(Mark One)
|
|||
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended
|
||
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
|
|
(Exact name of registrant as specified in its charter)
|
|
|
|
(State of incorporation)
|
(I.R.S. Employer Identification Number)
|
|
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number, including area code: (
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
Smaller reporting company
|
Emerging growth company
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
|
|
|
Page
|
||
PART I.
|
FINANCIAL INFORMATION
|
3
|
Item 1.
|
Financial Statements (unaudited)
|
|
3
|
||
4
|
||
5
|
||
6
|
||
8
|
||
9
|
||
Item 2.
|
24
|
|
Item 3.
|
38
|
|
Item 4.
|
39
|
|
PART II.
|
40
|
|
Item 1.
|
40
|
|
Item 1A.
|
40
|
|
Item 2.
|
40
|
|
Item 3
|
40
|
|
Item 4
|
40 | |
Item 5.
|
40
|
|
Item 6.
|
41
|
September 30, 2022
|
December 31, 2021
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash, current
|
||||||||
Contract receivables, net
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Equipment, software and leasehold improvements, net
|
|
|
||||||
Software development costs, net
|
|
|
||||||
Goodwill
|
|
|
||||||
Intangible assets, net
|
|
|
||||||
Restricted cash - long term | ||||||||
Operating lease right-of-use assets, net
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Line of credit
|
$
|
|
$
|
|
||||
Current portion of long-term note
|
|
|
||||||
Accounts payable
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Accrued compensation
|
|
|
||||||
Billings in excess of revenue earned
|
|
|
||||||
Accrued warranty
|
|
|
||||||
Income taxes payable
|
|
|
||||||
Derivative liabilities
|
||||||||
Other current liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Long-term note, less current portion
|
|
|
||||||
Operating lease liabilities noncurrent
|
|
|
||||||
Other noncurrent liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies (Note 16)
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock $
|
|
|
||||||
Common stock $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Accumulated other comprehensive income (loss)
|
|
(
|
)
|
|||||
Treasury stock at cost,
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
2022
|
September 30,
2021
|
September 30,
2022
|
September 30,
2021
|
|||||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Cost of revenue
|
|
|
|
|
||||||||||||
Gross profit
|
|
|
|
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Selling, general and administrative
|
|
|
|
|
||||||||||||
Research and development
|
|
|
|
|
||||||||||||
Restructuring (benefit) charges
|
|
(
|
)
|
|
|
|||||||||||
Goodwill and intangible asset impairment charge
|
||||||||||||||||
Depreciation
|
|
|
|
|
||||||||||||
Amortization of intangible assets
|
|
|
|
|
||||||||||||
Total operating expenses
|
|
|
|
|
||||||||||||
Operating loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Interest expense, net
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Change in fair value of derivative instruments, net
|
|
|
|
|
||||||||||||
Other (loss) income, net
|
(
|
)
|
|
(
|
)
|
|
||||||||||
(Loss) income before income taxes
|
(
|
)
|
|
(
|
)
|
|
||||||||||
(Benefit from) provision for income taxes
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Net (loss) income
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||
Net (loss) income per common share - basic and diluted
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||
Weighted average shares outstanding used to compute net
(loss) income per share - basic
|
|
|
|
|
||||||||||||
Weighted average shares outstanding used to compute net (loss) income per share - diluted
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
|||||||||||||
Net (loss) income
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||
Cumulative translation adjustment
|
|
(
|
)
|
|
|
|||||||||||
Comprehensive (loss) income
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
Common Stock
|
Accumulated |
Treasury Stock
|
||||||||||||||||||||||||||||||
Nine Months Ended
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Other
Comprehensive Loss
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||||
Balance, January 1, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
(
|
)
|
|
|
-
|
|
