10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)
☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended March 31, 2015
	or
☐	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)
1332 Londontown Blvd., Suite 200, Sykesville MD	21784
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code:  (410) 970-7800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [ X ]   No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such period that the registrant was required to submit and post such files). Yes [ X ]   No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐	Accelerated filer  ☐	Non-accelerated filer ☐	Smaller reporting company ☒
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in rule 12(b)-2 of the Exchange Act).    Yes  [  ]  No [X]

There were 17,887,859 shares of common stock, with a par value of $.01 per share outstanding as of  May 13, 2015.

1

GSE SYSTEMS, INC.

QUARTERLY REPORT ON FORM 10-Q

INDEX

		PAGE
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements:
	Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	3
	Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and March 31, 2014	4
	Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2015 and March 31, 2014	5
	Consolidated Statement of Changes in Stockholders' Equity for the Three Months Ended March 31, 2015	6
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and March 31, 2014	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	41
Item 6.	Exhibits	41
	SIGNATURES	42

2

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

GSE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	Unaudited
	March 31, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	11,590		$	13,583
Restricted cash		775			613
Contract receivables, net		15,191			15,830
Prepaid expenses and other current assets		1,698			1,703
Total current assets		29,254			31,729
Equipment, software and leasehold improvements		6,957			7,055
Accumulated depreciation		(5,171	)		(5,229	)
Equipment, software and leasehold improvements, net		1,786			1,826
Software development costs, net		1,830			1,414
Goodwill		5,612			5,612
Intangible assets, net		1,145			1,279
Long-term restricted cash		3,465			3,591
Other assets		485			548
Total assets	$	43,577		$	45,999
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit	$	-		$	339
Accounts payable		1,967			2,330
Accrued expenses		1,631			1,554
Accrued compensation and payroll taxes		2,516			2,595
Billings in excess of revenue earned		7,885			8,684
Accrued warranty		1,507			1,456
Current contingent consideration		1,900			2,842
Other current liabilities		499			473
Total current liabilities		17,905			20,273
Contingent consideration		2,492			1,948
Other liabilities		86			38
Total liabilities		20,483			22,259
Stockholders' equity:
Preferred stock $.01 par value, 2,000,000 shares authorized,  shares issued and outstanding none in 2015 and 2014		-			-
Common stock $.01 par value, 30,000,000 shares authorized, shares issued 19,486,770 and 17,887,859 shares outstanding in both 2015 and 2014		195			195
Additional paid-in capital		73,051			72,917
Accumulated deficit		(45,686	)		(45,142	)
Accumulated other comprehensive loss		(1,467	)		(1,231	)
Treasury stock at cost, 1,598,911 shares in 2015 and 2014		(2,999	)		(2,999	)
Total stockholders' equity		23,094			23,740
Total liabilities and stockholders' equity	$	43,577		$	45,999

The accompanying notes are an integral part of these consolidated financial statements.

3

GSE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

	Three Months ended March 31,
	2015			2014
Contract revenue	$	13,996		$	8,724
Cost of revenue		10,774			6,500
Gross profit		3,222			2,224
Operating expenses:
Selling, general and administrative		3,366			4,144
Depreciation		129			139
Amortization of definite-lived intangible assets		123			36
Total operating expenses		3,618			4,319
Operating loss		(396	)		(2,095	)
Interest income, net		27			31
Gain (loss) on derivative instruments, net		(48	)		104
Other expense, net		(39	)		(10	)
Loss before income taxes		(456	)		(1,970	)
Provision for income taxes		88			54
Net loss	$	(544	)	$	(2,024	)
Basic loss per common share	$	(0.03	)	$	(0.11	)
Diluted loss per common share	$	(0.03	)	$	(0.11	)

The accompanying notes are an integral part of these consolidated financial statements.

4

GSE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(Unaudited)

	Three Months ended March 31,
	2015			2014
Net loss	$	(544	)	$	(2,024	)
Foreign currency translation adjustment, net of tax		(236	)		5
Comprehensive loss	$	(780	)	$	(2,019	)

The accompanying notes are an integral part of these consolidated financial statements.

5

GSE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands)

(Unaudited)

	Common Stock				Additional Paid-in		Accumulated			Accumulated Other Comprehensive			Treasury Stock
	Shares		Amount		Capital		Deficit			Loss			Shares			Amount			Total
Balance, December 31, 2014		19,487	$	195	$	72,917	$	(45,142	)	$	(1,231	)		(1,599	)	$	(2,999	)	$	23,740
Stock-based compensation expense		-		-		134		-			-			-			-			134
Foreign currency translation adjustment		-				-		-			(236	)		-			-			(236	)
Net loss		-		-		-		(544	)		-			-			-			(544	)
Balance, March 31, 2015		19,487	$	195	$	73,051	$	(45,686	)	$	(1,467	)		(1,599	)	$	(2,999	)	$	23,094

The accompanying notes are an integral part of these consolidated financial statements.

6

GSE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Three Months ended March 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(544	)	$	(2,024	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		129			139
Amortization of definite-lived intangible assets		123			36
Capitalized software amortization		90			32
Change in fair value of contingent consideration		(80	)		27
Stock-based compensation expense		134			178
Equity loss on investments		39			27
(Gain) loss on derivative instruments		48			(104	)
Changes in assets and liabilities:
Contract receivables		583			9,875
Prepaid expenses and other assets		86			126
Accounts payable, accrued compensation and accrued expenses		(358	)		(2,210	)
Billings in excess of revenue earned		(791	)		173
Accrued warranty reserves		51			(61	)
Other liabilities		18			(388	)
Net cash provided by (used in) operating activities		(472	)		5,826
Cash flows from investing activities:
Capital expenditures		(104	)		(80	)
Capitalized software development costs		(506	)		(155	)
Restrictions of cash as collateral under letters of credit		(216	)		-
Releases of cash as collateral under letters of credit		180			34
Net cash used in investing activities		(646	)		(201	)
Cash flows from financing activities:
Payments on line of credit		(339	)		-
Payments of the liability-classified contingent consideration arrangements		(318	)		(500	)
Net cash used in financing activities		(657	)		(500	)
Effect of exchange rate changes on cash		(218	)		(12	)
Net increase (decrease) in cash and cash equivalents		(1,993	)		5,113
Cash and cash equivalents at beginning of year		13,583			15,643
Cash and cash equivalents at end of period	$	11,590		$	20,756

The accompanying notes are an integral part of these consolidated financial statements.

7

 

GSE SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months ended March 31, 2015 and 2014

(Unaudited)

1. Basis of Presentation and Revenue Recognition

Basis of Presentation

The consolidated interim financial statements included herein have been prepared by GSE Systems, Inc. (the "Company" or "GSE") without independent audit.  In the opinion of the Company's management, all adjustments and reclassifications of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows for the periods presented have been made.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted.  The results of operations for interim periods are not necessarily an indication of the results for the full year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 19, 2015.  Certain reclassifications have been made to prior period amounts to conform to the current presentation.

The Company has two reportable segments as follows:

· Performance Improvement Solutions

Our Performance Improvement Solutions business segment encompasses all of the solution-oriented technologies and services traditionally associated with GSE which focus on both our client's people and their plants and operations. This segment includes various simulation, training and engineering products and services delivered across the breadth of industries we serve. Our simulation solutions include platforms ranging from (1) the non-specific plant systems of our EnVision product line used to teach fundamental processes to newly hired employees, to (2) custom plant-specific simulators used to train plant operators, to (3) engineering-grade simulation solutions used to help clients verify and validate control systems prior to new plant construction or modification of existing plants, to (4) engineering-grade simulation solutions used for human factors engineering. Training applications include turnkey and custom training services and 3D visualization training products to make training more effective. Our engineering services include plant design, automation and control systems design, functional safety and compliance analysis, and engineering consultations.

· Staff Augmentation

Staff Augmentation services provide specialized workforce solutions primarily to the nuclear industry. These employees work at our clients' facilities under client direction. Examples of staff augmentation positions include instructors, procedure writers, work management specialists, planners, outage execution specialists, corrective action and self-assessment specialists, and training material developers. This business is managed through our Hyperspring LLC subsidiary. The business model, management focus, margins and other factors clearly separate this business line from the rest of the GSE product and service portfolio. Hyperspring has been providing these services since 2005.

Financial information about the two business segments are provided in Note 15 of the accompanying Consolidated Financial Statements.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period.  The Company's most significant estimates relate to revenue recognition, product warranties, capitalization of software development costs, valuation of goodwill and intangible assets acquired, contingent consideration issued in business acquisitions, and the recoverability of deferred tax assets.  Actual results could differ from these estimates and those differences could be material.

8

Revenue Recognition on Long-Term Contracts

The Company recognizes revenue through (1) fixed price contracts on the sale of uniquely designed systems containing hardware, software and other materials as well as (2) time and material contracts primarily through staff augmentation support and service agreements.

In accordance with U.S. generally accepted accounting principles ("GAAP"), our Performance Improvement Solutions segment accounts for revenue under fixed-price contracts using the percentage-of-completion method. This methodology recognizes revenue and earnings as work progresses on the contract and is based on an estimate of the revenue and earnings earned to date, less amounts recognized in prior periods. The Company bases its estimate of the degree of completion of the contract by reviewing the relationship of costs incurred to date to the expected total costs that will be incurred on the project. Estimated contract earnings are reviewed and revised periodically as the work progresses, and the cumulative effect of any change in estimate is recognized in the period in which the change is identified. Estimated losses are charged against earnings in the period such losses are identified. The Company recognizes revenue arising from contract claims either as income or as an offset against a potential loss only when the amount of the claim can be estimated reliably and realization is probable and there is a legal basis of the claim.

Uncertainties inherent in the performance of contracts include labor availability and productivity, material costs, change order scope and pricing, software modification and customer acceptance issues. The reliability of these cost estimates is critical to the Company's revenue recognition as a significant change in the estimates can cause the Company's revenue and related margins to change significantly from the amounts estimated in the early stages of the project.

As the Company recognizes revenue under the percentage-of-completion method, it provides an accrual for estimated future warranty costs based on historical and projected claims experience. The Company's long-term contracts generally provide for a one-year warranty on parts, labor and any bug fixes as it relates to software embedded in the systems.

The Company's system design contracts do not normally provide for "post customer support service" (PCS) in terms of software upgrades, software enhancements or telephone support. In order to obtain PCS, the customers normally must purchase a separate contract. Such PCS arrangements are generally for a one-year period renewable annually and include customer support, unspecified software upgrades, and maintenance releases. The Company recognizes revenue from these contracts ratably over the life of the agreements.

Revenue from the sale of software licenses which do not require significant modifications or customization for the Company's modeling tools are recognized when the license agreement is signed, the license fee is fixed and determinable, delivery has occurred, and collection is considered probable.

We evaluate our contracts for multiple deliverables under ASC 605-25 Revenue Recognition-Multiple Element Arrangements, and when appropriate, separate the contracts into separate units of accounting for revenue recognition. Contracts with multiple element arrangements typically include, but are not limited to, components such as training, licenses, and PCS, as described above, embedded in the agreement. When a contract contains multiple deliverables, the Company allocates revenue to each deliverable based on its relative selling price which is determined based on its vendor specific objective evidence ("VSOE") if available, third party evidence ("TPE") if VSOE is not available, or estimated selling price if neither VSOE nor TPE is available. Amounts allocated to training and support services are based on VSOE and revenue is deferred until the services have been performed. Amounts allocated to software licenses are also based on VSOE. Revenue related to software licenses is recognized once the license has been delivered.

The Company recognizes revenue under time and materials contracts primarily from staff augmentation and certain consulting agreements. Revenue on time and material contracts is recognized as services are rendered and performed. Under a typical time-and-materials billing arrangement, customers are billed on a regularly scheduled basis, such as biweekly or monthly. At the end of each accounting period, revenue is estimated and accrued for services performed since the last billing cycle. These unbilled amounts are billed the following month.

For the three months ended March 31, 2015 the following customer provided more than 10% of the Company's consolidated revenue:

	Three Months ended March 31,
	2015	2014
Tennessee Valley Authority	21.0 %	0.0 %

Tennessee Valley Authority ("TVA") is a customer of Hyperspring, LLC, which was acquired on November 14, 2014.

2. Recently Adopted Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today's guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance will be effective for the Company in the first quarter of its fiscal year ending December 31, 2018, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently in the process of evaluating the impact of its pending adoption of this ASU on the Company's consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2018.

9

3. Basic and Diluted Loss Per Common Share

Basic loss per share is based on the weighted average number of outstanding common shares for the period.  Diluted loss per share adjusts the weighted average shares outstanding for the potential dilution that could occur if stock options were exercised into common stock.

The number of common shares and common share equivalents used in the determination of basic and diluted loss per share were as follows:

(in thousands, except for share amounts)	Three Months ended
	March 31,
	2015			2014
Numerator:
Net loss	$	(544	)	$	(2,024	)
Denominator:
Weighted-average shares outstanding for basic earnings per share		17,887,859			17,887,859
Effect of dilutive securities:
Employee stock options		-			-
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share		17,887,859			17,887,859
Shares related to dilutive securities excluded because inclusion would be anti-dilutive		2,565,067			2,897,319

10

4. Acquisition

Hyperspring, LLC

On November 14, 2014, (the "Closing Date") the Company, through its operating subsidiary, GSE Power Systems, Inc. (now GSE Performance Solutions, Inc. "GSE Performance"),  acquired Hyperspring, LLC ("Hyperspring") pursuant to a Membership Interests Purchase Agreement ("Purchase Agreement") with the sellers of Hyperspring ("Sellers").  Hyperspring, headquartered in Huntsville, Alabama, specializes in training and development, plant operations support services, and staff augmentation, primarily in the United States nuclear industry.  Hyperspring operates as a wholly-owned subsidiary of GSE Performance.  The purchase price allocation included customer relationship intangible assets valued at $779,000 which are being amortized over seven years.

GSE Performance paid the Sellers an aggregate of $3.0 million in cash at the closing date. In addition, GSE may be required, pursuant to the terms of the Purchase Agreement, to pay the Sellers up to an additional $8.4 million if Hyperspring attains certain EBITDA (earnings before interest, taxes, depreciation and amortization) targets for the three-year period ending November 13, 2017. Accordingly, the total cash paid to the former Hyperspring members may total $11.4 million.  Included in this $11.4 million was a $1.2 million payment to the Hyperspring members if Hyperspring was successful in renewing its contract with the Tennessee Valley Authority ("TVA") on or before May 15, 2015 for a two year period for substantially the same scope as was currently being provided and with substantially the same economics. However, TVA did not issue their request for bid until late April 2015 and the award date is now scheduled for November 2015.  Although TVA did grant Hyperspring a six month extension of their contract from May to November 2015, since this did not meet the two-year extension requirement per the Purchase Agreement, the $1.2 million TVA payment is divided into three increments of $400,000 each and are added to the annual payments which will be made to the former Hyperspring members if they achieved certain EBITDA (earnings before interest, taxes, depreciation and amortization) targets for the three-year period ending November 13, 2017.  However, refer to Note 16 Subsequent Events regarding an amendment to the Purchase Agreement affecting the $1.2 million TVA payment.

In conjunction with the Hyperspring acquisition, GSE Performance invested $250,000 for a 50% interest in IntelliQlik, LLC ("IntelliQlik").  IntelliQlik is developing a software platform for online learning and learning management for the energy market.  GSE Performance is obligated to contribute an additional $250,000 should IntelliQlik attain certain development milestones by September 30, 2015.  IntelliQlik is jointly owned by GSE Performance and a former member of Hyperspring.

To assist our clients in creating world-class internal training and performance improvement programs, GSE is building an E2E (Entry2Expert) Performance Solution.  The Performance Solution includes a set of integrated and scalable products and services that provide a structured training program, from employee selection and onboarding through continuous skills improvement for experienced employees.  The Hyperspring acquisition, through its staff of instructors, engineers and specialists, and the IntelliQlik training platform, once completed, will increase the breadth of solutions that GSE can offer within the E2E Performance Solution program.

11

The following table summarizes the purchase price and purchase price allocation for the acquisition of Hyperspring, LLC, acquired on November 14, 2014.

(in thousands)
Cash purchase price	$	3,000
Fair value of contingent consideration		3,953
Total purchase price	$	6,953
Purchase price allocation:
Cash	$	152
Contract receivables		1,719
Prepaid expenses and other current assets		23
Property and equipment, net		12
Intangible assets		779
Goodwill		5,612
Total assets		8,297
Line of credit		749
Accounts payable, accrued expenses, and other liabilities		586
Billings in excess of revenue earned		9
Total liabilities		1,344
Net assets acquired	$	6,953

12

Pro forma results.  Our consolidated financial statements include the operating results of Hyperspring as of the date of acquisition.  For the three months ended March 31, 2015 and 2014, the unaudited pro forma financial information below assumes that our material business acquisition of Hyperspring occurred on January 1, 2014.  This pro forma information does not purport to represent what the Company's actual results would have been if the acquisition had occurred as of the date indicated or what results would be for any future periods.

(in thousands except per share data)	(unaudited)
	Three Months ended
	March 31,
Pro forma financial information including the acquisition of Hyperspring	2015				2014
Revenue		$	13,996			$	13,208
Operating loss			(446	)			(2,101	)
Net loss			(592	)			(2,031	)
Loss per common share — basic		$	(0.03	)		$	(0.11	)
Loss per common share — diluted		$	(0.03	)		$	(0.11	)

Contingent Consideration

Accounting Standards Codification 805, Business Combinations ("ASC 805") requires that contingent consideration be recognized at fair value on the acquisition date and be re-measured each reporting period with subsequent adjustments recognized in the consolidated statement of operations. We estimate the fair value of contingent consideration liabilities based on financial projections of the acquired companies and estimated probabilities of achievement and discount the liabilities to present value using a weighted-average cost of capital. Contingent consideration is valued using significant inputs that are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting. We believe our estimates and assumptions are reasonable, however, there is significant judgment involved. At each reporting date, the contingent consideration obligation is revalued to estimated fair value, and changes in fair value subsequent to the acquisitions are reflected in income or expense in the consolidated statements of operations, and could cause a material impact to, and volatility in, our operating results. Changes in the fair value of contingent consideration obligations may result from changes in discount periods, changes in the timing and amount of revenue and/or earnings estimates and changes in probability assumptions with respect to the likelihood of achieving the various earn-out criteria.

As of March 31, 2015 and December 31, 2014, contingent consideration included in the other current liabilities on the consolidated balance sheet totaled $1.9 million and $2.8 million, respectively.  As of March 31, 2015 and December 31, 2014, we also had accrued contingent consideration totaling $2.5 million and $1.9 million, respectively, which is included in other long-term liabilities on the consolidated balance sheet and represents the portion of contingent consideration estimated to be payable greater than twelve months from the balance sheet date.

(in thousands)
	March 31,		December 31,
	2015		2014
Hyperspring, LLC	$	1,516	$	2,152
IntelliQlik, LLC		213		213
EnVision Systems, Inc.		171		477
Current contingent consideration	$	1,900	$	2,842
Hyperspring, LLC	$	2,492	$	1,948
Contingent consideration	$	2,492	$	1,948

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5. Contracts Receivables

Contract receivables represent balances due from a broad base of both domestic and international customers.  All contract receivables are considered to be collectible within twelve months. Recoverable costs and accrued profit not billed represent costs incurred and associated profit accrued on contracts that will become billable upon future milestones or completion of contracts.

