14,350
|
$
|
13,943
|
407
|
3
|
%
|
||||||||||||||||||
Workforce Solutions
|
4,792
|
6,660
|
(1,868
|
)
|
(28
|
)%
|
10,670
|
12,683
|
(2,013
|
)
|
(16
|
)%
|
||||||||||||||||||||
Total revenue
|
$
|
12,745
|
$
|
13,522
|
(777
|
)
|
(6
|
)%
|
$
|
25,020
|
$
|
26,626
|
(1,606
|
)
|
(6
|
)%
|
(in thousands)
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||||||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||||||||||||||||||
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
|||||||||||||||||||||
Gross profit:
|
||||||||||||||||||||||||||||||||
Performance Improvement Solutions
|
$
|
2,568
|
32.3
|
%
|
$
|
1,760
|
25.6
|
%
|
$
|
4,383
|
30.5
|
%
|
$
|
3,952
|
28.3
|
%
|
||||||||||||||||
Workforce Solutions
|
604
|
12.6
|
%
|
929
|
13.9
|
%
|
1,216
|
11.4
|
%
|
1,665
|
13.1
|
%
|
||||||||||||||||||||
Total gross profit
|
$
|
3,172
|
24.9
|
%
|
$
|
2,689
|
19.9
|
%
|
$
|
5,599
|
22.4
|
%
|
$
|
5,617
|
21.1
|
%
|
Three months ended
|
Six months ended
|
|||||||||||||||
(in thousands)
|
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
||||||||||||
Corporate charges
|
$
|
3,375
|
$
|
2,632
|
$
|
6,857
|
$
|
5,390
|
||||||||
Business development
|
721
|
749
|
1,560
|
1,516
|
||||||||||||
Facility operation & maintenance (O&M)
|
216
|
268
|
393
|
468
|
||||||||||||
Bad debt expense
|
97
|
(137
|
)
|
97
|
(133
|
)
|
||||||||||
Other
|
1
|
10
|
10
|
15
|
||||||||||||
Total
|
$
|
4,410
|
$
|
3,522
|
$
|
8,917
|
$
|
7,256
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Net (loss) income
|
$
|
(1,401
|
)
|
$
|
3,231
|
$
|
(4,835
|
)
|
$
|
1,026
|
||||||
Interest expense, net
|
358
|
49
|
506
|
103
|
||||||||||||
Provision for income taxes
|
(57
|
)
|
(4
|
)
|
110
|
(39
|
)
|
|||||||||
Depreciation and amortization
|
387
|
481
|
802
|
994
|
||||||||||||
EBITDA
|
(713
|
)
|
3,757
|
(3,417
|
)
|
2,084
|
||||||||||
Employee retention credit
|
-
|
(5,075
|
)
|
-
|
(5,075
|
)
|
||||||||||
Restructuring charges
|
-
|
-
|
-
|
808
|
||||||||||||
Stock-based compensation expense
|
693
|
463
|
1,101
|
501
|
||||||||||||
Change in fair value of derivative instruments, net
|
(695
|
)
|
-
|
(114
|
)
|
-
|
||||||||||
VAT write-off
|
-
|
450
|
-
|
450
|
||||||||||||
Adjusted EBITDA
|
$
|
(715
|
)
|
$
|
(405
|
)
|
$
|
(2,430
|
)
|
$
|
(1,232
|
)
|
(in thousands)
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30,
2022
|
June 30,
2021
|
|||||||||||||
Net (loss) income
|
$
|
(1,401
|
)
|
$
|
3,231
|
$
|
(4,835
|
)
|
$
|
1,026
|
||||||
Employee retention credit
|
-
|
(5,075
|
)
|
-
|
(5,075
|
)
|
||||||||||
Restructuring charges
|
-
|
-
|
-
|
808
|
||||||||||||
Stock-based compensation expense
|
693
|
463
|
1,101
|
501
|
||||||||||||
Change in fair value of derivative instruments, net
|
(695
|
)
|
-
|
(114
|
)
|
-
|
||||||||||
VAT write-off
|
-
|
450
|
-
|
450
|
||||||||||||
Amortization of intangible assets related to acquisitions
|
231
|
303
|
491
|
643
|
||||||||||||
Adjusted net loss
|
$
|
(1,172
|
)
|
$
|
(628
|
)
|
$
|
(3,357
|
)
|
$
|
(1,647
|
)
|
||||
Adjusted net loss per common share - diluted
|
$
|
(0.06
|
)
|
$
|
(0.03
|
)
|
$
|
(0.16
|
)
|
$
|
(0.08
|
)
|
||||
Weighted average shares outstanding used to compute adjusted net loss per share - diluted(1)
|
21,033,447
|
20,647,426
|
21,006,910
|
20,638,116
|
Item 3. |
Quantitative and Qualitative Disclosure about Market Risk
|
Item 4. |
Controls and Procedures
|
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
|
31.1
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002, filed herewith.
|
|
31.2
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|
32.1
|
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|
101.INS*
|
XBRL Instance Document
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase
|
Date: August 15, 2022
|
|
GSE SYSTEMS, INC.
|
|
/S/ KYLE J. LOUDERMILK
|
|
Kyle J. Loudermilk
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/S/ EMMETT A. PEPE
|
|
Emmett A. Pepe
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|