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Repayment of convertible note in shares |
- | |||||||||||||||||||||||||||||||
Net loss
|
-
|
|
|
(
|
)
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Balance, September 30, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
Balance, January 1, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
(
|
)
|
|
|
-
|
|
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Net income
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Balance, September 30, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Common Stock
|
Accumulated |
Treasury Stock
|
||||||||||||||||||||||||||||||
Three Months Ended
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Other
Comprehensive Loss
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||||
Balance, July 1, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
(
|
)
|
|
|
-
|
|
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Repayment of convertible note in shares |
- | |||||||||||||||||||||||||||||||
Net loss
|
-
|
|
|
(
|
)
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Balance, September 30, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
Balance, July 1, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Net income
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Balance, September 30, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Nine months ended
|
||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
Cash flows from operating activities:
|
||||||||
Net (loss) income
|
$
|
(
|
)
|
$
|
|
|||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
|
||||||||
Goodwill and intangible asset impairment charge
|
||||||||
Depreciation
|
|
|
||||||
Amortization of intangible assets
|
|
|
||||||
Amortization of capitalized software development costs
|
|
|
||||||
Amortization of deferred financing costs
|
|
|
||||||
Amortization of debt discount
|
||||||||
Gain on PPP loan forgiveness
|
( |
) | ||||||
Stock-based compensation expense
|
|
|
||||||
Bad debt expense (recovery)
|
|
(
|
)
|
|||||
Change in fair value of derivative instruments, net
|
(
|
)
|
|
|||||
Deferred income taxes
|
( |
) | ||||||
Changes in assets and liabilities:
|
||||||||
Contract receivables, net
|
|
(
|
)
|
|||||
Prepaid expenses and other assets
|
|
(
|
)
|
|||||
Accounts payable, accrued compensation and accrued expenses
|
|
|
||||||
Billings in excess of revenue earned
|
(
|
)
|
(
|
)
|
||||
Accrued warranty
|
(
|
)
|
(
|
)
|
||||
Other liabilities
|
(
|
)
|
|
|||||
Net cash provided by (used in) operating activities
|
|
(
|
)
|
|||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(
|
)
|
(
|
)
|
||||
Capitalized software development costs
|
(
|
)
|
(
|
)
|
||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Proceeds from line of credit
|
||||||||
Repayment of line of credit
|
(
|
)
|
(
|
)
|
||||
Repayment of insurance premium
|
(
|
)
|
(
|
)
|
||||
Proceeds from issuance of long-term note and warrants, net of debt issuance cost and original issue discount
|
|
|
||||||
Repayment of convertible note
|
( |
) | ||||||
Tax paid for shares whithheld
|
(
|
)
|
(
|
)
|
||||
Net cash provided by (used in) financing activities
|
|
(
|
)
|
|||||
Effect of exchange rate changes on cash
|
(
|
)
|
(
|
)
|
||||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
(
|
)
|
|||||
Cash, cash equivalents and restricted cash at beginning of the period
|
|
|
||||||
Cash, cash equivalents and restricted cash at the end of the period
|
$
|
|
$
|
|
||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash, current | ||||||||
Restricted cash included in other long-term assets | ||||||||
Total cash, cash equivalents and restricted cash | $ | $ | ||||||
Supplemental cash flow disclosures: | ||||||||
Non-cash financing activities
|
||||||||
Repayment of convertible note
|
$ | $ | ||||||
Discount on issuance of convertible note
|
$ | $ |
(in thousands, except for share data)
|
Three months ended
|
Nine months ended
|
||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net (loss) income attributed to common stockholders
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||
Denominator:
|
||||||||||||||||
Weighted-average shares outstanding for basic earnings per share
|
|
|
|
|
||||||||||||
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share
|
|
|
|
|
||||||||||||