The components of contract receivables are as follows:

(in thousands)	March 31,			December 31,
	2015			2014
Billed receivables	$	8,427		$	10,792
Recoverable costs and accrued profit not billed		6,766			5,060
Allowance for doubtful accounts		(2	)		(22	)
Total contract receivables, net	$	15,191		$	15,830

Recoverable costs and accrued profit not billed totaled $6.8 million and $5.1 million as of March 31, 2015 and December 31, 2014, respectively.  During April 2015, the Company invoiced $2.3 million of the unbilled amounts.

The following customer accounted for more than 10% of the Company's consolidated contract receivables as of December 31, 2014:

	March 31, 2015	December 31, 2014
State Nuclear Power Automation System Engineering Co.	7.0 %	10.2 %

6. Software Development Costs

Certain computer software development costs are capitalized in the accompanying consolidated balance sheets.  Capitalization of computer software development costs begins upon the establishment of technological feasibility.  Capitalization ceases and amortization of capitalized costs begins when the software product is commercially available for general release to customers.  Amortization of capitalized computer software development costs is included in cost of revenue and is determined using the straight-line method over the remaining estimated economic life of the product, typically three years.  On an annual basis, and more frequently as conditions indicate, the Company assesses the recovery of the unamortized software development costs by estimating the net undiscounted cash flows expected to be generated by the sale of the product.  If the undiscounted cash flows are not sufficient to recover the unamortized software costs the Company will write-down the investment to its estimated fair value based on future undiscounted cash flows.  The excess of any unamortized software development costs over the related net realizable value is written down and charged to cost of revenue.

Software development costs capitalized were $506,000 and $155,000 for the three months ended March 31, 2015 and 2014, respectively.  Total amortization expense was $90,000 for the three months ended March 31, 2015 and $32,000 for the three months ended March 31, 2014.

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7. Goodwill and Intangible Assets

Goodwill

We review goodwill for impairment annually as of November 30 and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. We test goodwill at the reporting unit level. A reporting unit is an operating segment, or one level below an operating segment, as defined by U.S. generally accepted accounting principles. After the acquisition of Hyperspring, LLC ("Hyperspring") on November 14, 2014, our reporting units are: (i) Performance Improvement Solutions and (ii) Staff Augmentation.  At March 31, 2015 and December 31, 2014, the $5.6 million of goodwill  balance was related to the Hyperspring acquisition and is assigned to our Staff Augmentation segment.

Accounting Standards Update ("ASU") 2011-08, Testing Goodwill for Impairment ("ASU 2011-08") permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Under ASU 2011-08, an entity is not required to perform step one of the goodwill impairment test for a reporting unit if it is more likely than not that its fair value is greater than its carrying amount.

Intangible Assets Subject to Amortization

The Company's intangible assets include amounts recognized in connection with business acquisitions, including customer relationships, contract backlog and technology.  Intangible assets are initially valued at fair market value using generally accepted valuation methods appropriate for the type of intangible asset.  Amortization is recognized on a straight-line basis over the estimated useful life of the intangible assets, except for contract backlog and contractual customer relationships which are recognized in proportion to the related projected revenue streams.   The Company reviews specific definite-lived intangibles for impairment when events occur that may impact their value in accordance with the respective accounting guidance for long-lived assets.

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8. Fair Value of Financial Instruments

ASC 820, Fair Value Measurements and Disclosures ("ASC 820"), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The levels of the fair value hierarchy established by ASC 820 are:

Level 1:  inputs are quoted prices, unadjusted, in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2:  inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.  A Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3:  inputs are unobservable and reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The Company considers the recorded value of certain of its financial assets and liabilities, which consist primarily of accounts receivable and accounts payable, to approximate the fair value of the respective assets and liabilities at March 31, 2015 and December 31, 2014 based upon the short-term nature of the assets and liabilities.

The following table presents assets and liabilities measured at fair value at March 31, 2015:

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
(in thousands)	(Level 1)		(Level 2)			(Level 3)		Total
Money market funds	$	10,557	$	-		$	-	$	10,557
Foreign exchange contracts		-		149			-		149
Total assets	$	10,557	$	149		$	-	$	10,706
Foreign exchange contracts	$	-	$	(78	)	$	-	$	(78	)
Total liabilities	$	-	$	(78	)	$	-	$	(78	)

The following table presents assets and liabilities measured at fair value at December 31, 2014:

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
(in thousands)	(Level 1)		(Level 2)			(Level 3)		Total
Money market funds	$	11,661	$	-		$	-	$	11,661
Foreign exchange contracts		-		92			-		92
Total assets	$	11,661	$	92		$	-	$	11,753
Foreign exchange contracts	$	-	$	(24	)	$	-	$	(24	)
Total liabilities	$	-	$	(24	)	$	-	$	(24	)

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9. Derivative Instruments

The Company utilizes forward foreign currency exchange contracts to manage market risks associated with the fluctuations in foreign currency exchange rates.  It is the Company's policy to use such derivative financial instruments to protect against market risk arising in the normal course of business in order to reduce the impact of these exposures.  The Company minimizes credit exposure by limiting counterparties to nationally recognized financial institutions.

As of March 31, 2015, the Company had foreign exchange contracts outstanding of approximately 0.3 million Pounds Sterling, 0.7 million Australian Dollars and 2.2 million Euro at fixed rates.  The contracts expire on various dates through December 2016.  At December 31, 2014, the Company had contracts outstanding of approximately 0.3 million Pounds Sterling, 1.4 million Euro, 0.8 million Australian Dollars, and 0.5 million Malaysian Ringgits at fixed rates.

The Company has not designated any of the foreign exchange contracts outstanding as hedges and has recorded the estimated fair value of the contracts in the consolidated balance sheets as follows:

	March 31,			December 31,
(in thousands)	2015			2014
Asset derivatives
Prepaid expenses and other current assets	$	109		$	71
Other assets		40			21
		149			92
Liability derivatives
Other current liabilities		(24	)		(23	)
Other liabilities		(54	)		(1	)
		(78	)		(24	)
Net fair value	$	71		$	68

The changes in the fair value of the foreign exchange contracts are included in net gain (loss) on derivative instruments in the consolidated statements of operations.

The foreign currency denominated contract receivables, billings in excess of revenue earned and subcontractor accruals that are related to the outstanding foreign exchange contracts are remeasured at the end of each period into the functional currency using the current exchange rate at the end of the period.  The gain or loss resulting from such remeasurement is also included in net gain (loss) on derivative instruments in the consolidated statements of operations.

For the three months ended March 31, 2015 and 2014, the Company recognized a net gain (loss) on its derivative instruments as outlined below:

	Three Months ended March 31,
(in thousands)	2015			2014
Foreign exchange contracts- change in fair value	$	-		$	243
Remeasurement of related contract receivables,  billings in excess of revenue earned, and  subcontractor accruals		(48	)		(139	)
Gain (loss) on derivative instruments, net	$	(48	)	$	104

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10. Stock-Based Compensation

The Company recognizes compensation expense for all equity-based compensation awards issued to employees, directors and non-employees that are expected to vest.  Compensation cost is based on the fair value of awards as of the grant date.  The Company recognized $134,000 and $178,000 of stock-based compensation expense for the three months ended March 31, 2015 and 2014, respectively, under the fair value method.  The Company granted 50,000 stock options for the three months ended March 31, 2015.  The fair value of the options granted for the three months ended March 31, 2015 was $40,000.  The Company granted 60,000 stock options for the three months ended March 31, 2014.  The fair value of the granted options at the grant date was $56,000.

11. Long-Term Debt

At March 31, 2015 and December 31, 2014, the Company had no long-term debt.

Lines of Credit

Susquehanna Bank

At March 31, 2015, the Company had a Master Loan and Security Agreement and Revolving Credit Note with Susquehanna Bank ("Susquehanna").  The Company and its subsidiary, GSE Performance Solutions, Inc., were jointly and severally liable as co-borrowers.  The Loan Agreement provides a $7.5 million revolving line of credit for the purpose of (i) issuing stand-by letters of credit and (ii) providing working capital. Working capital advances bear interest at a rate equal to the Wall Street Journal Prime Rate of Interest, floating with a floor of 4 1/2%.  The agreement expires on June 30, 2015.

As collateral for the Company's obligations, the Company granted a first lien and security interest in all of the assets of the Company, including but not limited to, accounts receivable, proceeds and products, intangibles, trademarks, patents, intellectual property, machinery and equipment.

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On September 9, 2014, the Company signed a Third Comprehensive Amendment to the Master Loan and Security Agreement.  According to the Third Amendment, the Company is to maintain a segregated cash collateral account at Susquehanna Bank equal to the greater of (i) $3.0 million or (ii) the aggregate principal amounts of all Loans outstanding under the Revolving Credit Facility (including any issued and outstanding letters of credit, working capital advances, and negative foreign exchange positions) as security for the Company's obligations.  Under this Amendment, Susquehanna Bank shall have complete and unconditional control over the cash collateral account.

On September 30, 2014, Susquehanna Bank collateralized the outstanding letters of credit issued under the line of credit.  At both March 31, 2015 and December 31, 2014, the cash collateral account totaled $4.2 million and was classified as restricted cash on the balance sheet.

The credit agreement contains certain restrictive covenants regarding future acquisitions and incurrence of debt.  In addition, the credit agreement contains financial covenants with respect to the Company's cash flow coverage ratio, minimum tangible capital base, quick ratio, and tangible capital base ratio.

		As of
	Covenant	March 31, 2015
Cash flow coverage ratio	Must Exceed 1.20 : 1.00	-4.41 : 1.00
Minimum tangible capital base	Must Exceed $26.0 million	$14.5 million
Quick ratio	Must Exceed 2.00 : 1.00	1.63 : 1.00
Tangible capital base ratio	Not to Exceed .75 : 1.00	1.41 : 1.00

As of March 31, 2015, the Company was not in compliance with any of its covenants as defined above, however, the Company has received a written waiver from Susquehanna Bank for noncompliance.

IberiaBank

On November 14, 2014, the acquisition date, Hyperspring, LLC had a $1.0 million working capital line of credit with IberiaBank.  Interest was payable monthly at a rate of the prime rate of interest as published in the money rate section of the Wall Street Journal plus 2.50%. The effective rate at November 14, 2014 was 5.750%. The line was secured by all accounts and was guaranteed by the members of Hyperspring, LLC.

On December 7, 2014, the working capital line of credit matured while the Company was renegotiating the new terms with IberiaBank subsequent to the acquisition of Hyperspring. On January 22, 2015, a promissory note was executed between Hyperspring, LLC and IberiaBank to extend the $1.0 million line of credit until June 30, 2015. Under the new terms, interest is payable monthly at a rate of the prime rate of interest as published in the money rate section of the Wall Street Journal plus 1.00 %. The effective rate at the date of the promissory note was 4.25 %. The line is secured by all accounts of Hyperspring and guaranteed by GSE Systems, Inc.

At December 31, 2014 the outstanding balance on the line of credit was $339,000.  At March 31, 2015, no balance was outstanding on the line of credit.

The Company draws on the IberiaBank line of credit as needed mainly to provide for payroll funding for Hyperspring. The line is replenished through collection of receivables obtained in the following weeks.

Contingent Liabilities

As of March 31, 2015, the Company was contingently liable for fourteen standby letters of credit and one surety bond totaling $4.3 million which represent advance payment and performance bonds on twelve contracts.  The Company has deposited the full value of fourteen standby letters of credit in escrow accounts, amounting to $4.2 million, which have been restricted in that the Company does not have access to these funds until the related letters of credit have expired.  The cash has been recorded on the Company's balance sheet at March 31, 2015 as restricted cash.

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12. Product Warranty

As the Company recognizes revenue under the percentage-of-completion method, it provides an accrual for estimated future warranty costs based on historical experience and projected claims.  The activity in the warranty account is as follows:

(in thousands)
Balance at December 31, 2014	$	1,456
Warranty provision		171
Warranty claims		(109	)
Currency adjustment		(11	)
Balance at March 31, 2015	$	1,507

13. Income Taxes

The Company files in the United States federal jurisdiction and in several state and foreign jurisdictions. Because of the net operating loss carryforwards, the Company is subject to U.S. federal and state income tax examinations from years 1997 forward and is subject to foreign tax examinations by tax authorities for years 2007 and forward. Open tax years related to state and foreign jurisdictions remain subject to examination but are not considered material to our financial position, results of operations or cash flows.

An uncertain tax position taken or expected to be taken in a tax return is recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Interest and penalties related to income taxes are accounted for as income tax expense.  The Company has appropriately accounted for its uncertain tax positions.

The Company expects to pay income taxes in India and the UK in 2015.  In 2014, the Company paid income taxes in the UK and India.  The Company has a full valuation allowance on its U.S., Swedish, and Chinese net deferred tax assets at March 31, 2015.

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14. Preferred Stock Rights

On March 21, 2011, the Board of Directors of the Company declared a dividend, payable to holders of record as of the close of business on April 1, 2011, of  one preferred stock purchase right (a "Right") for each outstanding share of common stock, par value $0.01 per share, of the Company (the "Common Stock").  In addition, the Company will issue one Right with each new share of Common Stock issued.  In connection therewith, on March 21, 2011, the Company entered into a Stockholder Protection Rights Agreement (as amended from time to time, the Rights Agreement) with Continental Stock Transfer & Trust Company, as Rights Agent, which has a term of three years, unless amended by the Board of Directors in accordance with the terms of the Rights Agreement.  On March 21, 2014, the Rights Agreement was amended to extend the term an additional two years.  The Rights Agreement will now expire on March 21, 2016.  The Rights trade with and are inseparable from the Common Stock and are not evidenced by separate certificates unless they become exercisable.  Each Right entitles its holder to purchase from the Company one-hundredth of a share of participating preferred stock having economic and voting terms similar to the Common Stock at an exercise price of $8.00 per Right, subject to adjustment in accordance with the terms of the Rights Agreement, once the Rights become exercisable.  Under the Rights Agreement, the Rights become exercisable if any person or group acquires 20% or more of the Common Stock or, in the case of any person or group that owned 20% or more of the Common Stock as of March 21, 2011, upon the acquisition of any additional shares by such person or group.  The Company, its subsidiaries, employee benefit plans of the Company or any of its subsidiaries and any entity holding Common Stock for or pursuant to the terms of any such plan are accepted.  Upon exercise of the Right in accordance with the Rights Agreement, the holder would be able to purchase a number of shares of Common Stock from the Company having an aggregate market price (as defined in the Rights Agreement) equal to twice the then-current exercise price for an amount in cash equal to the then-current exercise price.  In addition, the Company may, in certain circumstances and pursuant to the terms of the Rights Agreement, exchange the Rights for one share of Common Stock or an equivalent security for each Right or, alternatively, redeem the Rights for $0.001 per Right.  The Rights will not prevent a takeover of our Company, but may cause substantial dilution to a person that acquires 20% or more of the Company's Common Stock.

15.Segment Information

The Company has two reportable business segments.  The Performance Improvement Solutions business segment provides simulation, training and engineering products and services delivered across the breadth of industries we serve.  Solutions include simulation for both training and engineering applications.  Example training applications include turnkey and custom training services, while engineering services include plant design verification and validation. We provide these services across all our market segments.  Contracts typically range from ten months to three years.

The Staff Augmentation services segment provides specialized workforce solutions primarily to the U.S. nuclear industry, working at our clients' facilities.  This business is managed through our Hyperspring, LLC subsidiary.  The business model, management focus, margins and other factors clearly separate this business line from the rest of the GSE product and service portfolio.  Hyperspring has been providing these services since 2005.

The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment contract revenue to consolidated revenue and operating results to consolidated loss before income taxes:

(in thousands)	Three Months ended
	March 31,
	2015			2014
Contract revenue:
Performance Improvement Solutions	$	8,816		$	8,724
Staff Augmentation		5,180			-
		13,996			8,724
Operating income (loss):
Performance Improvement Solutions		(776	)		(2,068	)
Staff Augmentation		300			-
Gain (Loss) on change in fair value of contingent consideration, net		80			(27	)
Operating loss		(396	)		(2,095	)
Interest income, net		27			31
Gain (loss) on derivative instruments, net		(48	)		104
Other expense, net		(39	)		(10	)
Loss before income taxes	$	(456	)	$	(1,970	)

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16. Subsequent Events

On May 13, 2015, GSE Performance Solutions, Inc. (previously known as GSE Power Systems, Inc.) and the former owners (the "Sellers") of Hyperspring, LLC agreed to an amendment (the "Amendment") to the Membership Interest Purchase Agreement.  Under the terms of the Amendment, the date to attain a renewal of the TVA contract was extended from May 15, 2015 to December 31, 2015 (the "Extension Date").  If, prior to the Extension Date, the TVA contract is renewed until at least May 15, 2016,  the Sellers will receive a lump sum payment in the amount of $600,000 and if the TVA contract is renewed until at least May 15, 2017,  the Sellers will receive a lump sum payment in the amount of $1.2 million.  If Hyperspring does not achieve a new, multi-year contract with TVA, then the $1.2 million earnout payment will remain divided into three increments of $400,000 and be added to the annual payments which will be made to the former Hyperspring members if they achieve EBITDA targets for the three year period following the Acquisition Date.

Due to the amendment of the Purchase Agreement, the Company will recognize a $262,000 accretion expense charge in the second quarter 2015 to reflect the change in the current value of the contingent consideration based on the revised payment terms.

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

GSE Systems, Inc. ("GSE Systems", "GSE" or the "Company") is a world leader in real-time high fidelity simulation.  The Company provides simulation and educational solutions and services to the nuclear and fossil electric utility industry, and the chemical and petrochemical industries.

For years we have described ourselves as a simulation company, providing mainly simulation solutions to improve designs, de-risk projects and train operators. Our acquisition of Hyperspring, LLC and investment in IntelliQlik, LLC in November 2014 are helping to accelerate our transformation into a Performance Improvement Company. We improve plant performance with a combination of simulation, engineering and plant services that help clients improve their plant's profitability, productivity and safety, and assist in decommissioning the plants at the end of their life cycle. We improve human performance by providing technologies and services that systematically help clients in recruiting and selecting the right person for the job and training that individual throughout their career from entry-level to expert.

GSE is the parent company of:

· GSE Performance Solutions, Inc. (formerly GSE Power Systems, Inc.), a Delaware corporation;

· GSE Power Systems, AB, a Swedish corporation;

· GSE Engineering Systems (Beijing) Co. Ltd., a Chinese limited liability company;

· GSE Systems, Ltd., a Scottish limited liability company;

· EnVision Systems (India) Pvt. Ltd., an Indian limited liability company; and

· Hyperspring, LLC, an Alabama limited liability company.

The Company has a 50% interest in IntelliQlik, LLC, a Delaware limited liability company and a 50% interest in General Simulation Engineering RUS LLC, a Russian closed joint-stock company.

The Company has two reportable business segments:  Staff Augmentation which provides personnel to fulfill staff positions on a short-term basis to energy industry customers and Performance Improvement Solutions which provides simulation, engineering, and training solutions and services to the nuclear and fossil fuel power industry and to the chemical and petrochemical industries.

Cautionary Statement Regarding Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward looking statements.  Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future events and results.  We use words such as "expects", "intends", "believes", "may", "will" and "anticipates" to indicate forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including, but not limited to, those factors set forth under Item 1A - Risk Factors of the Company's 2014 Annual Report on Form 10-K and those other risks and uncertainties detailed in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission. We caution that these risk factors may not be exhaustive.  We operate in a continually changing business environment, and new risk factors emerge from time to time.  We cannot predict these new risk factors, nor can we assess the effect, if any, of the new risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ from those expressed or implied by these forward-looking statements.

If any one or more of these expectations and assumptions proves incorrect, actual results will likely differ materially from those contemplated by the forward-looking statements.  Even if all of the foregoing assumptions and expectations prove correct, actual results may still differ materially from those expressed in the forward-looking statements as a result of factors we may not anticipate or that may be beyond our control.  While we cannot assess the future impact that any of these differences could have on our business, financial condition, results of operations and cash flows or the market price of shares of our common stock, the differences could be significant.  We do not undertake to update any forward-looking statements made by us, whether as a result of new information, future events or otherwise.  You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this report.

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General Business Environment

GSE Systems, Inc. ("GSE Systems", "GSE", the "Company", "we", "us" or "our"), a NYSE MKT company trading under symbol GVP, is a team of dedicated people that help customers meet their performance improvement goals and reduce their risk.  We do this by combining expertise in simulation, visualization, engineering, equipment operations, and training to improve both plant and human performance.

We execute projects globally with over 354 employees operating from offices in the U.S., China, India, Sweden and the United Kingdom.  While the majority of revenue comes from the nuclear and fossil power generation markets, we also serve the oil and gas, refining, chemicals, petrochemicals, industrial gas, manufacturing, transportation and plant utilities markets.

GSE Systems was formed on March 30, 1994 to consolidate the simulation and related businesses of S3 Technologies, General Physics International Engineering & Simulation and EuroSim, each separately owned and operated by ManTech International Corporation, GP Strategies Corporation and Vattenfall AB, respectively.

On April 26, 2010, we completed the acquisition of TAS Holdings Ltd ("TAS") and subsequently merged TAS into our UK subsidiary, GSE Systems Ltd.  Our UK operations, located in Stockton-on-Tees, England provides engineering consulting, specifically in electrical system design, instrumentation and controls engineering and automation engineering.  The majority of our UK customers are in the petroleum refining, oil and gas, chemical and petrochemical industries. 

On January 4, 2011, we acquired EnVision Systems, Inc. ("EnVision").  The EnVision product line consists of interactive computer-based tutorials and related simulation models primarily for the petrochemical and oil & gas refining industries.  The EnVision products provide a foundation in process fundamentals and plant operations and interaction.  We have more than 750 installations of EnVision products in over 28 countries, and our approximately 130 clients include Shell Oil Company, BP Products North America ("BP"), Total and Chevron.

On November 14, 2014, we acquired Hyperspring, LLC, an Alabama limited liability company.  Hyperspring is a staff augmentation company that hires personnel to fulfill staff positions on a short-term basis for energy industry customers, primarily nuclear power customers.  Hyperspring personnel provide training, operations and maintenance support including:  generic fundamentals exams (GFES), accreditation training visit (ATV) preparation, senior reactor operator (SRO) certification, procedure development, work management, tagging/labeling, outage execution, planning/scheduling, corrective action, self-assessments and equipment reliability.  Customers include TVA, Entergy, PSEG Nuclear LLC and NRG Energy Inc.

In conjunction with the Hyperspring acquisition, the Company acquired a 50% ownership stake in IntelliQlik, LLC, a Delaware limited liability company.  IntelliQlik is developing a software platform for online learning and learning management for the energy market.  A former Member of Hyperspring also has a 50% ownership stake in IntelliQlik.

On December 31, 2014 the Company merged EnVision with GSE Power Systems, Inc. and changed the name of GSE Power Systems, Inc. to GSE Performance Solutions, Inc.  The change reflects our growing focus on providing solutions to improve Human and Plant Performance Lifecycles.

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Operating Segments

With the acquisition of Hyperspring, we now operate through two reportable business segments.  We are organized by operating groups primarily based upon the services performed by each group.  Each operating group consists of business units which are focused on providing specific products and services to certain classes of customers or within targeted markets.  Marketing and communications, accounting, finance, legal, human resources, information systems and other administrative services are organized at the corporate level.  Business development and sales resources are aligned with operating groups to support existing customer accounts and new customer development.  Our two business segments are:

· Performance Improvement Solutions

As evidenced through the change in the company name of our U.S. operating company to GSE Performance Solutions, Inc., our Performance Improvement Solutions business segment encompasses all of the solution-oriented technologies and services traditionally associated with GSE which focus on both our client's people and their plants and operations.  This segment includes various simulation, training and engineering products and services delivered across the breadth of industries we serve.  Our simulation solutions include platforms ranging from (1) the non-specific plant systems of our EnVision product line used to teach fundamental processes to newly hired employees, to (2) custom plant-specific simulators used to train plant operators, to (3) engineering-grade simulation solutions used to help clients verify and validate control systems prior to new plant construction or modification of existing plants, to (4) engineering-grade simulation solutions used for human factors engineering.  Training applications include turnkey and custom training services and 3D visualization training products to make training more effective.  Our engineering services include plant design, automation and control systems design, functional safety and compliance analysis, and engineering consultations.

· Staff Augmentation

Staff Augmentation services provide specialized workforce solutions primarily to the nuclear industry.  These employees work at our clients' facilities under client direction.  Examples of staff augmentation positions include instructors, procedure writers, work management specialists, planners, outage execution specialists, corrective action and self-assessment specialists, and training material developers.  This business is managed through our Hyperspring LLC subsidiary.  The business model, management focus, margins and other factors clearly separate this business line from the rest of the GSE product and service portfolio.  Hyperspring has been providing these services since 2005.

Financial information about our business segments and geographic operations and revenue are provided in Note 15 of the accompanying Consolidated Financial Statements.

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Products, Services, Strategy

We believe the most serious future challenge facing the industries we serve is not their access to technology, their access to markets, nor their access to operating capital.  Instead the challenge will be their access to a trained and efficient workforce.  This challenge manifests itself due to both the knowledge that will be lost as a large percentage of the experienced workforce reaches retirement age in the next ten years and the replacement of these experienced workers by a new generation who have different learning styles and work expectations.

This belief is supported by the following trends as reported in the U.S. Department of Energy's National Energy Technology Laboratory 2013 report entitled Emerging Workforce Trends in the U.S. Energy and Mining Industries: A Call to Action.

· About 1/3 of the U.S. energy industry workforce is comprised of "baby boomers" (those born between 1946 and 1964), and they are poised to retire in great numbers by the end of this decade,

· There are too few younger workers in the pipeline to replace them, and many of the younger workers lack the necessary science, technology, engineering and math skills needed for many energy jobs,

· There is a critical need to capture the knowledge of experienced employees before they leave.

Exacerbating this workforce trend is the continuing domestic and global population increases which will continue to increase the overall demand for energy.  As the U.S.' current educational system is not able to provide the needed trained workers in adequate numbers, the onus is on the energy industry itself to address its training needs at both entry levels and more senior levels.  A complete lifecycle of training, from a worker's entry into the energy industry through to the achievement of expert knowledge and skills, is now required for the energy industry more than ever.

Business leaders are recognizing the problem and the challenge ahead.  A study published in Harvard Business Review (May 28, 2013) revealed that Boards of Directors identified Talent Management as their number one concern.  Those same executives rated their companies very poorly on key elements of talent management including attracting, hiring, assessing and developing top talent.

As companies are always under pressure to improve productivity, reduce costs and improve operating margins, energy industry companies have been working to create leaner, more competent organizations that can rapidly respond to a changing environment.  Increasing pressures to improve profitability have resulted in flatter organizational structures within companies with less middle management to exercise control.  According to the International Atomic Energy Agency (IAEA) article, A Systematic Approach to Human Performance Improvement in Nuclear Power Plants: Training Solutions, companies understand and value the potential contribution that every employee can make to their overall success.  As a result, companies have been emphasizing the quality of their human performance processes and the building of excellent educational processes for their employees.

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Entry2Expert Performance Cycle

To assist our clients in creating world-class internal training and performance improvement programs, we are building the E2E (Entry2Expert) Performance Solution, a set of integrated and scalable products and services which provide a structured program from employee selection and onboarding through continuous skills improvement for experienced employees.  GSE can now provide the right training solution for the right step in each employee's career.

The major elements of the E2E Performance Solution include:

· Employee Screening and Selection:  Leveraging the use of simulation and providing experts in employee assessments, we help clients ensure their candidates for employment possess both technical aptitude as well as personality traits suited for the specific job functions.

· Training Needs Assessments:  We help clients define their specific training needs by analyzing the job functions and processes specific to their plant.  This is the first step in creating a structured training program that will provide consistent and predictable results.

· Training Program Development: Following the ADDIE (Analyze, Design, Develop, Implement, and Evaluate) model for training program management, we can structure the entire training program for the client, including training media and modes, such as self-paced e-Learning, instructor-led classroom, in-depth simulation, and serious gaming.

· Self-Paced Training Tutorials:  We have a full complement of e-Learning material.  The products include basic equipment and component fundamentals that are applicable across a variety of industries, as well as comprehensive training for the oil and gas and refining markets.  Using a blended learning approach, students learn the overall purpose of plant systems, the major equipment, how the equipment is operated and controlled.  This methodology ensures the students know the basics before entering a plant-specific training program.  We have delivered over 500 such tutorial programs in multiple languages worldwide.

· Instructor-Led Training:  We provide classroom and simulator instructors as adjunct staff or to teach turnkey training programs using training materials that either we or the client have developed.  Turnkey courses include ANSI Fundamentals (math and sciences), Generic Fundamentals (nuclear plant components, systems, and reactor theory), Senior Reactor Operator (SRO) Certification, and Engineering Systems Program courses.

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· Universal Training Simulators:  These products complement the Self-Paced Training Tutorials by reinforcing what the student learned in the tutorial by putting it into practice on the Universal Simulator.  The simulation models are high fidelity and engineering correct, but represent a typical plant or typical process, versus the exact replication of a client's plant.  We have delivered over 250 such simulation models to clients consisting of major oil companies and educational institutions.

· Part-Task Training Simulators:  Like the Universal Simulators, we provide other unique training solutions such as a generic nuclear plant simulator, VPanel displays which replicate control room hardware and simulator solutions specific to industry need, such as Severe Accident models to train on and aid in the understanding of events such as the Fukushima Daiichi accident.

· 3D Visualization:  Being able to visualize complex processes, or detailed maintenance tasks significantly improves understanding and retention while reducing the learning process.  We provide 3D visualization solutions to help customers "see" and understand the internal workings complex systems such as nuclear reactors, or how to maintain complicated pieces of equipment.  Blending the learning strategy of incorporating 3D visualization with high-fidelity, real-time simulation models enables us to provide the energy industry with better, faster, and less costly training in an immersive environment that is ideally suited for the next generation workforce.

· Plant-Specific Operator Training Simulators:  These simulators provide an exact replication of the plant control room and plant operations.  They provide the highest level of realism and training and allow users to practice their own plant-specific procedures.  Clients can safely practice startup, shutdown, normal operations, as well as response to abnormal events we all hope they never have to experience in real life.  We have delivered nearly 450 plant-specific simulators to clients in the nuclear power, fossil power and process industries worldwide.

The goal of our E2E performance lifecycle offering is to ensure superior human achievement in the dimensions of:

· Recruiting, screening, and selecting the right workforce

· Shortening the learning process

· Reduce human errors

· Mitigate effects of retirement and turnover

· Improve workforce agility

· Achieve and maintain certifications and compliance

· All of which improve our customers' bottom lines

The dramatic increase in energy demand world-wide over the next 30 years will require significant amounts of training for new employees and also require new plants using energy of all sources.   Obviously, these new plants will need to be engineered and designed prior to construction, and due to their high-fidelity our modeling tools are being increasingly used to verify and validate control system and overall plant designs.

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Design2Decom Performance Cycle

Just like the Entry2Expert (E2E) process helps improve the performance of our customers' people, Design2Decom (D2D) encompasses a range of services and technologies aimed at improving plant performance. From getting a client's system on-line faster, to operating safety, and support from experienced staff throughout the lifecycle, services include:

· Engineering Consultancy, Project Execution and Project Management:  Whether in the feasibility, concept or detail design stages of a plant or for plant modifications, we help clients design and implement engineering projects across several disciplines:

o Instrumentation Engineering

o Control Systems Engineering

o Automation Design Engineering

o Electrical Design Engineering

· Virtual commissioning of plants.  Our high-fidelity, simulation-based engineering solutions test design assumptions and provide feedback throughout the design process for:

o Integrated systems design validation

o Control strategy design validation

o Human factors engineering support

o Operating procedure validation

o Control system validation

· Safety and Compliance:  Our engineering expert de-risk operations through engineering assessments and remediation services to ensure safety and legislative compliance in the following areas:

o Functional Safety

o Electrical Safety

o Hazardous Areas Safety

o Arc Flash Safety

o Alarm Management

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· Specialized Plant Support: As our customers' experienced staffs retire, access to experts that can help with specialized plant projects is critical.  Through the acquisition of Hyperspring, we also provide expert support either through staff augmentation or turnkey projects for the following:

o Procedure Development

o Training Material Upgrade and Development

o Work Management

o Outage Execution

o Planning and Scheduling

o Corrective Actions

o Self-Assessments

o Equipment Reliability

· Decommissioning:  As plants reach the end of their useful life, decommissioning and deconstruction is a critical service, particularly in the nuclear industry where contaminated material must be handled in safe and precise manners.  Our engineering, simulation and visualization capabilities enable clients to plan for, train for, and execute decommissioning while minimizing exposure to hazardous materials and saving money.

The goal of Design2Decom (D2D) is to help clients optimize plant performance and compliance in terms of the following:

· Finding design errors during engineering rather than construction allowing plant startup to occur sooner saving countless man-hours and dollars while simultaneously allowing revenue generation sooner. 

· Ensuring plants are safely operated within the regulatory requirements.

· Providing expert support for specialized projects and to augment an aging workforce.

· Limiting cost and hazards exposure through intelligent decommissioning solutions.

Our two overarching solution sets, Entry2Expert (E2E) and Design2Decom (D2D) bring together the collection of skills GSE has amassed over more than 40 years from its traditional roots in custom simulation to the acquisition of the specialized engineering capabilities of TAS Holding, entry and intermediate level training solutions via our EnVision acquisition, and now extensive training and plant support capabilities by acquiring Hyperspring.

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Competitive Advantages

While there is competition in various industry niches, there are few companies in our space that can combine the engineering, simulation and training expertise we now have through the execution of our acquisition strategy.  None of our traditional competitors serve the broader performance improvement market.

· Unique Combination of Talent.  Nobody in our market space brings together the sophistication of simulation technology with the engineering expertise, training expertise and visualization expertise to provide the holistic people and plant performance improvement solutions.

· Reputation for Customer Satisfaction.  As part of its ISO-9000 Quality Program Certification, GSE measures customer satisfaction across numerous factors such as On-Time Delivery, Problem Solving, and Customer Communication.  In each category measured we routinely exceed customer expectations.

· Industry Expertise.  GSE is a leading innovator and developer of real-time software with more than 40 years of experience producing high-fidelity, real-time simulators.  As a result, the Company has acquired substantial applications expertise in the energy and industrial process industries.  The Company employs a highly educated and experienced multinational workforce of over 300 employees, including approximately 180 engineers and scientists.  Of the almost 180 engineers, approximately 49% of these engineers and scientists have advanced science and technical degrees in fields such as chemical, mechanical and electrical engineering, applied mathematics and computer sciences, while an additional 33% have master degrees, and another 12% have doctorate degrees in the aforementioned fields.

· Proprietary Software Tools.  GSE has developed a library of proprietary software tools including auto-code generators and system models that substantially facilitate and expedite the design, production and integration, testing and modification of software and systems.  These tools are used to automatically generate the computer code and systems models required for specific functions commonly used in simulation applications, thereby enabling it or its customers to develop high-fidelity, real-time software quickly, accurately and at lower costs.  The Company has a substantial library of Process-Specific Simulation models and eLearning Modules aimed at the oil and gas, refining and specialty chemicals market.

· Training Curricula.   The Company has developed hundreds of detailed courses and simulator exercise material or specific industrial applications including oil and gas refining, gas-oil production, nuclear and combined cycle gas turbine power plant and desalination.

· In the area of training and training related products, Hyperspring can now include: state of the art 3D graphics and simulation to enhance our offerings and differentiate us from our competitors.  The area of staff augmentation is mostly focused on training and operations support.  The senior management of Hyperspring has strong active ties to the industries we serve which allows us to interface with our customers directly in the course of doing business versus having to periodically call on customers.  Our proximity allows us a significant competitive advantage in that we can immediately offer solutions and therefore bypass lengthy bid processes.

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Results of Operations

The following table sets forth the results of operations for the periods presented expressed in thousands of dollars and as a percentage of revenue:

(in thousands)	Three Months ended March 31,
	2015			%			2014			%
Contract revenue	$	13,996			100.0	%	$	8,724			100.0	%
Cost of revenue		10,774			77.0	%		6,500			74.5	%
Gross profit		3,222			23.0	%		2,224			25.5	%
Operating expenses:
Selling, general and administrative		3,366			24.0	%		4,144			47.5	%
Depreciation		129			0.9	%		139			1.6	%
Amortization of definite-lived intangible assets		123			0.9	%		36			0.4	%
Total operating expenses		3,618			25.8	%		4,319			49.5	%
Operating loss		(396	)		(2.8	)%		(2,095	)		(24.0	)%
Interest income, net		27			0.2	%		31			0.4	%
Gain (loss) on derivative instruments, net		(48	)		(0.4	)%		104			1.2	%
Other expense, net		(39	)		(0.3	)%		(10	)		(0.2	)%
Loss before income taxes		(456	)		(3.3	)%		(1,970	)		(22.6	)%
Provision for income taxes		88			0.6	%		54			0.6	%
Net loss	$	(544	)		(3.9	)%	$	(2,024	)		(23.2	)%

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates, judgments and assumptions are continually evaluated based on available information and experience.  Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

A summary of the Company's significant accounting policies as of December 31, 2014 is included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.  Certain of our accounting policies require higher degrees of judgment than others in their application.  These include revenue recognition on long-term contracts, capitalization of computer software development costs, contingent consideration issued in business acquisitions, and the recoverability of deferred tax assets.  These critical accounting policies and estimates are discussed in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in the 2014 Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

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Results of Operations - Three Months ended March 31, 2015 versus Three Months ended March 31, 2014

Contract Revenue.  Contract revenue for the three months ended March 31, 2015 totaled $14.0 million, which was 60.4% greater than the $8.7 million of revenue for the three months ended March 31, 2014.  The increase in revenue was driven by the acquisition of Hyperspring, represented by our Staff Augmentation segment, depicted below.

(in thousands)	Three Months ended
	March 31,
	2015			2014
Contract Revenue:
Performance Improvement Solutions		$	8,816		$	8,724
Staff Augmentation			5,180			-
Total Contract Revenue		$	13,996		$	8,724

Performance Improvement Solutions revenue increased 1.1% from $8.7 million for the three months ended March 31, 2014 to $8.8 million for the March 31, 2015.  We recorded total Performance Improvement Solutions orders of $11.1 million in the three months ended March 31, 2015 as compared to $6.3 million in the three months ended March 31, 2014.