Shares related to potentially dilutive securities excluded because inclusion would be anti-dilutive
|
|
|
|
|
(in thousands)
|
September 30, 2022
|
December 31, 2021
|
||||||
Billed receivables
|
$
|
|
$
|
|
||||
Unbilled receivables
|
|
|
||||||
Allowance for doubtful accounts
|
(
|
)
|
(
|
)
|
||||
Total contract receivables, net
|
$
|
|
$
|
|
|
Goodwill
|
Impairment
|
Net
|
|||||||||
|
||||||||||||
Performance Improvement Solutions
|
$ |
|
$ |
(
|
)
|
$ |
|
|||||
Workforce Solutions
|
|
(
|
)
|
|
||||||||
Net book value at September 30, 2022
|
$
|
|
$
|
(
|
)
|
$
|
|
|
Goodwill
|
Impairment
|
Net
|
|||||||||
|
||||||||||||
Performance Improvement Solutions
|
$ |
|
$ |
(
|
)
|
$ |
|
|||||
Workforce Solutions
|
|
|
|
|||||||||
Net book value at December 31, 2021
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
As of September 30, 2022
|
|||||||||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Impairment |
Net
|
|||||||||||||
Amortized intangible assets:
|
||||||||||||||||
Customer relationships
|
$
|
|
$
|
(
|
)
|
$ |
( |
) |
$
|
|
||||||
Trade names
|
|
(
|
)
|
|
||||||||||||
Developed technology
|
|
(
|
)
|
|
||||||||||||
Non-contractual customer relationships
|
|
(
|
)
|
|
||||||||||||
Noncompete agreement
|
|
(
|
)
|
|
||||||||||||
Alliance agreement
|
|
(
|
)
|
|
||||||||||||
Others
|
|
(
|
)
|
|
||||||||||||
Total
|
$
|
|
$
|
(
|
)
|
$ | ( |
) |
$
|
|
(in thousands)
|
As of December 31, 2021
|
|||||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
|
||||||||||
Amortized intangible assets:
|
||||||||||||
Customer relationships
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Trade names
|
|
(
|
)
|
|
||||||||
Developed technology
|
|
(
|
)
|
|
||||||||
Non-contractual customer relationships
|
|
(
|
)
|
|
||||||||
Noncompete agreement
|
|
(
|
)
|
|
||||||||
Alliance agreement
|
|
(
|
)
|
|
||||||||
Others
|
|
(
|
)
|
|
||||||||
Total
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
||||
Years ended December 31:
|
||||
2022 remainder
|
$
|
|
||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
Thereafter
|
|
|||
Total
|
$
|
|
(in thousands)
|
||||||||
September 30, 2022
|
December 31, 2021
|
|||||||
Computer and equipment
|
$
|
|
$
|
|
||||
Software
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Furniture and fixtures
|
|
|
||||||
|
|
|||||||
Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
Equipment, software and leasehold improvements, net
|
$
|
|
$
|
|
Exercise Price
|
$ | ||
Common Stock Price
|
$ | ||
Risk Free Rate
|
% | ||
Volatility
|
% | ||
Term (in years)
|
|
(in thousands)
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
Significant
Other Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
||||||||||||
Derivative liability | $ | $ | $ | $ | ||||||||||||
Warrant liability |
||||||||||||||||
Cash settled performance-vesting restricted stock units
|
||||||||||||||||
Total liabilities | $ | $ | $ | $ |
(in thousands)
|
Embedded
Redemption Features
|
Warrant |
Cash Settled
PRSUs
|
Level 3 Total |
||||||||||||
Balance at December 31, 2021
|
$
|
|
$ | $ | $ | |||||||||||
Derivative liabilities at issuance date
|
|
|||||||||||||||
Warrant liabilities at issuance date
|
||||||||||||||||
Change in fair value included in gain on derivative instruments, net
|
( |
) | ( |
) | ( |
) | ||||||||||
Fair value of cash settled PRSUs vested
|
||||||||||||||||
Cash paid on vested shares
|
( |
) | ( |
) | ||||||||||||
Balance at September 30, 2022
|
$
|
|
$ | $ | $ |
Amount
|
||||
Convertible Note issued
|
$
|
|
||
Debt discount
|
(
|
)
|
||
Issuance cost:
|
||||
Commitment fee
|
(
|
)
|
||
Balance of investor’s counsel fees
|
(
|
)
|
||
Net proceeds of Convertible Note
|
$
|
|
||
Fair value of Warrant Liabilities on issuance |
( |
) | ||
Fair value of Conversion Feature on issuance |
( |
) | ||
Allocated OID costs to Convertible Note
|
( |
) | ||
Interest expense accrued on Convertible Note as of September 30, 2022 |
||||
Principal and interest payments as of September 30, 2022 | ( |
) | ||
Balance of Convertible Note as of September 30, 2022 |
$ |
(in thousands)
|
||||
Balance at January 1, 2022
|
$
|
|
||
Current period recovery
|
(
|
)
|
||
Current period claims
|
(
|
)
|
||
Currency adjustment
|
(
|
)
|
||
Balance at September 30, 2022
|
$
|
|
(in thousands)
|
Three months ended
|
Nine months ended
|