As discussed earlier, our Staff Augmentation business segment was created due to the acquisition of Hyperspring, LLC on November 14, 2014.  Revenue for the three months ended March 31, 2015 totaled $5.2 million.  Staff Augmentation orders totaled $7.0 million during the same period.

At March 31, 2015, backlog was $52.4 million: $44.0 million for the Performance Improvement Solutions business segment and $8.4 million for Staff Augmentation.  At December 31, 2014, the Company's backlog was $48.4 million: $41.7 million for the Performance Improvement Solutions business segment and $6.7 million for Staff Augmentation.

Gross Profit.  Gross profit totaled $3.2 million for the three months ended March 31, 2015 compared to $2.2 million for the same period in 2014.  As a percentage of revenue, gross profit decreased from 25.5% for the three months ended March 31, 2014 to 23.0% for the three months ended March 31, 2015.  The addition of the Staff Augmentation segment, which has an overall gross profit lower than the Company's historical Performance Improvement Solution segment gross profits, has contributed to the decrease in gross profit percentage for the three months ended March 31, 2015.

($ in thousands)	Three Months ended
	March 31,
	2015			%			2014			%
Gross Profit:
Performance Improvement Solutions		$	2,705		30.7	%		$	2,224		25.5	%
Staff Augmentation			517		10.0	%			-		0.0	%
Consolidated Gross Profit		$	3,222		23.0	%		$	2,224		25.5	%

Performance Improvement Solutions' gross profit of $2.7 million or 30.7% of revenue for the three months ended March 31, 2015 increased $0.5 million from $2.2 million or 25.5% of revenue for the three months ended March 31, 2014.  The increase in gross margin percent for Performance Improvement Solutions for the three months ended March 31, 2015 as compared to the same period in 2014 is mainly due to:

· The restructuring of our Swedish operations in 2014 which has reduced their operations overhead costs and facility expenses,

· The completion in 2014 of a process simulation project that had a 14% gross margin, and

· Higher margined engineering consulting projects in 2015 for our UK subsidiary.

Selling, General and Administrative Expenses.  Selling, general and administrative ("SG&A") expenses totaled $3.4 million in the three months ended March 31, 2015, an 18.8% decrease from the $4.1 million for the same period in 2014.  The decrease reflects the following spending variances:

· Business development and marketing costs decreased from $1.4 million to $1.3 million for the three months ended March 31, 2014 and 2015, respectively. Bidding and proposal costs, which are the costs of operations personnel assisting with the preparation of contract proposals, decreased $92,000 to $285,000 for the three months ended March 31, 2015, as compared to the three months ended March 31,2014.

· The Company's general and administrative expenses ("G&A") decreased from $2.1 million to $1.7 million for the three months ended March 31, 2014 and 2015, respectively. The components of G&A reflected the following variances:

o The Company incurred a foreign currency translation gain of $30,000 for the three months ended March 31, 2015 compared to a loss of $172,000 for the three months ended March 31, 2014.

o In the first quarter 2014, the Company incurred severance costs of $281,000 associated with the separation of an executive from our Swedish operations.

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· Gross spending on software product development ("development") expenses for the three months ended March 31, 2015 and 2014 totaled $901,000 and $790,000, respectively. The Company capitalized $506,000 and $155,000 of product development expenses for the three months ended March 31, 2015 and 2014, respectively.  Net development spending decreased from $635,000 for the three months ended March 31, 2014 to $395,000 for the three months ended March 31, 2015.

o Spending on simulation and modeling software product development totaled $601,000 and $661,000 for the three months ended March 31, 2015 and 2014, respectively.  The Company's development expenses were mainly related to EDM™, our configuration management system, and enhancements to our JADE™ applications.

o Development expense related to the EnVision product line totaled $268,000 and $83,000 for the three months ended March 31, 2015 and 2014, respectively.

o The Company's 3D visualization team, which develops 3D technology to add to our training programs, incurred $32,000 and $46,000 of costs related to this effort during the three months ended March 31, 2015 and 2014, respectively.

Depreciation.  Depreciation expense totaled $129,000 and $139,000 during the quarters ended March 31, 2015 and 2014, respectively.

Amortization of definite-lived intangible assets. Amortization expense related to definite-lived intangible assets totaled $123,000 and $36,000 for the three months ended March 31, 2015 and 2014, respectively.  The increase in first quarter 2015 amortization expense reflects the amortization of the intangible asset recorded with the Hyperspring acquisition in November 2014 which is being amortized over seven years.

Operating Loss.  The Company had an operating loss of $0.4 million (2.8% of revenue) for the three months ended March 31, 2015, as compared with an operating loss of $2.1 million (24.0% of revenue) for the same period in 2014.  The variances were due to the factors outlined above.

Interest Income, Net.  Net interest income totaled $27,000 and $31,000 for the three months ended March 31, 2015 and 2014, respectively.

Gain (loss) on Derivative Instruments, Net.  The Company periodically enters into forward foreign exchange contracts to manage market risks associated with the fluctuations in foreign currency exchange rates on foreign-denominated trade receivables.  As of March 31, 2015, the Company had foreign exchange contracts outstanding of approximately 0.3 million Pounds Sterling, 2.2 million Euro, and 0.7 million Australian Dollars at fixed rates.  The contracts expire on various dates through December 2016.  The Company has not designated the contracts as hedges and has recognized no gain or loss on the change in the estimated fair value of the contracts for the three months ended March 31, 2015.

As of March 31, 2014, the Company had foreign exchange contracts outstanding of approximately 0.2 million Pounds Sterling, 5.3 million Euro, and 2.2 million Japanese Yen at fixed rates.  The contracts expired on various dates through May 2016.  The Company had not designated the contracts as hedges and had recognized a gain on the change in the estimated fair value of the contracts of $243,000 for the three months ended March 31, 2014.

The foreign currency denominated contract receivables, billings in excess of revenue earned, and subcontractor accruals that are related to the outstanding foreign exchange contracts were remeasured into the functional currency using the current exchange rate at the end of the period.  The gain or loss resulting from such remeasurement is also included in net gain (loss) on derivative instruments in the consolidated statements of operations.  For the three months ended March 31, 2015, the Company recognized a loss of $48,000 from the remeasurement of such contract receivables, billings in excess of revenue earned and subcontractor accruals.  For the same period in 2014, the Company recognized a loss of $139,000.

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Other Expense, net.  For the three months ended March 31, 2015 and 2014, the Company recognized other expense, net of $39,000 and $10,000, respectively.  The major components of other expense, net included the following items:

· On November 14, 2014, in conjunction with the Hyperspring acquisition, the Company invested $250,000 for a 50% interest in IntelliQlik, LLC ("IntelliQlik") and is obligated to contribute an additional $250,000 upon the attainment by IntelliQlik of certain development milestones by September 30, 2015. IntelliQlik is jointly owned by GSE Performance and one of the former shareholders of Hyperspring. For the three months ended March 31, 2015, the Company recognized a $39,000 equity loss on its investment in IntelliQlik.

· On May 22, 2013, the Company and Electrobalt Holding, a Russian Federation closed joint-stock company, created a 50/50 joint venture called General Simulation Engineering RUS Limited Liability Company ("GSE RUS").  For the three months ended March 31, 2014, the Company recognized a $27,000 equity loss on its equity investment in GSE RUS.

· The Company had other miscellaneous income of $17,000 for the three months ended March 31, 2014.

Provision for Income Taxes

The Company files in the United States federal jurisdiction and in several state and foreign jurisdictions. Because of the net operating loss carryforwards, the Company is subject to U.S. federal and state income tax examinations from years 1997 and forward and is subject to foreign tax examinations by tax authorities for years 2007 and forward.  Open tax years related to state and foreign jurisdictions remain subject to examination but are not considered material to our financial position, results of operations or cash flows.

An uncertain tax position taken or expected to be taken in a tax return is recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Interest and penalties related to income taxes are accounted for as income tax expense.  The Company has appropriately accounted for its uncertain tax positions.

The Company expects to pay income taxes in India and the UK in 2015.  In 2014, the Company paid income taxes in the UK and India.  The Company has a full valuation allowance on its U.S., Swedish, and Chinese net deferred tax assets at March 31, 2015.

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Liquidity and Capital Resources

As of March 31, 2015, the Company's cash and cash equivalents totaled $11.6 million compared to $13.6 million at December 31, 2014.

Cash provided by (used in) operating activities.  For the three months ended March 31, 2015, net cash used in operations totaled $0.5 million.  Significant changes in the Company's assets and liabilities in the three months ended March 31, 2015 included:

· A $0.6 million decrease in the Company's contract receivables.  The Company's trade receivables, net of the allowance for doubtful accounts, decreased from $10.8 million at December 31, 2014 to $8.4 million at March 31, 2015.  At March 31, 2015, trade receivables outstanding for more than 90 days, net of the bad debt reserve, totaled approximately $0.9 million as compared to $0.4 million at December 31, 2014.  The Company believes the entire 90-day balance at March 31, 2015 will be received.  The Company's unbilled receivables increased by approximately $1.7 million to $6.8 million at March 31, 2015 as compared to December 31, 2014.  The increase in the unbilled receivables is due to the timing of contracted billing milestones of the Company's current projects.  In April 2015, the Company invoiced $2.3 million of the unbilled amounts; the balance is expected to be invoiced and collected within one year.

· A $0.4 million decrease in accounts payable, accrued compensation and accrued expenses.  The decrease was due to the timing of payments made by the Company to vendors and subcontractors.

For the three months ended March 31, 2014, net cash provided by operations totaled $5.8 million.  Significant changes in the Company's assets and liabilities in the three months ended March 31, 2014 included:

· A $9.9 million decrease in the Company's contract receivables.  The Company's trade receivables, net of the allowance for doubtful accounts, decreased from $19.0 million at December 31, 2013 to $6.8 million at March 31, 2014.  At March 31, 2014, trade receivables outstanding for more than 90 days, net of the bad debt reserve, totaled approximately $1.1 million versus $0.6 million at December 31, 2013.  The Company's unbilled receivables increased by approximately $2.2 million to $7.7 million at March 31, 2015 as compared to December 31, 2013.  The increase in the unbilled receivables was due to the timing of contracted billing milestones of the Company's current projects.  

· A $2.2 million decrease in accounts payable, accrued compensation, and accrued expenses.  The decrease was due to the timing of payments made by the Company to vendors and subcontractors.

Cash used in investing activities.  Net cash used in investing activities totaled $0.6 million for the three months ended March 31, 2015.  Capital expenditures totaled $104,000 and capitalized software development costs totaled $506,000 for the three months ended March 31, 2015. Restrictions of cash as collateral under letters of credit totaled $216,000 for the three months ended March 31, 2015.  Releases of restricted cash as collateral under letters of credit totaled $180,000 for the three months ended March 31, 2015.

Net cash used in investing activities totaled $201,000 for the three months ended March 31, 2014.  Capital expenditures totaled $80,000 and capitalized software development costs totaled $155,000 for the three months ended March 31, 2014.  Releases of restricted cash as collateral under letters of credit totaled $34,000 for the three months ended March 31, 2014.

Cash used in financing activities.  Cash used in financing activities totaled $657,000 for the three months ended March 31, 2015. Hyperspring has a working capital line of credit with IberiaBank.  The Company paid down $339,000 of the outstanding balance of the line of credit during the three months ended March 31, 2015.  During the three months ended March 31, 2015, the Company made payments of $318,000 in relation to the liability classified contingent-consideration associated with the acquisition of EnVision Systems, Inc.

Net cash used in financing activities totaled $500,000 for the three months ended March 31, 2014.  During the three months ended March 31, 2014, the Company made payments of $500,000 in relation to the liability classified contingent-consideration associated with the acquisition of EnVision Systems, Inc.

At March 31, 2015, the Company had cash and cash equivalents of $11.6 million.  The Company believes that its (i) cash and cash equivalents and (ii) cash generated from normal operations will be sufficient to fund its working capital and other requirements for at least the next twelve months.

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Credit Facilities

At March 31, 2015, the Company had a Master Loan and Security Agreement and Revolving Credit Note with Susquehanna Bank ("Susquehanna").  The Company and its subsidiary, GSE Performance Solutions, Inc., were jointly and severally liable as co-borrowers.  The Loan Agreement provides a $7.5 million revolving line of credit for the purpose of (i) issuing stand-by letters of credit and (ii) providing working capital. Working capital advances bear interest at a rate equal to the Wall Street Journal Prime Rate of Interest, floating with a floor of 4 1/2%.  The agreement expires on June 30, 2015.

As collateral for the Company's obligations, the Company granted a first lien and security interest in all of the assets of the Company, including but not limited to, accounts receivable, proceeds and products, intangibles, trademarks, patents, intellectual property, machinery and equipment.

On September 9, 2014, the Company signed a Third Comprehensive Amendment to the Master Loan and Security Agreement.  According to the Third Amendment, the Company is to maintain a segregated cash collateral account at Susquehanna Bank equal to the greater of (i) $3.0 million or (ii) the aggregate principal amounts of all Loans outstanding under the Revolving Credit Facility (including any issued and outstanding letters of credit, working capital advances, and negative foreign exchange positions) as security for the Company's obligations.  Under this Amendment, Susquehanna Bank shall have complete and unconditional control over the cash collateral account.

On September 30, 2014, Susquehanna Bank collateralized the outstanding letters of credit issued under the line of credit.  At March 31, 2015, the cash collateral account totaled $4.2 million and was classified as restricted cash on the balance sheet.

The credit agreement contains certain restrictive covenants regarding future acquisitions and incurrence of debt.  In addition, the credit agreement contains financial covenants with respect to the Company's cash flow coverage ratio, minimum tangible capital base, quick ratio, and tangible capital base ratio.

		As of
	Covenant	March 31, 2015
Cash flow coverage ratio	Must Exceed 1.20 : 1.00	-4.41 : 1.00
Minimum tangible capital base	Must Exceed $26.0 million	$14.5 million
Quick ratio	Must Exceed 2.00 : 1.00	1.63 : 1.00
Tangible capital base ratio	Not to Exceed .75 : 1.00	1.41 : 1.00

As of March 31, 2015, the Company was not in compliance with any of its covenants as defined above, however, the Company has received a written waiver from Susquehanna Bank for noncompliance.

On November 14, 2014, the acquisition date, Hyperspring, LLC had a $1.0 million working capital line of credit with IberiaBank.  Interest was payable monthly at a rate of the prime rate of interest as published in the money rate section of the Wall Street Journal plus 2.50%. The effective rate at November 14, 2014 was 5.750%. The line was secured by all accounts of Hyperspring and was guaranteed by the members of Hyperspring, LLC.

On December 7, 2014, the working capital line of credit matured while the Company was renegotiating the new terms with IberiaBank subsequent to the acquisition of Hyperspring. On January 22, 2015, a promissory note was executed between Hyperspring, LLC and IberiaBank to extend the $1.0 million line of credit until June 30, 2015. Under the new terms, interest is payable monthly at a rate of the prime rate of interest as published in the money rate section of the Wall Street Journal plus 1.00 %. The effective rate at the date of the promissory note was 4.25 %. The line is secured by all accounts of Hyperspring and guaranteed by GSE Systems, Inc.

At December 31, 2014 the outstanding balance on the line of credit was $339,000.  At March 31, 2015, no balance was outstanding on the line of credit.

The Company draws on the IberiaBank line of credit as needed mainly to provide for payroll funding for Hyperspring. The line is replenished through collection of receivables obtained in the following weeks.

Contingent Liabilities

As of March 31, 2015, the Company was contingently liable for fourteen standby letters of credit and one surety bond totaling $4.3 million which represent advance payment and performance bonds on twelve contracts.  The Company has deposited the full value of fourteen standby letters of credit in escrow accounts, amounting to $4.2 million, which have been restricted in that the Company does not have access to these funds until the related letters of credit have expired.  The cash has been recorded on the Company's balance sheet at March 31, 2015 as restricted cash.

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Item 3.  Quantitative and Qualitative Disclosure about Market Risk

The Company's market risk is principally confined to changes in foreign currency exchange rates.  The Company's exposure to foreign exchange rate fluctuations arises in part from customer contracts that are denominated in currencies other than the Company's functional currency as well as from inter-company accounts in which costs incurred in one entity are charged to other entities in different foreign jurisdictions.  The Company is also exposed to foreign exchange rate fluctuations as the financial results of all foreign subsidiaries are translated into U.S. dollars in consolidation.  As exchange rates vary, those results when translated may vary from expectations and adversely impact overall expected profitability.

The Company utilizes forward foreign currency exchange contracts to manage market risks associated with the fluctuations in foreign currency exchange rates.  The principal currencies for which such forward exchange contracts are entered into are the Pound Sterling, the Euro and the Australian Dollar.  It is the Company's policy to use such derivative financial instruments to protect against market risk arising in the normal course of business in order to reduce the impact of these exposures.  The Company minimizes credit exposure by limiting counterparties to nationally recognized financial institutions.

As of March 31, 2015, the Company had foreign exchange contracts outstanding of approximately 0.3  million Pounds Sterling, 0.7 million Australian Dollars, and 2.2 million Euro at fixed rates.  The contracts expire on various dates through December 2016.  The Company had not designated the contracts as hedges and has recognized no change in the estimated fair value of the contracts for the three months ended March 31, 2015.  A 10% fluctuation in the foreign currency exchange rates up or down as of March 31, 2015 would have increased/decreased the change in the estimated fair value of the contracts by $7,100.

As of March 31, 2014, the Company had foreign exchange contracts outstanding of approximately 0.2 million Pounds Sterling, 5.3 million Euro, and 2.2 million Japanese Yen at fixed rates.  The contracts expire on various dates through May 2016.  The Company had not designated the contracts as hedges and had recognized losses on the change in the estimated fair value of the contracts of $243,000 for the three months ended March 31, 2014.  A 10% fluctuation in the foreign currency exchange rates up or down as of March 31, 2014 would have increased/decreased the change in the estimated fair value of the contracts by $27,000.

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Item 4.Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by it in its reports filed or submitted pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that information required to be disclosed by the Company in its Exchange Act reports is accumulated and communicated to management, including the Company's Chief Executive Officer ("CEO"), who is its principal executive officer, and Chief Financial Officer ("CFO"), who is its principal financial officer, to allow timely decisions regarding required disclosure.  At the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management including our CEO and our CFO, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13-15(e) of the Exchange Act.  Based on the evaluation of our disclosure controls and procedures as of March 31, 2015, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

(b)  Changes in internal control over financial reporting

There were no changes in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

(c)  Limitation of Effectiveness of Controls

Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate this risk.

39

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

None.

Item 1A.  Risk Factors

The Company has no material changes to the disclosure on this matter made in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.  Defaults Upon Senior Securities

None

Item 4.  Mine Safety Disclosures

Not applicable.

40

Item 5. Other Information

None

Item 6. Exhibits

10.1	Extension of the $7,500,000 Revolving Credit Note, dated May 12, 2015, filed herewith.
10.2	Amendment to Membership Interests Purchase Agreement, dated May 13, 2015, filed herewith.
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

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:  May 14, 2015GSE SYSTEMS, INC.

/S/ JAMES A. EBERLE

James A. Eberle

Chief Executive Officer

(Principal Executive Officer)

/S/ JEFFERY G. HOUGH

Jeffery G. Hough

Senior Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

42

EX-10.1

Exhibit 10.1

Susquehanna Bank

Robert P. Whelen, Jr., Senior Vice President

307 International Circle, 6th floor

Hunt Valley, MD 21030-1376

Tel (410) 316-0214

Fax (410) 316-0016

May 12, 2015

Mr. Jeffery G. Hough

SVP, Chief Financial Officer

GSE Systems

1332 Londontown Blvd.

Sykesville, MD 21784

Dear Jeff:

The purpose of this letter is to confirm that the Bank has agreed to the following:

· The Bank has agreed to extend the Revolving Credit Expiration Date until June 30, 2015, as defined in the Master Loan and Security Agreement dated November 22, 2011 in Section 1.1 (a), by and among GSE Systems, Inc., GSE Power Systems, Inc., GSE EnVision, Inc. (collectively, the Borrowers) and Susquehanna Bank. The Bank has also agreed to waive compliance by the of the financial covenants set forth in Sections 5.1, 5.2, 5.3, and 5.4 of the Loan Agreement for the testing measurement date of March 31, 2015 (the "Waiver").  Each of these financial covenants remain in full force and effect for the quarter ending June 30, 2015 and for each quarter thereafter.  The Bank's agreement to waive the said financial covenants in Sections 5.1, 5.2, 5.3 and 5.4 of the Loan Agreement for the testing date of March 31, 2015, and no other consent or waiver is hereby granted, nor should any other consent or waiver be implied.   The Waiver described herein is limited precisely as written and shall not be deemed to (i) be a consent to or waiver of any other term or condition of the Loan Agreement or any of the other Financing Documents, or (ii) prejudice any right or rights which the Bank may now have or may have in the future under or in connection with the Loan Agreement or any of the other Financing Documents.

Respectfully,

/s/ Robert P Whelen, Jr.

Robert P Whelen, Jr.

Senior Vice President

EX-10.2

Exhibit 10.2

Amendment To

Membership Interests Purchase Agreement

This Amendment, dated as of this 13th day of May, 2015, amends that certain Membership Interests Purchase Agreement, dated November 14, 2014, by and among Dale Jennings, Paul Abbott, Shawn McKeever and Mickey Ellis, as "Sellers" thereunder, and GSE Performance Solutions, Inc. (previously known as GSE Power Systems, Inc.), as "Purchaser" thereunder (the "Agreement") and is entered into by and between Shawn McKeever, acting in his capacity as Sellers' Representative as defined in, and authorized by, the Agreement,and the Purchaser.

Background

All capitalized terms used herein and not otherwise defined hall have the meaning ascribed to them in the Agreement.  Pursuant to Section 7.18 of the Agreement, each of the Sellers appointed Shawn McKeever as the Sellers' Representative, with the power to execute any amendment to the Agreement, excepting only amendments that would materially reduce the Purchase Price.

Pursuant to Section 2.3(a) of the Agreement, Sellers had the opportunity to earn the Remainder amount by achieving a Successful TVA Renewal. Sellers were unable to achieve the Successful TVA Renewal as a result of which Sellers have forfeited the Remainder pursuant to the terms of the Agreement.

Notwithstanding the failure to achieve a Successful TVA Renewal, Sellers were able to obtain a short-term renewal with the possibility of a longer term renewal of the TVA Agreement to follow. As a result, Sellers' Representative and Purchaser have agreed to amend Section 2.3(g) of the Agreement to provide for a further opportunity for the Sellers to achieve a Successful TVA Renewal and earn the Remainder.

Now therefore, intending to be legally bound hereby, the parties agree as follows:

1.  Section 2.3(g) of the Agreement is hereby amended and restated, in its entirety, as follows:

(g) The Company is in the process of renewing its contract with the Tennessee Valley Authority ("TVA"). If the Company is able to renew the TVA contract, on or before December 31, 2015, for substantially the same scope and volume of services as currently being provided, and the TVA contract includes a provision for at least a 15% markup on the base hourly straight time rate of the employees provided to TVA (a "Successful TVA Renewal"), and for one of the terms set forth below, the Remainder will be paid to Sellers as follows:

a) if the Successful TVA Renewal term is at least two years beyond May 15, 2015, Purchaser will pay Sellers 100% of the Remainder.

b) if the Successful TVA Renewal term is less than two years, but at least one year, beyond May 15, 2015, Purchaser will pay Sellers 50% of the Remainder; provided, however, if the Company is subsequently able to achieve an additional, Successful TVA Renewal that results in a total, consecutive Successful TVA Renewal term of at least two years from May 15, 2015, the Purchaser will pay Sellers the remaining 50% of the Remainder.

In all other events, the Remainder shall be 100% forfeited by Sellers.

2. In the event of a conflict between the provisions of this Amendment and the Agreement, the Agreement shall be interpreted in a manner consistent with the provisions of this Amendment.

3. This Amendment may be executed in any number of counterparts each of which shall be an original instrument and all of which, when taken together, shall constitute one and the same agreement.

4. Except as modified herein, the remainder of the Agreement remains in full force and effect.

In witness whereof, and intending to be legally bound hereby, the parties have executed this Amendment as of the day and year first set forth above.

Sellers' RepresentativeGSE Performance Solutions, Inc.

/s/ Shawn McKeeverBy:/s/ Lawrence M. GordonShawn McKeeverLawrence M. Gordon

EX-31.1

Exhibit 31.1

Certification of the Chief Executive Officer

I, James A. Eberle, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GSE Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting;

Date:  May 14, 2015	/s/ James A. Eberle
	James A. Eberle
	Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of the Chief Financial Officer

I, Jeffery G. Hough, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GSE Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting;

Date:  May 14, 2015	/s/ Jeffery G. Hough
	Jeffery G. Hough
	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of GSE Systems, Inc. (the "Company") for the quarter ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James A. Eberle, Chief Executive Officer of the Company, and I, Jeffery G. Hough, Senior Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that,

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 14, 2015	/s/ James A. Eberle	/s/ Jeffery G. Hough
	James A. Eberle	Jeffery G. Hough
	Chief Executive Officer	Senior Vice President and Chief
		Financial Officer

XML

Contract Receivables (Details) (USD $)	1 Months Ended	3 Months Ended
	Oct. 31, 2014	Mar. 31, 2015	Dec. 31, 2014
Contract Receivables [Abstract]
Maximum term of contract receivables (in months)		12 months
Components of contract receivables [Abstract]
Billed receivables		$ 8,427,000	$ 10,792,000
Recoverable costs and accrued profit not billed		6,766,000	5,060,000
Allowance for doubtful accounts		2,000	22,000
Total contract receivables, net		15,191,000	15,830,000
Unbilled Contract Receivables Billed during April 2015	$ 2,300,000
State Nuclear Power Automation System Engineering Co. [Member]
Concentration Risk [Line Items]
Percentage of contract receivables accounted by major customers (in hundredths)		7.00%	10.20%

XML

Product Warranty (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Activities in product warranty account [Abstract]
Balance at December 31, 2014	$ 1,456
Warranty provision	171
Warranty claims	109
Currency adjustment	(11)
Standard Product Warranty Accrual, Period Increase (Decrease), Total	51	(61)
Balance at March 31, 2015	$ 1,507

XML

Stock-Based Compensation (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Stock-Based Compensation [Abstract]
Pre-tax share based compensation expense	$ 134,000	$ 178,000
Shares granted under stock options (in shares)	50,000	60,000
Fair value of shares granted under stock option plan	$ 40,000	$ 56,000

XML

Product Warranty (Tables)

3 Months Ended

Mar. 31, 2015

Product Warranty [Abstract]

Activities in the product warranty accounts

As the Company recognizes revenue under the percentage-of-completion method, it provides an accrual for estimated future warranty costs based on historical experience and projected claims.  The activity in the warranty account is as follows:

(in thousands)
Balance at December 31, 2014	$	1,456
Warranty provision		171
Warranty claims		(109	)
Currency adjustment		(11	)
Balance at March 31, 2015	$	1,507

XML

Recently Adopted Accounting Pronouncements (Policies)

3 Months Ended

Mar. 31, 2015

Recently Adopted Accounting Pronouncements Not Yet Adopted [Abstract]

New accounting standards

2. Recently Adopted Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today's guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance will be effective for the Company in the first quarter of its fiscal year ending December 31, 2018, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently in the process of evaluating the impact of its pending adoption of this ASU on the Company's consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2018.

XML

Preferred Stock Rights (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Mar. 21, 2011 Right
Preferred Stock Rights
Common stock, par value (in dollars per share)	0.01	$ 0.01
Preferred Stock Rights Agreement [Member]
Preferred Stock Rights
Date on which dividends payable was declared by Board of Directors	Mar. 21, 2011
Number of preferred stock purchase right declared for each outstanding common stock (per right)			1
Common stock, par value (in dollars per share)			$ 0.01
Number of rights issued with each issuance of common stock (per right)			1
Term of stockholder protection rights agreement	3 years
Rights Agreement Amendment Date	Mar. 21, 2014
Term of the Rights Agreement extension	2 years
Rights Agreement Expiration Date	Mar. 21, 2016
Fraction of participating preferred stock that can be exercised as a result of right			0.01
Exercise price of right (in dollars per share)			$ 8.00
Minimum percentage of common stock owned for right to become exercisable (in hundredths)			20.00%
Redemption price per right (in dollars per share)			$ 0.001
Number of common stock exchange for rights (in shares)			1
Percentage of common stock acquired to cause substantial dilution (in hundredths)			20.00%

XML

Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Assets and liabilities measured at fair value [Abstract]
Money market fund	$ 10,557	$ 11,661
Foreign exchange contracts - Assets	149	92
Total assets	10,706	11,753
Foreign exchange contracts - Liabilities	78	24
Total liabilities	78	24
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets and liabilities measured at fair value [Abstract]
Money market fund	10,557	11,661
Foreign exchange contracts - Assets	0	0
Total assets	10,557	11,661
Foreign exchange contracts - Liabilities	0	0
Total liabilities	0	0
Significant Other Observable Inputs (Level 2) [Member]
Assets and liabilities measured at fair value [Abstract]
Money market fund	0	0
Foreign exchange contracts - Assets	149	92
Total assets	149	92
Foreign exchange contracts - Liabilities	78	24
Total liabilities	78	24
Significant Unobservable Inputs (Level 3) [Member]
Assets and liabilities measured at fair value [Abstract]
Money market fund	0	0
Foreign exchange contracts - Assets	0	0
Total assets	0	0
Foreign exchange contracts - Liabilities	0	0
Total liabilities	$ 0	$ 0

XML

Acquisition (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014	Nov. 14, 2014
Business Combinations Purchase Price Allocation [Abstract]
Goodwill	$ 5,612		$ 5,612
Business Acquisition, Pro Forma Information [Abstract]
Revenue	13,996	13,208
Operating loss	(446)	(2,101)
Net loss	(592)	(2,031)
Loss per common share - basic	$ (0.03)	$ (0.11)
Loss per common share - diluted	$ (0.03)	$ (0.11)
Hyperspring, LLC [Member]
Business Acquisition [Line Items]
Business Acquisition, Name of Acquired Entity	Hyperspring, LLC
Business Acquisition, Effective Date of Acquisition	Nov. 14, 2014
Percentage of ownership interest acquired (in hundredths)				100.00%
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High				11,400
Cash purchase price	3,000		3,000
Fair value of contingent consideration			3,953
Total purchase price			6,953
Business Combinations Purchase Price Allocation [Abstract]
Cash				152
Contract receivables				1,719
Prepaid expenses and other current assets				23
Property, plant and equipment, net				12
Intangible assets				779
Goodwill				5,612
Total assets				8,297
Line of credit				749
Accounts payable, accrued expenses and other liabilities				586
Billings in excess of revenue earned				9
Total liabilities				1,344
Net assets acquired				6,953
Hyperspring, LLC [Member] | Contingent Consideration Case 1 [Member]
Business Acquisition [Line Items]
Business Acquisition Contingent Consideration Agreement	for the three-year period ending November 13, 2017
Hyperspring, LLC [Member] | Contingent Consideration Case 1 [Member] | EBITDA Target [Member]
Business Acquisition [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High				7,200
Business Combination, Contingent Consideration Arrangements, Description	the $1.2 million TVA payment is divided into three increments of $400,000 each and are added to the annual payments which will be made to the former Hyperspring members if they achieved certain EBITDA (earnings before interest, taxes, depreciation and amortization) targets for the three-year period ending November 13, 2017.
Hyperspring, LLC [Member] | Contingent Consideration Case 1 [Member] | Tennessee Valley Authority Renewal Target [Member]
Business Acquisition [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High				1,200
Business Combination, Contingent Consideration Arrangements, Description	if Hyperspring was successful in renewing its contract with the Tennessee Valley Authority ("TVA") on or before May 15, 2015 for a two year period for substantially the same scope as was currently being provided and with substantially the same economics.
Hyperspring, LLC [Member] | Contingent Consideration Case 2 [Member]
Business Acquisition [Line Items]
Business Acquisition Contingent Consideration Agreement	for the three-year period ending November 13, 2017
Hyperspring, LLC [Member] | Contingent Consideration Case 2 [Member] | EBITDA Target [Member]
Business Acquisition [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High				8,400
Business Combination, Contingent Consideration Arrangements, Description	certain EBITDA (earnings before interest, taxes, depreciation and amortization) targets
Hyperspring, LLC [Member] | Contractual Customer Relationships [Member]
Business Combinations Purchase Price Allocation [Abstract]
Intangible assets				779
Hyperspring, LLC [Member] | Contractual Customer Relationships [Member] | Maximum [Member]
Business Acquisition [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	7 years
Hyperspring, LLC [Member] | Customer Relationships [Member]
Business Combinations Purchase Price Allocation [Abstract]
Intangible assets				0
Hyperspring, LLC [Member] | Developed Technology [Member]
Business Combinations Purchase Price Allocation [Abstract]
Intangible assets				0
Hyperspring, LLC [Member] | In Process Research and Development [Member]
Business Combinations Purchase Price Allocation [Abstract]
Intangible assets				0
Hyperspring, LLC [Member] | Domain Names and Other Marketing Related [Member]
Business Combinations Purchase Price Allocation [Abstract]
Intangible assets				0
IntelliQlik, LLC [Member]
Business Acquisition [Line Items]
Business Acquisition, Name of Acquired Entity	IntelliQlik, LLC
Business Acquisition, Effective Date of Acquisition	Nov. 14, 2014
Percentage of ownership interest acquired (in hundredths)				50.00%
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High				250
Payments to Acquire Equity Method Investments			$ 250

XML

Subsequent Events (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Nov. 14, 2014	May 13, 2015
Subsequent Event [Line Items]
Change in fair value of contingent consideration	$ (80)	$ 27
Tennessee Valley Authority Renewal Target [Member]
Subsequent Event [Line Items]
Subsequent Event, Date	May 13, 2015
Hyperspring, LLC [Member]
Subsequent Event [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High			11,400
Hyperspring, LLC [Member] | Contingent Consideration Case 1 [Member] | Tennessee Valley Authority Renewal Target [Member]
Subsequent Event [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High			1,200
Business Combination, Contingent Consideration Arrangements, Description	if Hyperspring was successful in renewing its contract with the Tennessee Valley Authority ("TVA") on or before May 15, 2015 for a two year period for substantially the same scope as was currently being provided and with substantially the same economics.
Hyperspring, LLC [Member] | Contingent Consideration Case 1 [Member] | EBITDA Target [Member]
Subsequent Event [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High			7,200
Business Combination, Contingent Consideration Arrangements, Description	the $1.2 million TVA payment is divided into three increments of $400,000 each and are added to the annual payments which will be made to the former Hyperspring members if they achieved certain EBITDA (earnings before interest, taxes, depreciation and amortization) targets for the three-year period ending November 13, 2017.
Hyperspring, LLC [Member] | Contingent Consideration Case 2 [Member] | EBITDA Target [Member]
Subsequent Event [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High			8,400
Business Combination, Contingent Consideration Arrangements, Description	certain EBITDA (earnings before interest, taxes, depreciation and amortization) targets
Hyperspring, LLC [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Change in fair value of contingent consideration	262
Hyperspring, LLC [Member] | Subsequent Event [Member] | Contingent Consideration Case 1 [Member] | Tennessee Valley Authority Renewal Target [Member]
Subsequent Event [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High				1,200
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, Low				600
Business Combination, Contingent Consideration Arrangements, Description	If, prior to the Extension Date, the TVA contract is renewed until at least May 15, 2016, the Sellers will receive a lump sum payment in the amount of $600,000 and if the TVA contract is renewed until at least May 15, 2017, the Sellers will receive a lump sum payment in the amount of $1.2 million.
Hyperspring, LLC [Member] | Subsequent Event [Member] | Contingent Consideration Case 1 [Member] | EBITDA Target [Member]
Subsequent Event [Line Items]
Business Combination, Contingent Consideration Arrangements, Description	If Hyperspring does not achieve a new, multi-year contract with TVA, then the $1.2 million earnout payment will remain divided into three increments of $400,000 and be added to the annual payments which will be made to the former Hyperspring members if they achieve EBITDA targets for the three year period following the Acquisition Date.
IntelliQlik, LLC [Member]
Subsequent Event [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High			$ 250

XML

Long-Term Debt (Details) (USD $)	3 Months Ended
	Mar. 31, 2015 Right Bond	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Line of Credit Facility [Line Items]
Line of Credit Facility, Interest Rate During Period	4.25%
Number of consecutive quarters entity must attain positive net income	2
Issuances of stand-by letters of credit and advances as of period end	$ 4,200,000
Performance Bond Abstract
Number of Standby Letters of Credit	14
Number of Surety Bonds	1
Letter of Credit and Surety Bonds	4,300,000
Number of Performance and Bid Bonds issued in relation to contracts	12
Number of stand by letters of credit deposited in escrow accounts	14
Restricted cash and investments	4,200,000		4,200,000
Susquehanna Bank [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Principal amount of the line of credit	7,500,000
Line of Credit Facility, Affiliated Borrower	GSE Systems, Inc. and GSE Performance Solutions, Inc.
Line of Credit Facility, Interest Rate Description	Working capital advances bear interest at a rate equal to the Wall Street Journal Prime Rate of Interest, floating with a floor of 4 1/2%
Line of credit facility term	2 years
Expiration date of credit agreement	Jun. 30, 2015
Minimum Cash Balance Requirement	3,000,000
Susquehanna Bank [Member] | Revolving Credit Facility [Member] | Cash flow coverage ratio [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Covenant Terms	Must Exceed 1.20 : 1.00
Line of Credit Facility, Covenant Compliance		-4.41 : 1.00
Susquehanna Bank [Member] | Revolving Credit Facility [Member] | Minimum tangible capital base [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Covenant Terms	Must Exceed $26.0 million
Line of Credit Facility, Covenant Compliance		$14.5 million
Susquehanna Bank [Member] | Revolving Credit Facility [Member] | Quick Ratio [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Covenant Terms	Must Exceed 2.00 : 1.00
Line of Credit Facility, Covenant Compliance		1.63 : 1.00
Susquehanna Bank [Member] | Revolving Credit Facility [Member] | Tangible capital base ratio [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Covenant Terms	Not to Exceed .75 : 1.00
Line of Credit Facility, Covenant Compliance		1.41 : 1.00
IberiaBank [Member] | Line of Credit [Member]
Line of Credit Facility [Line Items]
Principal amount of the line of credit	1,000,000
Line of Credit Facility, Affiliated Borrower	Hyperspring, LLC
Line of Credit Facility, Interest Rate Description	interest is payable monthly at a rate of the prime rate of interest as published in the money rate section of the Wall Street Journal plus 1.00 %
Line of Credit Facility, Collateral	The line is secured by all accounts of Hyperspring and guaranteed by GSE Systems, Inc.
Line of credit facility term	0 years 5 months 9 days
Expiration date of credit agreement	Jun. 30, 2015
Line of Credit Facility, Fair Value of Amount Outstanding	$ 0			$ 339,000

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Recently Adopted Accounting Pronouncements Not Yet Adopted

3 Months Ended

Mar. 31, 2015

Recently Adopted Accounting Pronouncements Not Yet Adopted [Abstract]

Recently Adopted Accounting Pronouncements Not Yet Adopted [Text Block]

2. Recently Adopted Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today's guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance will be effective for the Company in the first quarter of its fiscal year ending December 31, 2018, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently in the process of evaluating the impact of its pending adoption of this ASU on the Company's consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2018.