||||||||||||||
September 30,
2022
|
September 30,
2021
|
September 30,
2022
|
September 30,
2021
|
|||||||||||||
Performance Improvement Solutions segment
|
||||||||||||||||
System Design and Build
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Over time
|
|
|
|
|
||||||||||||
Software and Support
|
|
|
|
|
||||||||||||
Point in time
|
|
|
|
|
||||||||||||
Over time
|
|
|
|
|
||||||||||||
Training and Consulting Services
|
|
|
|
|
||||||||||||
Point in time
|
|
|
|
|
||||||||||||
Over time
|
|
|
|
|
||||||||||||
Workforce Solutions |
||||||||||||||||
Training and Consulting Services
|
|
|
|
|
||||||||||||
Point in time
|
|
|
|
|
||||||||||||
Over time
|
|
|
|
|
||||||||||||
Total revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
(in thousands)
|
Three months ended
|
Nine months ended
|
||||||||||||||
September 30,
2022
|
September 30,
2021
|
September 30,
2022
|
September 30,
2021
|
|||||||||||||
Revenue recognized in the period from amounts included in billings in excess of revenue earned at the beginning of the period
|
$
|
|
$
|
|
$
|
|
$
|
|
(in thousands)
|
Three months ended
|
Nine months ended
|
||||||||||||||
September 30,
2022
|
September 30,
2021
|
September 30,
2022
|
September 30,
2021
|
|||||||||||||
(Loss) income before income taxes
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||
(Benefit from) provision for income taxes
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Effective tax rate
|
|
%
|
|
%
|
|
%
|
|
%
|
|
As of
|
|||||||||
Operating Leases
|
Classification
|
September 30, 2022
|
December 31, 2021
|
|||||||
Leased Assets
|
||||||||||
Operating lease - right of use assets
|
|
$
|
|
$
|
|
|||||
Lease Liabilities
|
||||||||||
Operating lease liabilities - Current
|
|
|
|
|||||||
Operating lease liabilities
|
|
|
|
|||||||
|
$ |
|
$
|
|
Three months ended
|
Nine months ended
|
|||||||||||||||||
Lease Cost
|
Classification
|
September 30,
2022 |
September 30,
2021
|
September 30,
2022
|
September 30,
2021
|
|||||||||||||
Operating lease cost (1)
|
Selling, general and administrative expenses
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
Short-term leases costs (2)
|
Selling, general and administrative expenses
|
|
|
|
|
|||||||||||||
Sublease income (3)
|
Selling, general and administrative expenses
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Net lease cost
|
$
|
|
$
|
|
$
|
|
$
|
|
(in thousands)
|
Gross Future
Minimum Lease
Payments
|
|||
2022 remainder
|
$
|
|
||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
Thereafter |
||||
Total lease payments
|
$
|
|
||
Less: Interest
|
|
|||
Present value of lease payments
|
$
|
|
Lease Term and Discount Rate
|
September 30, 2022
|
December 31, 2021
|
||||||
Weighted-average remaining lease term (years)
|
||||||||
Operating leases
|
|
|
||||||
Weighted-average discount rate
|
||||||||
Operating leases
|
% | % |
(in thousands)
|
Nine months ended
|
|||||||
Cash paid for amounts included in
measurement of liabilities
|
September 30, 2022
|
September 30, 2021
|
||||||
Operating cash flows used in operating leases
|
$
|
|
$
|
|
Three months ended
|
Nine months ended
|
|||||||||||||||
(in thousands)
|
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
||||||||||||
Revenue:
|
||||||||||||||||
Performance Improvement Solutions
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Workforce Solutions
|
|
|
|
|
||||||||||||
Total revenue
|
|
|
|
|
||||||||||||
Gross Profit
|
||||||||||||||||
Performance Improvement Solutions
|
||||||||||||||||
Workforce Solutions
|
||||||||||||||||
Total gross profit
|
||||||||||||||||
Operating loss
|
||||||||||||||||
Performance Improvement Solutions
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Workforce Solutions
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Operating loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Interest expense, net
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Change in fair value of derivative instruments, net |
|
|
|
|
||||||||||||
Other (loss) income, net
|
(
|
)
|
|
(
|
)
|
|
||||||||||
(Loss) income before income taxes
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
•
|
optimization of existing generation assets;
|
•
|
design support and deployment of advanced reactor designs; and
|
•
|
integration with renewable power sources.