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Derivative Instruments, Foreign Exchange Contracts (Details) (Foreign Exchange Contract [Member]) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2015 United Kingdom, Pounds GBP (£)	Dec. 31, 2014 United Kingdom, Pounds GBP (£)	Mar. 31, 2015 Euro Member Countries, Euro EUR (€)	Dec. 31, 2014 Euro Member Countries, Euro EUR (€)	Mar. 31, 2015 Australia, Dollars AUD	Dec. 31, 2014 Australia, Dollars AUD	Dec. 31, 2014 Malaysia, Ringgits MYR
Derivative [Line Items]
Derivative, Maturity Date	Dec. 01, 2016
Foreign exchange contract outstanding		£ 263	£ 300	€ 2,200	€ 1,400	667	800	500

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Contract Receivables (Tables)

3 Months Ended

Mar. 31, 2015

Contract Receivables [Abstract]

Components of contract receivables

The components of contract receivables are as follows:

(in thousands)	March 31,			December 31,
	2015			2014
Billed receivables	$	8,427		$	10,792
Recoverable costs and accrued profit not billed		6,766			5,060
Allowance for doubtful accounts		(2	)		(22	)
Total contract receivables, net	$	15,191		$	15,830

Concentration Risk [Line Items]

Contract receivable by major customers

The following customer accounted for more than 10% of the Company's consolidated contract receivables as of December 31, 2014:

	March 31, 2015	December 31, 2014
State Nuclear Power Automation System Engineering Co.	7.0 %	10.2 %

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Acquisition (Tables)

3 Months Ended

Mar. 31, 2015

Acquisition [Abstract]

Schedule of Business Acquisitions, by Acquisition

The following table summarizes the purchase price and purchase price allocation for the acquisition of Hyperspring, LLC, acquired on November 14, 2014.

(in thousands)
Cash purchase price	$	3,000
Fair value of contingent consideration		3,953
Total purchase price	$	6,953
Purchase price allocation:
Cash	$	152
Contract receivables		1,719
Prepaid expenses and other current assets		23
Property and equipment, net		12
Intangible assets		779
Goodwill		5,612
Total assets		8,297
Line of credit		749
Accounts payable, accrued expenses, and other liabilities		586
Billings in excess of revenue earned		9
Total liabilities		1,344
Net assets acquired	$	6,953

Schedule of Pro Forma Results

Pro forma results.  Our consolidated financial statements include the operating results of Hyperspring as of the date of acquisition.  For the three months ended March 31, 2015 and 2014, the unaudited pro forma financial information below assumes that our material business acquisition of Hyperspring occurred on January 1, 2014.  This pro forma information does not purport to represent what the Company's actual results would have been if the acquisition had occurred as of the date indicated or what results would be for any future periods.

(in thousands except per share data)	(unaudited)
	Three Months ended
	March 31,
Pro forma financial information including the acquisition of Hyperspring	2015				2014
Revenue		$	13,996			$	13,208
Operating loss			(446	)			(2,101	)
Net loss			(592	)			(2,031	)
Loss per common share — basic		$	(0.03	)		$	(0.11	)
Loss per common share — diluted		$	(0.03	)		$	(0.11	)

Schedule of Business Acquisitions by Acquisition, Contingent Consideration [Table Text Block]

As of March 31, 2015 and December 31, 2014, contingent consideration included in the other current liabilities on the consolidated balance sheet totaled $1.9 million and $2.8 million, respectively.  As of March 31, 2015 and December 31, 2014, we also had accrued contingent consideration totaling $2.5 million and $1.9 million, respectively, which is included in other long-term liabilities on the consolidated balance sheet and represents the portion of contingent consideration estimated to be payable greater than twelve months from the balance sheet date.

(in thousands)
	March 31,		December 31,
	2015		2014
Hyperspring, LLC	$	1,516	$	2,152
IntelliQlik, LLC		213		213
EnVision Systems, Inc.		171		477
Current contingent consideration	$	1,900	$	2,842
Hyperspring, LLC	$	2,492	$	1,948
Contingent consideration	$	2,492	$	1,948

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Derivative Instruments, Fair Values Derivatives, Balance Sheet Location (Details) (Foreign Exchange Contract [Member], Not Designated as Hedging Instrument [Member], USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Estimated fair value of the contracts in the consolidated balance sheets [Abstract]
Asset derivatives	$ 149	$ 92
Liability derivatives	78	24
Net fair value	71	68
Other Current Assets [Member]
Estimated fair value of the contracts in the consolidated balance sheets [Abstract]
Asset derivatives	109	71
Other Noncurrent Assets [Member]
Estimated fair value of the contracts in the consolidated balance sheets [Abstract]
Asset derivatives	40	21
Other Current Liabilities [Member]
Estimated fair value of the contracts in the consolidated balance sheets [Abstract]
Liability derivatives	24	23
Other Noncurrent Liabilities [Member]
Estimated fair value of the contracts in the consolidated balance sheets [Abstract]
Liability derivatives	$ 54	$ 1

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value of Financial Instruments [Abstract]

Assets and liabilities measured at fair value

The following table presents assets and liabilities measured at fair value at March 31, 2015:

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
(in thousands)	(Level 1)		(Level 2)			(Level 3)		Total
Money market funds	$	10,557	$	-		$	-	$	10,557
Foreign exchange contracts		-		149			-		149
Total assets	$	10,557	$	149		$	-	$	10,706
Foreign exchange contracts	$	-	$	(78	)	$	-	$	(78	)
Total liabilities	$	-	$	(78	)	$	-	$	(78	)

The following table presents assets and liabilities measured at fair value at December 31, 2014:

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
(in thousands)	(Level 1)		(Level 2)			(Level 3)		Total
Money market funds	$	11,661	$	-		$	-	$	11,661
Foreign exchange contracts		-		92			-		92
Total assets	$	11,661	$	92		$	-	$	11,753
Foreign exchange contracts	$	-	$	(24	)	$	-	$	(24	)
Total liabilities	$	-	$	(24	)	$	-	$	(24	)

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Derivative Instruments (Tables)

3 Months Ended

Mar. 31, 2015

Derivative Instruments [Abstract]

Estimated fair value of the contracts in the consolidated balance sheets

The Company has not designated any of the foreign exchange contracts outstanding as hedges and has recorded the estimated fair value of the contracts in the consolidated balance sheets as follows:

	March 31,			December 31,
(in thousands)	2015			2014
Asset derivatives
Prepaid expenses and other current assets	$	109		$	71
Other assets		40			21
		149			92
Liability derivatives
Other current liabilities		(24	)		(23	)
Other liabilities		(54	)		(1	)
		(78	)		(24	)
Net fair value	$	71		$	68

Derivative Instruments, Gain (Loss) [Table Text Block]

For the three months ended March 31, 2015 and 2014, the Company recognized a net gain (loss) on its derivative instruments as outlined below:

	Three Months ended March 31,
(in thousands)	2015			2014
Foreign exchange contracts- change in fair value	$	-		$	243
Remeasurement of related contract receivables,  billings in excess of revenue earned, and  subcontractor accruals		(48	)		(139	)
Gain (loss) on derivative instruments, net	$	(48	)	$	104

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Basis of Presentation and Revenue Recognition

3 Months Ended

Mar. 31, 2015

Basis of Presentation and Revenue Recognition [Abstract]

Basis of Presentation and Revenue Recognition

1. Basis of Presentation and Revenue Recognition

Basis of Presentation

The consolidated interim financial statements included herein have been prepared by GSE Systems, Inc. (the "Company" or "GSE") without independent audit.  In the opinion of the Company's management, all adjustments and reclassifications of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows for the periods presented have been made.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted.  The results of operations for interim periods are not necessarily an indication of the results for the full year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 19, 2015.  Certain reclassifications have been made to prior period amounts to conform to the current presentation.

The Company has two reportable segments as follows:

· Performance Improvement Solutions

Our Performance Improvement Solutions business segment encompasses all of the solution-oriented technologies and services traditionally associated with GSE which focus on both our client's people and their plants and operations. This segment includes various simulation, training and engineering products and services delivered across the breadth of industries we serve. Our simulation solutions include platforms ranging from (1) the non-specific plant systems of our EnVision product line used to teach fundamental processes to newly hired employees, to (2) custom plant-specific simulators used to train plant operators, to (3) engineering-grade simulation solutions used to help clients verify and validate control systems prior to new plant construction or modification of existing plants, to (4) engineering-grade simulation solutions used for human factors engineering. Training applications include turnkey and custom training services and 3D visualization training products to make training more effective. Our engineering services include plant design, automation and control systems design, functional safety and compliance analysis, and engineering consultations.

· Staff Augmentation

Staff Augmentation services provide specialized workforce solutions primarily to the nuclear industry. These employees work at our clients' facilities under client direction. Examples of staff augmentation positions include instructors, procedure writers, work management specialists, planners, outage execution specialists, corrective action and self-assessment specialists, and training material developers. This business is managed through our Hyperspring LLC subsidiary. The business model, management focus, margins and other factors clearly separate this business line from the rest of the GSE product and service portfolio. Hyperspring has been providing these services since 2005.

Financial information about the two business segments are provided in Note 15 of the accompanying Consolidated Financial Statements.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period.  The Company's most significant estimates relate to revenue recognition, product warranties, capitalization of software development costs, valuation of goodwill and intangible assets acquired, contingent consideration issued in business acquisitions, and the recoverability of deferred tax assets.  Actual results could differ from these estimates and those differences could be material.

Revenue Recognition on Long-Term Contracts

The Company recognizes revenue through (1) fixed price contracts on the sale of uniquely designed systems containing hardware, software and other materials as well as (2) time and material contracts primarily through staff augmentation support and service agreements.

In accordance with U.S. generally accepted accounting principles ("GAAP"), our Performance Improvement Solutions segment accounts for revenue under fixed-price contracts using the percentage-of-completion method. This methodology recognizes revenue and earnings as work progresses on the contract and is based on an estimate of the revenue and earnings earned to date, less amounts recognized in prior periods. The Company bases its estimate of the degree of completion of the contract by reviewing the relationship of costs incurred to date to the expected total costs that will be incurred on the project. Estimated contract earnings are reviewed and revised periodically as the work progresses, and the cumulative effect of any change in estimate is recognized in the period in which the change is identified. Estimated losses are charged against earnings in the period such losses are identified. The Company recognizes revenue arising from contract claims either as income or as an offset against a potential loss only when the amount of the claim can be estimated reliably and realization is probable and there is a legal basis of the claim.

Uncertainties inherent in the performance of contracts include labor availability and productivity, material costs, change order scope and pricing, software modification and customer acceptance issues. The reliability of these cost estimates is critical to the Company's revenue recognition as a significant change in the estimates can cause the Company's revenue and related margins to change significantly from the amounts estimated in the early stages of the project.

As the Company recognizes revenue under the percentage-of-completion method, it provides an accrual for estimated future warranty costs based on historical and projected claims experience. The Company's long-term contracts generally provide for a one-year warranty on parts, labor and any bug fixes as it relates to software embedded in the systems.

The Company's system design contracts do not normally provide for "post customer support service" (PCS) in terms of software upgrades, software enhancements or telephone support. In order to obtain PCS, the customers normally must purchase a separate contract. Such PCS arrangements are generally for a one-year period renewable annually and include customer support, unspecified software upgrades, and maintenance releases. The Company recognizes revenue from these contracts ratably over the life of the agreements.

Revenue from the sale of software licenses which do not require significant modifications or customization for the Company's modeling tools are recognized when the license agreement is signed, the license fee is fixed and determinable, delivery has occurred, and collection is considered probable.

We evaluate our contracts for multiple deliverables under ASC 605-25 Revenue Recognition-Multiple Element Arrangements, and when appropriate, separate the contracts into separate units of accounting for revenue recognition. Contracts with multiple element arrangements typically include, but are not limited to, components such as training, licenses, and PCS, as described above, embedded in the agreement. When a contract contains multiple deliverables, the Company allocates revenue to each deliverable based on its relative selling price which is determined based on its vendor specific objective evidence ("VSOE") if available, third party evidence ("TPE") if VSOE is not available, or estimated selling price if neither VSOE nor TPE is available. Amounts allocated to training and support services are based on VSOE and revenue is deferred until the services have been performed. Amounts allocated to software licenses are also based on VSOE. Revenue related to software licenses is recognized once the license has been delivered.

The Company recognizes revenue under time and materials contracts primarily from staff augmentation and certain consulting agreements. Revenue on time and material contracts is recognized as services are rendered and performed. Under a typical time-and-materials billing arrangement, customers are billed on a regularly scheduled basis, such as biweekly or monthly. At the end of each accounting period, revenue is estimated and accrued for services performed since the last billing cycle. These unbilled amounts are billed the following month.

For the three months ended March 31, 2015 the following customer provided more than 10% of the Company's consolidated revenue:

	Three Months ended March 31,
	2015	2014
Tennessee Valley Authority	21.0 %	0.0 %

Tennessee Valley Authority ("TVA") is a customer of Hyperspring, LLC, which was acquired on November 14, 2014.

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2015

Long-Term Debt [Abstract]

Susquehanna Bank Loan Agreement debt covenants

On September 9, 2014, the Company signed a Third Comprehensive Amendment to the Master Loan and Security Agreement.  According to the Third Amendment, the Company is to maintain a segregated cash collateral account at Susquehanna Bank equal to the greater of (i) $3.0 million or (ii) the aggregate principal amounts of all Loans outstanding under the Revolving Credit Facility (including any issued and outstanding letters of credit, working capital advances, and negative foreign exchange positions) as security for the Company's obligations.  Under this Amendment, Susquehanna Bank shall have complete and unconditional control over the cash collateral account.

On September 30, 2014, Susquehanna Bank collateralized the outstanding letters of credit issued under the line of credit.  At both March 31, 2015 and December 31, 2014, the cash collateral account totaled $4.2 million and was classified as restricted cash on the balance sheet.

The credit agreement contains certain restrictive covenants regarding future acquisitions and incurrence of debt.  In addition, the credit agreement contains financial covenants with respect to the Company's cash flow coverage ratio, minimum tangible capital base, quick ratio, and tangible capital base ratio.

		As of
	Covenant	March 31, 2015
Cash flow coverage ratio	Must Exceed 1.20 : 1.00	-4.41 : 1.00
Minimum tangible capital base	Must Exceed $26.0 million	$14.5 million
Quick ratio	Must Exceed 2.00 : 1.00	1.63 : 1.00
Tangible capital base ratio	Not to Exceed .75 : 1.00	1.41 : 1.00

As of March 31, 2015, the Company was not in compliance with any of its covenants as defined above, however, the Company has received a written waiver from Susquehanna Bank for noncompliance.

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Software Development Costs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Software Development Costs [Abstract]
Total capitalized software development cost	$ 506	$ 155
Capitalized software amortization	90	32
Capitalized Computer Software, Period Increase (Decrease), Total	$ 416	$ 123

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 11,590	$ 13,583
Restricted cash	775	613
Contract receivables, net	15,191	15,830
Prepaid expenses and other current assets	1,698	1,703
Total current assets	29,254	31,729
Equipment, software and leasehold improvements	6,957	7,055
Accumulated depreciation	5,171	5,229
Equipment, software and leasehold improvements, net	1,786	1,826
Software development costs, net	1,830	1,414
Goodwill	5,612	5,612
Intangible assets, net	1,145	1,279
Long-term restricted cash	3,465	3,591
Other assets	485	548
Total assets	43,577	45,999
Current liabilities:
Line of credit	0	339
Accounts payable	1,967	2,330
Accrued expenses	1,631	1,554
Accrued compensation and payroll taxes	2,516	2,595
Billings in excess of revenue earned	7,885	8,684
Accrued warranty	1,507	1,456
Current contingent consideration	1,900	2,842
Other current liabilities	499	473
Total current liabilities	17,905	20,273
Contingent consideration	2,492	1,948
Other liabilities	86	38
Total liabilities	20,483	22,259
Stockholder's equity:
Preferred stock $.01 par value, 2,000,000 shares authorized, shares issued and outstanding none in 2015 and 2014	0	0
Common stock $.01 par value, 30,000,000 shares authorized, shares issued 19,486,770 and 17,887,859 shares outstanding in both 2015 and 2014	195	195
Additional paid-in capital	73,051	72,917
Accumulated deficit	(45,686)	(45,142)
Accumulated other comprehensive loss	(1,467)	(1,231)
Treasury stock at cost, 1,598,911 shares in 2015 and 2014	2,999	2,999
Total stockholders' equity	23,094	23,740
Total liabilities and stockholders' equity	$ 43,577	$ 45,999

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Derivative Instruments, Gain (Loss) On Derivative Instruments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Derivative Instruments, Gain (Loss) [Line Items]
Foreign exchange contracts- change in fair value	$ 0	$ 243
Remeasurement of related contract receivables, billings in excess of revenue earned, and subcontractor accruals	(48)	(139)
(Gain) loss on derivative instruments, net	$ (48)	$ 104

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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (USD $) In Thousands, except Share data	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Treasury Stock	Total
Balance at Dec. 31, 2014	$ 195	$ 72,917	$ (45,142)	$ (1,231)	$ (2,999)	$ 23,740
Balance (in shares) at Dec. 31, 2014	19,486,770				(1,598,911)	17,887,859
Stock-based compensation expense		134				134
Foreign currency translation adjustment, net of tax				(236)		(236)
Net loss			(544)			(544)
Balance at Mar. 31, 2015	$ 195	$ 73,051	$ (45,686)	$ (1,467)	$ (2,999)	$ 23,094
Balance (in shares) at Mar. 31, 2015	19,486,770				(1,598,911)	17,887,859

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Basis of Presentation and Revenue Recognition (Details)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Basis of Presentation and Revenue Recognition [Abstract]
Number of reportable segment	2
Term of warranty (in years)	1 year
Period of post customer support service (PCS) (in years)	1 year
Revenue [Member]
Revenue by major customers [Abstract]
Concentration Risk, Benchmark Description	the following customer provided more than 10% of the Company’s consolidated revenue
Revenue [Member] | Tennessee Valley Authority [Member]
Revenue by major customers [Abstract]
Percentage of revenue contributed by major customers (in hundredths)	21.00%	0.00%

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Segment Information

3 Months Ended

Mar. 31, 2015

Segment Information [Abstract]

Segment Information

15.Segment Information

The Company has two reportable business segments.  The Performance Improvement Solutions business segment provides simulation, training and engineering products and services delivered across the breadth of industries we serve.  Solutions include simulation for both training and engineering applications.  Example training applications include turnkey and custom training services, while engineering services include plant design verification and validation. We provide these services across all our market segments.  Contracts typically range from ten months to three years.