|
•
|
Design engineering for plant mechanical, electrical, I&C, civil and structural, fire protection and cyber systems
|
•
|
Engineering programs addressing ASME codes, balance of plant programs other regulatory programs and economic driven programs such as plant thermal performance
|
•
|
Simulation engineering for nuclear, thermal and process plant training and virtual commissioning
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||||||||||||||||||
(in thousands)
|
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
||||||||||||||||||||||||||||
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
|||||||||||||||||||||
Revenue
|
$
|
11,898
|
100.0
|
%
|
$
|
14,686
|
100.0
|
%
|
$
|
36,918
|
100.0
|
%
|
$
|
41,312
|
100.0
|
%
|
||||||||||||||||
Cost of revenue
|
8,642
|
72.6
|
%
|
11,503
|
78.3
|
%
|
28,063
|
76.0
|
%
|
32,512
|
78.7
|
%
|
||||||||||||||||||||
Gross profit
|
3,256
|
27.4
|
%
|
3,183
|
21.7
|
%
|
8,855
|
24.0
|
%
|
8,800
|
21.3
|
%
|
||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Selling, general and administrative
|
4,336
|
36.4
|
%
|
3,265
|
22.2
|
%
|
13,253
|
35.9
|
%
|
10,521
|
25.5
|
%
|
||||||||||||||||||||
Research and development
|
186
|
1.6
|
%
|
149
|
1.0
|
%
|
510
|
1.4
|
%
|
460
|
1.1
|
%
|
||||||||||||||||||||
Restructuring (benefit) charges
|
-
|
0.0
|
%
|
(10
|
)
|
(0.1
|
)%
|
-
|
0.0
|
%
|
798
|
1.9
|
%
|
|||||||||||||||||||
Goodwill and intangible asset impairment charge
|
7,505
|
63.1
|
%
|
3
|
0.0
|
%
|
7,505
|
20.3
|
%
|
3
|
0.0
|
%
|
||||||||||||||||||||
Depreciation
|
69
|
0.6
|
%
|
69
|
0.5
|
%
|
213
|
0.6
|
%
|
216
|
0.5
|
%
|
||||||||||||||||||||
Amortization of intangible assets
|
209
|
1.8
|
%
|
286
|
1.9
|
%
|
700
|
1.9
|
%
|
929
|
2.2
|
%
|
||||||||||||||||||||
Total operating expenses
|
12,305
|
103.4
|
%
|
3,762
|
25.6
|
%
|
22,181
|
60.1
|
%
|
12,927
|
31.3
|
%
|
||||||||||||||||||||
Operating loss
|
(9,049
|
)
|
(76.1
|
)%
|
(579
|
)
|
(3.9
|
)%
|
(13,326
|
)
|
(36.2
|
)%
|
(4,127
|
)
|
(10.1
|
)%
|
||||||||||||||||
Interest expense, net
|
(422
|
)
|
(3.5
|
)%
|
(32
|
)
|
(0.2
|
)%
|
(928
|
)
|
(2.5
|
)%
|
(135
|
)
|
(0.3
|
)%
|
||||||||||||||||
Change in fair value of derivative instruments, net
|
263
|
2.2
|
%
|
-
|
0.0
|
%
|
377
|
1.0
|
%
|
-
|
0.0
|
%
|
||||||||||||||||||||
Other (loss) income, net
|
(2
|
)
|
0.0
|
%
|
12,215
|
83.2
|
%
|
(58
|
)
|
(0.2
|
)%
|
16,853
|
40.8
|
%
|
||||||||||||||||||
(Loss) income before income taxes
|
(9,210
|
)
|
(77.4
|
)%
|
11,604
|
79.0
|
%
|
(13,935
|
)
|
(37.7
|
)%
|
12,591
|
30.5
|
%
|
||||||||||||||||||
(Benefit from) provision for income taxes
|
(218
|
)
|
(1.8
|
)%
|
166
|
1.1
|
%
|
(108
|
) |
0.3
|
%
|
127
|
0.3
|
%
|
||||||||||||||||||
Net (loss) income
|
$
|
(8,992
|
)
|
(75.6
|
)%
|
$
|
11,438
|
77.9
|
%
|
$
|
(13,827
|
)
|
(37.5
|
)%
|
$
|
12,464
|
30.2
|
%
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||||||||||||||||||
(in thousands)
|
September 30, 2022
|
September 30, 2021
|
Change
|
September 30, 2022
|
September 30, 2021
|
Change
|
||||||||||||||||||||||||||
Revenue:
|
$ |
|
%
|
$ |
|
%
|
||||||||||||||||||||||||||
Performance
|
$
|
8,052
|
$
|
7,375
|
677
|
9
|
%
|
$
|
22,402
|
$
|
21,318
|
1,084
|
5
|
%
|
||||||||||||||||||
Workforce Solutions
|
3,846
|
7,311
|
(3,465
|
)
|
(47
|
)%
|
14,516
|
19,994
|
(5,478
|
)
|
(27
|
)%
|
||||||||||||||||||||
Total revenue
|
$
|
11,898
|
$
|
14,686
|
(2,788
|
)
|
(19
|
)%
|
$
|
36,918
|
$
|
41,312
|
(4,394
|
)
|
(11
|
)%
|
(in thousands)
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||||||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
|||||||||||||||||||||||||||||
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
|||||||||||||||||||||
Gross profit:
|
||||||||||||||||||||||||||||||||
Performance Improvement Solutions
|
$
|
2,654
|
33.0
|
%
|
$
|
2,252
|
30.5
|
%
|
$
|
7,037
|
31.4
|
%
|
$
|
6,204
|
29.1
|
%
|
||||||||||||||||
Workforce Solutions
|
602
|
15.7
|
%
|
931
|
12.7
|
%
|
1,818
|
12.5
|
%
|
2,596
|
13.0
|
%
|
||||||||||||||||||||
Total gross profit
|
$
|
3,256
|
27.4
|
%
|
$
|
3,183
|
21.7
|
%
|
$
|
8,855
|
24.0
|
%
|
$
|
8,800
|
21.3
|
%
|
Three months ended
|
Nine months ended
|
|||||||||||||||
(in thousands)
|
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
||||||||||||
Corporate charges
|
$
|
3,201
|
$
|
2,364
|
$
|
10,058
|
$
|
7,754
|
||||||||
Business development
|
951
|
714
|
2,511
|
2,230
|
||||||||||||
Facility operation & maintenance (O&M)
|
182
|
186
|
575
|
654
|
||||||||||||
Bad debt expense
|
-
|
-
|
97
|
(133
|
)
|
|||||||||||
Other
|
2
|
1
|
12
|
16
|
||||||||||||
Total
|
$
|
4,336
|
$
|
3,265
|
$
|
13,253
|
$
|
10,521
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
2022
|
September 30,
2021
|
September 30,
2022
|
September 30,
2021
|
|||||||||||||
Net (loss) income
|
$
|
(8,992
|
)
|
$
|
11,438
|
$
|
(13,827
|
)
|
$
|
12,464
|
||||||
Interest expense, net
|
422
|
32
|
928
|
135
|
||||||||||||
Provision for income taxes
|
(218
|
)
|
166
|
(108
|
) |
127
|
||||||||||
Depreciation and amortization
|
365
|
432
|
1,167
|
1,426
|
||||||||||||
EBITDA
|
(8,423
|
)
|
12,068
|
(11,840
|
)
|
14,152
|
||||||||||
Goodwill and intangible asset impairment charge
|
7,505
|
3
|
7,505
|
3
|
||||||||||||
Employee retention credit