The Staff Augmentation services segment provides specialized workforce solutions primarily to the U.S. nuclear industry, working at our clients' facilities.  This business is managed through our Hyperspring, LLC subsidiary.  The business model, management focus, margins and other factors clearly separate this business line from the rest of the GSE product and service portfolio.  Hyperspring has been providing these services since 2005.

The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment contract revenue to consolidated revenue and operating results to consolidated loss before income taxes:

(in thousands)	Three Months ended
	March 31,
	2015			2014
Contract revenue:
Performance Improvement Solutions	$	8,816		$	8,724
Staff Augmentation		5,180			-
		13,996			8,724
Operating income (loss):
Performance Improvement Solutions		(776	)		(2,068	)
Staff Augmentation		300			-
Gain (Loss) on change in fair value of contingent consideration, net		80			(27	)
Operating loss		(396	)		(2,095	)
Interest income, net		27			31
Gain (loss) on derivative instruments, net		(48	)		104
Other expense, net		(39	)		(10	)
Loss before income taxes	$	(456	)	$	(1,970	)

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Basic and Diluted Loss Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Numerator:
Net loss	$ (544)	$ (2,024)
Denominator:
Weighted-average shares outstanding for basic earnings per share (in shares)	17,887,859	17,887,859
Effect of dilutive securities:
Employee stock options (in shares)	0	0
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share (in shares)	17,887,859	17,887,859
Shares related to dilutive securities excluded because inclusion would be anti-dilutive (in shares)	2,565,067	2,897,319

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Basis of Presentation and Revenue Recognition (Policies)

3 Months Ended

Mar. 31, 2015

Basis of Presentation and Revenue Recognition [Abstract]

Basis of Presentation

Basis of Presentation

The consolidated interim financial statements included herein have been prepared by GSE Systems, Inc. (the "Company" or "GSE") without independent audit.  In the opinion of the Company's management, all adjustments and reclassifications of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows for the periods presented have been made.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted.  The results of operations for interim periods are not necessarily an indication of the results for the full year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 19, 2015.  Certain reclassifications have been made to prior period amounts to conform to the current presentation.

The Company has two reportable segments as follows:

· Performance Improvement Solutions

Our Performance Improvement Solutions business segment encompasses all of the solution-oriented technologies and services traditionally associated with GSE which focus on both our client's people and their plants and operations. This segment includes various simulation, training and engineering products and services delivered across the breadth of industries we serve. Our simulation solutions include platforms ranging from (1) the non-specific plant systems of our EnVision product line used to teach fundamental processes to newly hired employees, to (2) custom plant-specific simulators used to train plant operators, to (3) engineering-grade simulation solutions used to help clients verify and validate control systems prior to new plant construction or modification of existing plants, to (4) engineering-grade simulation solutions used for human factors engineering. Training applications include turnkey and custom training services and 3D visualization training products to make training more effective. Our engineering services include plant design, automation and control systems design, functional safety and compliance analysis, and engineering consultations.

· Staff Augmentation

Staff Augmentation services provide specialized workforce solutions primarily to the nuclear industry. These employees work at our clients' facilities under client direction. Examples of staff augmentation positions include instructors, procedure writers, work management specialists, planners, outage execution specialists, corrective action and self-assessment specialists, and training material developers. This business is managed through our Hyperspring LLC subsidiary. The business model, management focus, margins and other factors clearly separate this business line from the rest of the GSE product and service portfolio. Hyperspring has been providing these services since 2005.

Financial information about the two business segments are provided in Note 15 of the accompanying Consolidated Financial Statements.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period.  The Company's most significant estimates relate to revenue recognition, product warranties, capitalization of software development costs, valuation of goodwill and intangible assets acquired, contingent consideration issued in business acquisitions, and the recoverability of deferred tax assets.  Actual results could differ from these estimates and those differences could be material.

Revenue Recognition

Revenue Recognition on Long-Term Contracts

The Company recognizes revenue through (1) fixed price contracts on the sale of uniquely designed systems containing hardware, software and other materials as well as (2) time and material contracts primarily through staff augmentation support and service agreements.

In accordance with U.S. generally accepted accounting principles ("GAAP"), our Performance Improvement Solutions segment accounts for revenue under fixed-price contracts using the percentage-of-completion method. This methodology recognizes revenue and earnings as work progresses on the contract and is based on an estimate of the revenue and earnings earned to date, less amounts recognized in prior periods. The Company bases its estimate of the degree of completion of the contract by reviewing the relationship of costs incurred to date to the expected total costs that will be incurred on the project. Estimated contract earnings are reviewed and revised periodically as the work progresses, and the cumulative effect of any change in estimate is recognized in the period in which the change is identified. Estimated losses are charged against earnings in the period such losses are identified. The Company recognizes revenue arising from contract claims either as income or as an offset against a potential loss only when the amount of the claim can be estimated reliably and realization is probable and there is a legal basis of the claim.

Uncertainties inherent in the performance of contracts include labor availability and productivity, material costs, change order scope and pricing, software modification and customer acceptance issues. The reliability of these cost estimates is critical to the Company's revenue recognition as a significant change in the estimates can cause the Company's revenue and related margins to change significantly from the amounts estimated in the early stages of the project.

As the Company recognizes revenue under the percentage-of-completion method, it provides an accrual for estimated future warranty costs based on historical and projected claims experience. The Company's long-term contracts generally provide for a one-year warranty on parts, labor and any bug fixes as it relates to software embedded in the systems.

The Company's system design contracts do not normally provide for "post customer support service" (PCS) in terms of software upgrades, software enhancements or telephone support. In order to obtain PCS, the customers normally must purchase a separate contract. Such PCS arrangements are generally for a one-year period renewable annually and include customer support, unspecified software upgrades, and maintenance releases. The Company recognizes revenue from these contracts ratably over the life of the agreements.

Revenue from the sale of software licenses which do not require significant modifications or customization for the Company's modeling tools are recognized when the license agreement is signed, the license fee is fixed and determinable, delivery has occurred, and collection is considered probable.

We evaluate our contracts for multiple deliverables under ASC 605-25 Revenue Recognition-Multiple Element Arrangements, and when appropriate, separate the contracts into separate units of accounting for revenue recognition. Contracts with multiple element arrangements typically include, but are not limited to, components such as training, licenses, and PCS, as described above, embedded in the agreement. When a contract contains multiple deliverables, the Company allocates revenue to each deliverable based on its relative selling price which is determined based on its vendor specific objective evidence ("VSOE") if available, third party evidence ("TPE") if VSOE is not available, or estimated selling price if neither VSOE nor TPE is available. Amounts allocated to training and support services are based on VSOE and revenue is deferred until the services have been performed. Amounts allocated to software licenses are also based on VSOE. Revenue related to software licenses is recognized once the license has been delivered.

The Company recognizes revenue under time and materials contracts primarily from staff augmentation and certain consulting agreements. Revenue on time and material contracts is recognized as services are rendered and performed. Under a typical time-and-materials billing arrangement, customers are billed on a regularly scheduled basis, such as biweekly or monthly. At the end of each accounting period, revenue is estimated and accrued for services performed since the last billing cycle. These unbilled amounts are billed the following month.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net loss	$ (544)	$ (2,024)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	129	139
Amortization of definite-lived intangible assets	123	36
Capitalized software amortization	90	32
Change in fair value of contingent consideration	(80)	27
Stock-based compensation expense	134	178
Equity loss on investments	(39)	(27)
(Gain) loss on derivative instruments, net	(48)	104
Changes in assets and liabilities:
Contract receivables, net	(583)	(9,875)
Prepaid expenses and other assets	(86)	(126)
Accounts payable, accrued compensation and accrued expenses	(358)	(2,210)
Billings in excess of revenue earned	(791)	173
Accrued warranty reserves	51	(61)
Other liabilities	18	(388)
Net cash provided by (used in) operating activities	(472)	5,826
Cash flows from investing activities:
Capital expenditures	104	80
Capitalized Software Development Costs	506	155
Restrictions of cash as collateral under letters of credit	216	0
Releases of cash as collateral under letters of credit	180	34
Net cash used in investing activities	(646)	(201)
Cash flows from financing activities:
Payments on line of credit	(339)	0
Payments of the liability-classified contingent consideration arrangements	318	500
Net cash used in financing activities	(657)	(500)
Effect of exchange rate changes on cash	(218)	(12)
Net increase (decrease) in cash and cash equivalents	(1,993)	5,113
Cash and cash equivalents at beginning of year	13,583	15,643
Cash and cash equivalents at end of period	$ 11,590	$ 20,756

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Stockholder's equity:
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	30,000,000	30,000,000
Common stock, shares issued (in shares)	19,486,770	19,486,770
Treasury stock, shares acquired (in shares)	1,598,911	1,598,911
Common Stock, Shares, Outstanding	17,887,859	17,887,859

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2015

Stock-Based Compensation [Abstract]

Stock-Based Compensation

10. Stock-Based Compensation

The Company recognizes compensation expense for all equity-based compensation awards issued to employees, directors and non-employees that are expected to vest.  Compensation cost is based on the fair value of awards as of the grant date.  The Company recognized $134,000 and $178,000 of stock-based compensation expense for the three months ended March 31, 2015 and 2014, respectively, under the fair value method.  The Company granted 50,000 stock options for the three months ended March 31, 2015.  The fair value of the options granted for the three months ended March 31, 2015 was $40,000.  The Company granted 60,000 stock options for the three months ended March 31, 2014.  The fair value of the granted options at the grant date was $56,000.

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Document and Entity Information (USD $)	3 Months Ended
	Mar. 31, 2015	May 14, 2015	Jun. 30, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	GSE SYSTEMS INC
Entity Central Index Key	0000944480
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 28,901,284
Entity Common Stock, Shares Outstanding		17,887,859
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2015

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Long-Term Debt

3 Months Ended

Mar. 31, 2015

Long-Term Debt [Abstract]

Long-Term Debt

11. Long-Term Debt

At March 31, 2015 and December 31, 2014, the Company had no long-term debt.

Lines of Credit

Susquehanna Bank

At March 31, 2015, the Company had a Master Loan and Security Agreement and Revolving Credit Note with Susquehanna Bank ("Susquehanna").  The Company and its subsidiary, GSE Performance Solutions, Inc., were jointly and severally liable as co-borrowers.  The Loan Agreement provides a $7.5 million revolving line of credit for the purpose of (i) issuing stand-by letters of credit and (ii) providing working capital. Working capital advances bear interest at a rate equal to the Wall Street Journal Prime Rate of Interest, floating with a floor of 4 1/2%.  The agreement expires on June 30, 2015.

As collateral for the Company's obligations, the Company granted a first lien and security interest in all of the assets of the Company, including but not limited to, accounts receivable, proceeds and products, intangibles, trademarks, patents, intellectual property, machinery and equipment.

On September 9, 2014, the Company signed a Third Comprehensive Amendment to the Master Loan and Security Agreement.  According to the Third Amendment, the Company is to maintain a segregated cash collateral account at Susquehanna Bank equal to the greater of (i) $3.0 million or (ii) the aggregate principal amounts of all Loans outstanding under the Revolving Credit Facility (including any issued and outstanding letters of credit, working capital advances, and negative foreign exchange positions) as security for the Company's obligations.  Under this Amendment, Susquehanna Bank shall have complete and unconditional control over the cash collateral account.

On September 30, 2014, Susquehanna Bank collateralized the outstanding letters of credit issued under the line of credit.  At both March 31, 2015 and December 31, 2014, the cash collateral account totaled $4.2 million and was classified as restricted cash on the balance sheet.

The credit agreement contains certain restrictive covenants regarding future acquisitions and incurrence of debt.  In addition, the credit agreement contains financial covenants with respect to the Company's cash flow coverage ratio, minimum tangible capital base, quick ratio, and tangible capital base ratio.

		As of
	Covenant	March 31, 2015
Cash flow coverage ratio	Must Exceed 1.20 : 1.00	-4.41 : 1.00
Minimum tangible capital base	Must Exceed $26.0 million	$14.5 million
Quick ratio	Must Exceed 2.00 : 1.00	1.63 : 1.00
Tangible capital base ratio	Not to Exceed .75 : 1.00	1.41 : 1.00

As of March 31, 2015, the Company was not in compliance with any of its covenants as defined above, however, the Company has received a written waiver from Susquehanna Bank for noncompliance.

IberiaBank

On November 14, 2014, the acquisition date, Hyperspring, LLC had a $1.0 million working capital line of credit with IberiaBank.  Interest was payable monthly at a rate of the prime rate of interest as published in the money rate section of the Wall Street Journal plus 2.50%. The effective rate at November 14, 2014 was 5.750%. The line was secured by all accounts and was guaranteed by the members of Hyperspring, LLC.

On December 7, 2014, the working capital line of credit matured while the Company was renegotiating the new terms with IberiaBank subsequent to the acquisition of Hyperspring. On January 22, 2015, a promissory note was executed between Hyperspring, LLC and IberiaBank to extend the $1.0 million line of credit until June 30, 2015. Under the new terms, interest is payable monthly at a rate of the prime rate of interest as published in the money rate section of the Wall Street Journal plus 1.00 %. The effective rate at the date of the promissory note was 4.25 %. The line is secured by all accounts of Hyperspring and guaranteed by GSE Systems, Inc.

At December 31, 2014 the outstanding balance on the line of credit was $339,000.  At March 31, 2015, no balance was outstanding on the line of credit.

The Company draws on the IberiaBank line of credit as needed mainly to provide for payroll funding for Hyperspring. The line is replenished through collection of receivables obtained in the following weeks.

Contingent Liabilities

As of March 31, 2015, the Company was contingently liable for fourteen standby letters of credit and one surety bond totaling $4.3 million which represent advance payment and performance bonds on twelve contracts.  The Company has deposited the full value of fourteen standby letters of credit in escrow accounts, amounting to $4.2 million, which have been restricted in that the Company does not have access to these funds until the related letters of credit have expired.  The cash has been recorded on the Company's balance sheet at March 31, 2015 as restricted cash.

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Consolidated Statements of Operations (Unaudited)
Contract revenue	$ 13,996	$ 8,724
Cost of revenue	10,774	6,500
Gross profit	3,222	2,224
Operating expenses:
Selling, general and administrative	3,366	4,144
Goodwill impairment loss	0
Depreciation	129	139
Amortization of definite-lived intangible assets	123	36
Total operating expenses	3,618	4,319
Operating loss	(396)	(2,095)
Interest income, net	27	31
(Gain) loss on derivative instruments, net	(48)	104
Other expense, net	(39)	(10)
Loss before income taxes	(456)	(1,970)
Provision for income taxes	88	54
Net loss	$ (544)	$ (2,024)
Basic loss per common share	$ (0.03)	$ (0.11)
Diluted loss per common share	$ (0.03)	$ (0.11)

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Contract Receivables

3 Months Ended

Mar. 31, 2015

Contract Receivables [Abstract]

Contract Receivables

5. Contracts Receivables

Contract receivables represent balances due from a broad base of both domestic and international customers.  All contract receivables are considered to be collectible within twelve months. Recoverable costs and accrued profit not billed represent costs incurred and associated profit accrued on contracts that will become billable upon future milestones or completion of contracts.

The components of contract receivables are as follows:

(in thousands)	March 31,			December 31,
	2015			2014
Billed receivables	$	8,427		$	10,792
Recoverable costs and accrued profit not billed		6,766			5,060
Allowance for doubtful accounts		(2	)		(22	)
Total contract receivables, net	$	15,191		$	15,830

Recoverable costs and accrued profit not billed totaled $6.8 million and $5.1 million as of March 31, 2015 and December 31, 2014, respectively.  During April 2015, the Company invoiced $2.3 million of the unbilled amounts.

The following customer accounted for more than 10% of the Company's consolidated contract receivables as of December 31, 2014:

	March 31, 2015	December 31, 2014
State Nuclear Power Automation System Engineering Co.	7.0 %	10.2 %

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Acquisition

3 Months Ended

Mar. 31, 2015

Acquisition [Abstract]

Acquisition

4. Acquisition

Hyperspring, LLC

On November 14, 2014, (the "Closing Date") the Company, through its operating subsidiary, GSE Power Systems, Inc. (now GSE Performance Solutions, Inc. "GSE Performance"),  acquired Hyperspring, LLC ("Hyperspring") pursuant to a Membership Interests Purchase Agreement ("Purchase Agreement") with the sellers of Hyperspring ("Sellers").  Hyperspring, headquartered in Huntsville, Alabama, specializes in training and development, plant operations support services, and staff augmentation, primarily in the United States nuclear industry.  Hyperspring operates as a wholly-owned subsidiary of GSE Performance.  The purchase price allocation included customer relationship intangible assets valued at $779,000 which are being amortized over seven years.

GSE Performance paid the Sellers an aggregate of $3.0 million in cash at the closing date. In addition, GSE may be required, pursuant to the terms of the Purchase Agreement, to pay the Sellers up to an additional $8.4 million if Hyperspring attains certain EBITDA (earnings before interest, taxes, depreciation and amortization) targets for the three-year period ending November 13, 2017. Accordingly, the total cash paid to the former Hyperspring members may total $11.4 million.  Included in this $11.4 million was a $1.2 million payment to the Hyperspring members if Hyperspring was successful in renewing its contract with the Tennessee Valley Authority ("TVA") on or before May 15, 2015 for a two year period for substantially the same scope as was currently being provided and with substantially the same economics. However, TVA did not issue their request for bid until late April 2015 and the award date is now scheduled for November 2015.  Although TVA did grant Hyperspring a six month extension of their contract from May to November 2015, since this did not meet the two-year extension requirement per the Purchase Agreement, the $1.2 million TVA payment is divided into three increments of $400,000 each and are added to the annual payments which will be made to the former Hyperspring members if they achieved certain EBITDA (earnings before interest, taxes, depreciation and amortization) targets for the three-year period ending November 13, 2017.  However, refer to Note 16 Subsequent Events regarding an amendment to the Purchase Agreement affecting the $1.2 million TVA payment.

In conjunction with the Hyperspring acquisition, GSE Performance invested $250,000 for a 50% interest in IntelliQlik, LLC ("IntelliQlik").  IntelliQlik is developing a software platform for online learning and learning management for the energy market.  GSE Performance is obligated to contribute an additional $250,000 should IntelliQlik attain certain development milestones by September 30, 2015.  IntelliQlik is jointly owned by GSE Performance and a former member of Hyperspring.

To assist our clients in creating world-class internal training and performance improvement programs, GSE is building an E2E (Entry2Expert) Performance Solution.  The Performance Solution includes a set of integrated and scalable products and services that provide a structured training program, from employee selection and onboarding through continuous skills improvement for experienced employees.  The Hyperspring acquisition, through its staff of instructors, engineers and specialists, and the IntelliQlik training platform, once completed, will increase the breadth of solutions that GSE can offer within the E2E Performance Solution program.

The following table summarizes the purchase price and purchase price allocation for the acquisition of Hyperspring, LLC, acquired on November 14, 2014.