|
-
|
(2,087
|
)
|
-
|
(7,162
|
)
|
||||||||||
PPP loan and accumulated interest forgiveness
|
-
|
(10,127
|
)
|
-
|
(10,127
|
)
|
||||||||||
Restructuring charges
|
-
|
(10
|
)
|
-
|
798
|
|||||||||||
Stock-based compensation expense
|
491
|
283
|
1,592
|
784
|
||||||||||||
Change in fair value of derivative instruments, net
|
(263
|
)
|
-
|
(377
|
)
|
-
|
||||||||||
VAT write-off
|
-
|
-
|
-
|
450
|
||||||||||||
Adjusted EBITDA
|
$
|
(690
|
)
|
$
|
130
|
$
|
(3,120
|
)
|
$
|
(1,102
|
)
|
(in thousands)
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||
September
30, 2022
|
September
30, 2021
|
September
30, 2022
|
September
30, 2021
|
|||||||||||||
Net (loss) income
|
$
|
(8,992
|
)
|
$
|
11,438
|
$
|
(13,827
|
)
|
$
|
12,464
|
||||||
Goodwill and intangible asset impairment charge
|
7,505
|
3
|
7,505
|
3
|
||||||||||||
Employee retention credit
|
-
|
(2,087
|
)
|
-
|
(7,162
|
)
|
||||||||||
PPP loan and accumulated interest forgiveness
|
-
|
(10,127
|
)
|
-
|
(10,127
|
)
|
||||||||||
Restructuring charges
|
-
|
(10
|
)
|
-
|
798
|
|||||||||||
Stock-based compensation expense
|
491
|
283
|
1,592
|
784
|
||||||||||||
Change in fair value of derivative instruments, net
|
(263
|
)
|
-
|
(377
|
)
|
-
|
||||||||||
VAT write-off
|
-
|
-
|
-
|
450
|
||||||||||||
Amortization of intangible assets related to acquisitions
|
209
|
286
|
700
|
929
|
||||||||||||
Adjusted net loss
|
$
|
(1,050
|
)
|
$
|
(214
|
)
|
$
|
(4,407
|
)
|
$
|
(1,861
|
)
|
||||
Adjusted net loss per common share – diluted
|
$
|
(0.05
|
)
|
$
|
(0.01
|
)
|
$
|
(0.21
|
)
|
$
|
(0.09
|
)
|
||||
Weighted average shares outstanding used to compute adjusted net loss per share - diluted(1)
|
21,288,883
|
20,863,479
|
21,101,942
|
20,714,068
|
Item 3. |
Quantitative and Qualitative Disclosure about Market Risk
|
Item 4. |
Controls and Procedures
|
Item 1. |
Legal Proceedings
|
Item 1A. |
Risk Factors
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3. |
Defaults Upon Senior Securities
|
Item 4. |
Mine Safety Disclosures
|
Item 5. |
Other Information
|
Item 6. |
Exhibits
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002, filed herewith.
|
||
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
||
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
||
101.INS*
|
XBRL Instance Document
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase
|
Date: November 14, 2022
|
|
GSE SYSTEMS, INC.
|
|
/S/ KYLE J. LOUDERMILK
|
|
Kyle J. Loudermilk
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/S/ EMMETT A. PEPE
|
|
Emmett A. Pepe
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|