(in thousands)
Cash purchase price	$	3,000
Fair value of contingent consideration		3,953
Total purchase price	$	6,953
Purchase price allocation:
Cash	$	152
Contract receivables		1,719
Prepaid expenses and other current assets		23
Property and equipment, net		12
Intangible assets		779
Goodwill		5,612
Total assets		8,297
Line of credit		749
Accounts payable, accrued expenses, and other liabilities		586
Billings in excess of revenue earned		9
Total liabilities		1,344
Net assets acquired	$	6,953

Pro forma results.  Our consolidated financial statements include the operating results of Hyperspring as of the date of acquisition.  For the three months ended March 31, 2015 and 2014, the unaudited pro forma financial information below assumes that our material business acquisition of Hyperspring occurred on January 1, 2014.  This pro forma information does not purport to represent what the Company's actual results would have been if the acquisition had occurred as of the date indicated or what results would be for any future periods.

(in thousands except per share data)	(unaudited)
	Three Months ended
	March 31,
Pro forma financial information including the acquisition of Hyperspring	2015				2014
Revenue		$	13,996			$	13,208
Operating loss			(446	)			(2,101	)
Net loss			(592	)			(2,031	)
Loss per common share — basic		$	(0.03	)		$	(0.11	)
Loss per common share — diluted		$	(0.03	)		$	(0.11	)

Contingent Consideration

Accounting Standards Codification 805, Business Combinations ("ASC 805") requires that contingent consideration be recognized at fair value on the acquisition date and be re-measured each reporting period with subsequent adjustments recognized in the consolidated statement of operations. We estimate the fair value of contingent consideration liabilities based on financial projections of the acquired companies and estimated probabilities of achievement and discount the liabilities to present value using a weighted-average cost of capital. Contingent consideration is valued using significant inputs that are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting. We believe our estimates and assumptions are reasonable, however, there is significant judgment involved. At each reporting date, the contingent consideration obligation is revalued to estimated fair value, and changes in fair value subsequent to the acquisitions are reflected in income or expense in the consolidated statements of operations, and could cause a material impact to, and volatility in, our operating results. Changes in the fair value of contingent consideration obligations may result from changes in discount periods, changes in the timing and amount of revenue and/or earnings estimates and changes in probability assumptions with respect to the likelihood of achieving the various earn-out criteria.

As of March 31, 2015 and December 31, 2014, contingent consideration included in the other current liabilities on the consolidated balance sheet totaled $1.9 million and $2.8 million, respectively.  As of March 31, 2015 and December 31, 2014, we also had accrued contingent consideration totaling $2.5 million and $1.9 million, respectively, which is included in other long-term liabilities on the consolidated balance sheet and represents the portion of contingent consideration estimated to be payable greater than twelve months from the balance sheet date.

(in thousands)
	March 31,		December 31,
	2015		2014
Hyperspring, LLC	$	1,516	$	2,152
IntelliQlik, LLC		213		213
EnVision Systems, Inc.		171		477
Current contingent consideration	$	1,900	$	2,842
Hyperspring, LLC	$	2,492	$	1,948
Contingent consideration	$	2,492	$	1,948

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Subsequent Events

3 Months Ended

Mar. 31, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

16. Subsequent Events

On May 13, 2015, GSE Performance Solutions, Inc. (previously known as GSE Power Systems, Inc.) and the former owners (the "Sellers") of Hyperspring, LLC agreed to an amendment (the "Amendment") to the Membership Interest Purchase Agreement.  Under the terms of the Amendment, the date to attain a renewal of the TVA contract was extended from May 15, 2015 to December 31, 2015 (the "Extension Date").  If, prior to the Extension Date, the TVA contract is renewed until at least May 15, 2016,  the Sellers will receive a lump sum payment in the amount of $600,000 and if the TVA contract is renewed until at least May 15, 2017,  the Sellers will receive a lump sum payment in the amount of $1.2 million.  If Hyperspring does not achieve a new, multi-year contract with TVA, then the $1.2 million earnout payment will remain divided into three increments of $400,000 and be added to the annual payments which will be made to the former Hyperspring members if they achieve EBITDA targets for the three year period following the Acquisition Date.

Due to the amendment of the Purchase Agreement, the Company will recognize a $262,000 accretion expense charge in the second quarter 2015 to reflect the change in the current value of the contingent consideration based on the revised payment terms.

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Product Warranty

3 Months Ended

Mar. 31, 2015

Product Warranty [Abstract]

Product Warranty

12. Product Warranty

As the Company recognizes revenue under the percentage-of-completion method, it provides an accrual for estimated future warranty costs based on historical experience and projected claims.  The activity in the warranty account is as follows:

(in thousands)
Balance at December 31, 2014	$	1,456
Warranty provision		171
Warranty claims		(109	)
Currency adjustment		(11	)
Balance at March 31, 2015	$	1,507

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2015

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

8. Fair Value of Financial Instruments

ASC 820, Fair Value Measurements and Disclosures ("ASC 820"), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The levels of the fair value hierarchy established by ASC 820 are:

Level 1:  inputs are quoted prices, unadjusted, in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2:  inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.  A Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3:  inputs are unobservable and reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The Company considers the recorded value of certain of its financial assets and liabilities, which consist primarily of accounts receivable and accounts payable, to approximate the fair value of the respective assets and liabilities at March 31, 2015 and December 31, 2014 based upon the short-term nature of the assets and liabilities.

The following table presents assets and liabilities measured at fair value at March 31, 2015:

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
(in thousands)	(Level 1)		(Level 2)			(Level 3)		Total
Money market funds	$	10,557	$	-		$	-	$	10,557
Foreign exchange contracts		-		149			-		149
Total assets	$	10,557	$	149		$	-	$	10,706
Foreign exchange contracts	$	-	$	(78	)	$	-	$	(78	)
Total liabilities	$	-	$	(78	)	$	-	$	(78	)

The following table presents assets and liabilities measured at fair value at December 31, 2014:

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
(in thousands)	(Level 1)		(Level 2)			(Level 3)		Total
Money market funds	$	11,661	$	-		$	-	$	11,661
Foreign exchange contracts		-		92			-		92
Total assets	$	11,661	$	92		$	-	$	11,753
Foreign exchange contracts	$	-	$	(24	)	$	-	$	(24	)
Total liabilities	$	-	$	(24	)	$	-	$	(24	)

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Software Development Costs

3 Months Ended

Mar. 31, 2015

Software Development Costs [Abstract]

Software Development Costs

6. Software Development Costs

Certain computer software development costs are capitalized in the accompanying consolidated balance sheets.  Capitalization of computer software development costs begins upon the establishment of technological feasibility.  Capitalization ceases and amortization of capitalized costs begins when the software product is commercially available for general release to customers.  Amortization of capitalized computer software development costs is included in cost of revenue and is determined using the straight-line method over the remaining estimated economic life of the product, typically three years.  On an annual basis, and more frequently as conditions indicate, the Company assesses the recovery of the unamortized software development costs by estimating the net undiscounted cash flows expected to be generated by the sale of the product.  If the undiscounted cash flows are not sufficient to recover the unamortized software costs the Company will write-down the investment to its estimated fair value based on future undiscounted cash flows.  The excess of any unamortized software development costs over the related net realizable value is written down and charged to cost of revenue.

Software development costs capitalized were $506,000 and $155,000 for the three months ended March 31, 2015 and 2014, respectively.  Total amortization expense was $90,000 for the three months ended March 31, 2015 and $32,000 for the three months ended March 31, 2014.

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Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2015

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets

7. Goodwill and Intangible Assets

Goodwill

We review goodwill for impairment annually as of November 30 and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. We test goodwill at the reporting unit level. A reporting unit is an operating segment, or one level below an operating segment, as defined by U.S. generally accepted accounting principles. After the acquisition of Hyperspring, LLC ("Hyperspring") on November 14, 2014, our reporting units are: (i) Performance Improvement Solutions and (ii) Staff Augmentation.  At March 31, 2015 and December 31, 2014, the $5.6 million of goodwill  balance was related to the Hyperspring acquisition and is assigned to our Staff Augmentation segment.

Accounting Standards Update ("ASU") 2011-08, Testing Goodwill for Impairment ("ASU 2011-08") permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Under ASU 2011-08, an entity is not required to perform step one of the goodwill impairment test for a reporting unit if it is more likely than not that its fair value is greater than its carrying amount.

Intangible Assets Subject to Amortization

The Company's intangible assets include amounts recognized in connection with business acquisitions, including customer relationships, contract backlog and technology.  Intangible assets are initially valued at fair market value using generally accepted valuation methods appropriate for the type of intangible asset.  Amortization is recognized on a straight-line basis over the estimated useful life of the intangible assets, except for contract backlog and contractual customer relationships which are recognized in proportion to the related projected revenue streams.   The Company reviews specific definite-lived intangibles for impairment when events occur that may impact their value in accordance with the respective accounting guidance for long-lived assets.

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Derivative Instruments

3 Months Ended

Mar. 31, 2015

Derivative Instruments [Abstract]

Derivative Instruments

9. Derivative Instruments

The Company utilizes forward foreign currency exchange contracts to manage market risks associated with the fluctuations in foreign currency exchange rates.  It is the Company's policy to use such derivative financial instruments to protect against market risk arising in the normal course of business in order to reduce the impact of these exposures.  The Company minimizes credit exposure by limiting counterparties to nationally recognized financial institutions.

As of March 31, 2015, the Company had foreign exchange contracts outstanding of approximately 0.3 million Pounds Sterling, 0.7 million Australian Dollars and 2.2 million Euro at fixed rates.  The contracts expire on various dates through December 2016.  At December 31, 2014, the Company had contracts outstanding of approximately 0.3 million Pounds Sterling, 1.4 million Euro, 0.8 million Australian Dollars, and 0.5 million Malaysian Ringgits at fixed rates.

The Company has not designated any of the foreign exchange contracts outstanding as hedges and has recorded the estimated fair value of the contracts in the consolidated balance sheets as follows:

	March 31,			December 31,
(in thousands)	2015			2014
Asset derivatives
Prepaid expenses and other current assets	$	109		$	71
Other assets		40			21
		149			92
Liability derivatives
Other current liabilities		(24	)		(23	)
Other liabilities		(54	)		(1	)
		(78	)		(24	)
Net fair value	$	71		$	68

The changes in the fair value of the foreign exchange contracts are included in net gain (loss) on derivative instruments in the consolidated statements of operations.

The foreign currency denominated contract receivables, billings in excess of revenue earned and subcontractor accruals that are related to the outstanding foreign exchange contracts are remeasured at the end of each period into the functional currency using the current exchange rate at the end of the period.  The gain or loss resulting from such remeasurement is also included in net gain (loss) on derivative instruments in the consolidated statements of operations.

For the three months ended March 31, 2015 and 2014, the Company recognized a net gain (loss) on its derivative instruments as outlined below:

	Three Months ended March 31,
(in thousands)	2015			2014
Foreign exchange contracts- change in fair value	$	-		$	243
Remeasurement of related contract receivables,  billings in excess of revenue earned, and  subcontractor accruals		(48	)		(139	)
Gain (loss) on derivative instruments, net	$	(48	)	$	104

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2015

Segment Information [Abstract]

Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block]

The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment contract revenue to consolidated revenue and operating results to consolidated loss before income taxes:

(in thousands)	Three Months ended
	March 31,
	2015			2014
Contract revenue:
Performance Improvement Solutions	$	8,816		$	8,724
Staff Augmentation		5,180			-
		13,996			8,724
Operating income (loss):
Performance Improvement Solutions		(776	)		(2,068	)
Staff Augmentation		300			-
Gain (Loss) on change in fair value of contingent consideration, net		80			(27	)
Operating loss		(396	)		(2,095	)
Interest income, net		27			31
Gain (loss) on derivative instruments, net		(48	)		104
Other expense, net		(39	)		(10	)
Loss before income taxes	$	(456	)	$	(1,970	)

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 Segment	Mar. 31, 2014
Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract]
Number of reportable business segments	2
Segment Reporting Information, Income (Loss) before Income Taxes [Abstract]
Revenues	$ 13,996	$ 8,724
Operating loss	(396)	(2,095)
Change in fair value of contingent consideration	(80)	27
Interest income, net	27	31
(Gain) loss on derivative instruments, net	(48)	104
Other expense, net	(39)	(10)
Loss before income taxes	(456)	(1,970)
Performance Improvement Solutions [Member]
Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract]
Contract range, minimum	10 months
Contract range, maximum	3 years
Segment Reporting Information, Income (Loss) before Income Taxes [Abstract]
Revenues	8,816	8,724
Operating loss	(776)	(2,068)
Staff Augmentation [Member]
Segment Reporting Information, Income (Loss) before Income Taxes [Abstract]
Revenues	5,180	0
Operating loss	$ 300	$ 0

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Preferred Stock Rights

3 Months Ended

Mar. 31, 2015

Preferred Stock Rights [Abstract]

Preferred Stock Rights [Text Block]

14. Preferred Stock Rights

On March 21, 2011, the Board of Directors of the Company declared a dividend, payable to holders of record as of the close of business on April 1, 2011, of  one preferred stock purchase right (a "Right") for each outstanding share of common stock, par value $0.01 per share, of the Company (the "Common Stock").  In addition, the Company will issue one Right with each new share of Common Stock issued.  In connection therewith, on March 21, 2011, the Company entered into a Stockholder Protection Rights Agreement (as amended from time to time, the Rights Agreement) with Continental Stock Transfer & Trust Company, as Rights Agent, which has a term of three years, unless amended by the Board of Directors in accordance with the terms of the Rights Agreement.  On March 21, 2014, the Rights Agreement was amended to extend the term an additional two years.  The Rights Agreement will now expire on March 21, 2016.  The Rights trade with and are inseparable from the Common Stock and are not evidenced by separate certificates unless they become exercisable.  Each Right entitles its holder to purchase from the Company one-hundredth of a share of participating preferred stock having economic and voting terms similar to the Common Stock at an exercise price of $8.00 per Right, subject to adjustment in accordance with the terms of the Rights Agreement, once the Rights become exercisable.  Under the Rights Agreement, the Rights become exercisable if any person or group acquires 20% or more of the Common Stock or, in the case of any person or group that owned 20% or more of the Common Stock as of March 21, 2011, upon the acquisition of any additional shares by such person or group.  The Company, its subsidiaries, employee benefit plans of the Company or any of its subsidiaries and any entity holding Common Stock for or pursuant to the terms of any such plan are accepted.  Upon exercise of the Right in accordance with the Rights Agreement, the holder would be able to purchase a number of shares of Common Stock from the Company having an aggregate market price (as defined in the Rights Agreement) equal to twice the then-current exercise price for an amount in cash equal to the then-current exercise price.  In addition, the Company may, in certain circumstances and pursuant to the terms of the Rights Agreement, exchange the Rights for one share of Common Stock or an equivalent security for each Right or, alternatively, redeem the Rights for $0.001 per Right.  The Rights will not prevent a takeover of our Company, but may cause substantial dilution to a person that acquires 20% or more of the Company's Common Stock.

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Basis of Presentation and Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2015

Basis of Presentation and Revenue Recognition [Abstract]

Percentage of revenue by major customers

For the three months ended March 31, 2015 the following customer provided more than 10% of the Company's consolidated revenue:

	Three Months ended March 31,
	2015	2014
Tennessee Valley Authority	21.0 %	0.0 %

Tennessee Valley Authority ("TVA") is a customer of Hyperspring, LLC, which was acquired on November 14, 2014.

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Income Taxes (Details)	3 Months Ended
	Mar. 31, 2015
Income Taxes [Abstract]
Minimum probability of uncertain tax position to be recognized (in hundredths)	50.00%
Minimum percentage of tax position realized upon ultimate settlement (in hundredths)	50.00%

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Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Goodwill [Roll Forward]
Beginning balance	$ 5,612
Goodwill impairment loss	0
Foreign currency translation	0
Goodwill, Period Increase (Decrease), Total	0
Ending balance	$ 5,612

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Consolidated Statements of Comprehensive Loss
Net loss	$ (544)	$ (2,024)
Foreign currency translation adjustment, net of tax	(236)	5
Comprehensive loss	$ (780)	$ (2,019)

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Basic and Diluted Loss Per Common Share

3 Months Ended

Mar. 31, 2015

Basic and Diluted Loss Per Common Share [Abstract]

Basic and Diluted Loss Per Common Share

3. Basic and Diluted Loss Per Common Share

Basic loss per share is based on the weighted average number of outstanding common shares for the period.  Diluted loss per share adjusts the weighted average shares outstanding for the potential dilution that could occur if stock options were exercised into common stock.

The number of common shares and common share equivalents used in the determination of basic and diluted loss per share were as follows:

(in thousands, except for share amounts)	Three Months ended
	March 31,
	2015			2014
Numerator:
Net loss	$	(544	)	$	(2,024	)
Denominator:
Weighted-average shares outstanding for basic earnings per share		17,887,859			17,887,859
Effect of dilutive securities:
Employee stock options		-			-
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share		17,887,859			17,887,859
Shares related to dilutive securities excluded because inclusion would be anti-dilutive		2,565,067			2,897,319

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Basic and Diluted Loss Per Common Share (Tables)

3 Months Ended

Mar. 31, 2015

Basic and Diluted Loss Per Common Share [Abstract]

Number of common shares and common share equivalents used in the determination of basic and diluted income (loss) per share

The number of common shares and common share equivalents used in the determination of basic and diluted loss per share were as follows:

(in thousands, except for share amounts)	Three Months ended
	March 31,
	2015			2014
Numerator:
Net loss	$	(544	)	$	(2,024	)
Denominator:
Weighted-average shares outstanding for basic earnings per share		17,887,859			17,887,859
Effect of dilutive securities:
Employee stock options		-			-
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share		17,887,859			17,887,859
Shares related to dilutive securities excluded because inclusion would be anti-dilutive		2,565,067			2,897,319

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Acquisition, Contingent Consideration by Acquisition (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Other Current Liabilities [Member]
Business Acquisition, Contingent Consideration [Line Items]
Contingent Consideration, Liability	$ 1,900	$ 2,842
Other non current liabilities [Member]
Business Acquisition, Contingent Consideration [Line Items]
Contingent Consideration, Liability	2,492	1,948
Hyperspring, LLC [Member] | Other Current Liabilities [Member]
Business Acquisition, Contingent Consideration [Line Items]
Contingent Consideration, Liability	1,516	2,152
Hyperspring, LLC [Member] | Other non current liabilities [Member]
Business Acquisition, Contingent Consideration [Line Items]
Contingent Consideration, Liability	2,492	1,948
IntelliQlik, LLC [Member] | Other Current Liabilities [Member]
Business Acquisition, Contingent Consideration [Line Items]
Contingent Consideration, Liability	213	213
EnVision Systems, Inc. [Member] | Other Current Liabilities [Member]
Business Acquisition, Contingent Consideration [Line Items]
Contingent Consideration, Liability	$ 171	$ 477

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Income Taxes

3 Months Ended

Mar. 31, 2015

Income Taxes [Abstract]

Income Taxes

13. Income Taxes

The Company files in the United States federal jurisdiction and in several state and foreign jurisdictions. Because of the net operating loss carryforwards, the Company is subject to U.S. federal and state income tax examinations from years 1997 forward and is subject to foreign tax examinations by tax authorities for years 2007 and forward. Open tax years related to state and foreign jurisdictions remain subject to examination but are not considered material to our financial position, results of operations or cash flows.

An uncertain tax position taken or expected to be taken in a tax return is recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Interest and penalties related to income taxes are accounted for as income tax expense.  The Company has appropriately accounted for its uncertain tax positions.

The Company expects to pay income taxes in India and the UK in 2015.  In 2014, the Company paid income taxes in the UK and India.  The Company has a full valuation allowance on its U.S., Swedish, and Chinese net deferred tax assets at March 31, 2015.