(Mark One)
|
|||
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
|
||
|
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: (
|
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
|
|
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
Smaller reporting company
|
Emerging growth company
|
PART I
|
Page
|
|
Item 1.
|
3
|
|
Item 1A.
|
15
|
|
Item 1B.
|
26
|
|
Item 1C.
|
26
|
|
Item 2.
|
27
|
|
Item 3.
|
27
|
|
Item 4.
|
27
|
|
PART II
|
||
Item 5.
|
28
|
|
Item 6.
|
28
|
|
Item 7.
|
29
|
|
Item 7A.
|
38
|
|
Item 8.
|
38 |
|
Item 9.
|
74
|
|
Item 9A.
|
74
|
|
Item 9B.
|
75
|
|
Item 9C.
|
75
|
|
PART III
|
||
Item 10.
|
75
|
|
Item 11.
|
76
|
|
Item 12.
|
76
|
|
Item 13.
|
77
|
|
Item 14.
|
77
|
|
PART IV
|
||
Item 15.
|
77
|
|
Item 16.
|
82
|
|
82
|
||
78
|
* |
to be incorporated by reference from the Proxy Statement for the registrant’s 2024 Annual Meeting of Shareholders.
|
• |
changes in the rate of economic growth in the United States and other major international economies;
|
• |
changes in investment by the nuclear and fossil electric utility industry, the chemical and petrochemical industries, or the U.S. military;
|
• |
changes in the financial condition of our customers;
|
• |
changes in the regulatory environment;
|
• |
changes in political climate;
|
• |
changes in project design or schedules;
|
• |
contract cancellations;
|
• |
changes in our estimates of costs to complete projects;
|
• |
changes in trade, monetary and fiscal policies worldwide;
|
• |
currency fluctuations;
|
• |
war and/or terrorist attacks on facilities either owned by our customers or our company, or where equipment or services are or may be provided;
|
• |
catastrophic failure or other incident at facilities either owned by our customers or our company, or where equipment or services are or may be provided;
|
• |
initiation, prosecution, or outcomes of future litigation;
|
• |
protection and validity of our trademarks and other intellectual property rights;
|
• |
increasing competition by foreign and domestic companies;
|
• |
compliance with our debt covenants;
|
• |
recoverability of claims against our customers and others;
|
• |
changes in estimates used in our critical accounting policies; and
|
ITEM 1. |
BUSINESS.
|
• |
maintain regulatory compliance
|
• |
extend the operating lifetime of the existing fleet
|
• |
support capital investment to produce more power from the fleet over time
|
• |
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
|
Electrical and I&C Engineering
|
Project Management
|
Leadership Mentoring
|
|||
Civil and Mechanical Engineering
|
Manufacturing
|
Operator Requalification
|
|||
Operations, Outage & Work Mgmt.
|
Maintenance
|
Design
|
|||
Project Controls
|
QA/QC
|
Construction
|
|||
Procedure Specialists
|
Safety & Inspection
|
Field Service
|
|||
Procedure Writing
|
Operations Specialists
|
Thermal Performance
|
|||
Training Instructors
|
Simulation Specialists
|
Programs & Compliance
|
ACAD Fundamentals
|
Technical Training for Engineers
|
ANSI Fundamentals
|
|||
Electrical/Mechanical/I&C
|
Generic Fundamentals
|
Maintenance & Technical
|
|||
SRO Certification
|
Radiation Worker/Chemistry
|
Power Plant Familiarization
|
|||
Licensed & Non Licensed Operator
|
Licensed Operator Requalification
|
Control Room Operator Qualification
|
|||
Job and Task Analysis
|
Knowledge/Skill Assessment
|
Media/Mode Evaluation
|
|||
Instructor Bootcamp
|
Curriculum Architecture
|
Training Needs Assessment
|
|||
Program Evaluation
|
Existing Program Audit
|
Instructional Technology
|
• |
Retain and strengthen our “Base” revenue through optimization of current capabilities and established client relationships.
|
• |
Integrate our product and service areas to provide more comprehensive or enhanced solutions when internal or external value can be identified.
|
• |
Explore, evaluate, and develop new collaborative service areas, products, and solutions closely aligned with internal core strengths, client goals, and overall industry clean power initiatives.
|
Years ended December 31,
|
||||||||
2023
|
2022
|
|||||||
Nuclear power
|
92
|
%
|
89
|
%
|
||||
Fossil fuel power
|
4
|
%
|
6
|
%
|
||||
Process
|
4
|
%
|
5
|
%
|
||||
Total
|
100
|
%
|
100
|
%
|
ITEM 1A. |
RISK FACTORS.
|
• |
export laws and regulations that could erode our profit margins or restrict the export of some or all of our products;
|
• |
compliance with the U.S. Foreign Corrupt Practices Act and similar non-U.S. regulations;
|
• |
the burden and cost of compliance with foreign laws, treaties and technical standards generally, as well as responding to changes in those requirements;
|
• |
contract award and funding delays;
|
• |
potential restrictions on transfers of funds;
|
• |
potential difficulties in accounts receivable collection;
|
• |
currency fluctuations, including costs and potentially limited availability of viable hedging options;
|
• |
import and export duties and value added or other taxes;
|
• |
transportation and communication delays and interruptions;
|
• |
differences in insurance availability and coverage in some jurisdictions;
|
• |
difficulties involving strategic alliances and managing foreign sales agents or representatives;
|
• |
uncertainties arising from foreign local business practices and cultural considerations; and
|
• |
potential military conflicts and political risks, including particularly the current conflict between Russia and Ukraine
|
• |
potential disruption of our international business due to the worldwide COVID-19 virus outbreak.
|
Years ended December 31,
|
||||||||
2023
|
2022
|
|||||||
Customer A
|
23
|
%
|
9
|
%
|
||||
Customer B
|
17
|
%
|
16
|
%
|
||||
Customer C
|
11
|
%
|
24
|
%
|
||||
Customer D
|
11
|
%
|
9
|
%
|
Years ended December 31,
|
||||||||
2023
|
2022
|
|||||||
Customer E
|
32
|
%
|
22
|
%
|
• |
providing that our Board of Directors fixes the number of members of the board and fills all vacancies on the Board of Directors;
|
• |
providing for the division of our Board of Directors into three classes with staggered terms;
|
• |
limiting who may call special meetings of shareholders;
|
• |
prohibiting shareholder action by written consent, thereby requiring shareholder action to be taken at a meeting of the shareholders;
|
• |
establishing advance notice requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted on by shareholders at shareholder meetings;
|
• |
establishing supermajority vote requirements for certain amendments to our certificate of incorporation and bylaws;
|
• |
limiting the right of shareholders to remove directors; and
|
• |
authorizing the issuance of “blank check” preferred stock, which could be issued by our Board of Directors to increase the number of outstanding shares and thwart a takeover attempt.
|
ITEM 1B. |
UNRESOLVED STAFF COMMENTS.
|
ITEM 1C. |
CYBERSECURITY.
|
ITEM 2. |
PROPERTIES.
|
ITEM 3. |
LEGAL PROCEEDINGS.
|
ITEM 4. |
MINE SAFETY DISCLOSURES.
|
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
ITEM 6. |
RESERVED.
|
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
($ in thousands)
|
Years ended December 31,
|
|||||||||||||||
2023
|
%
|
2022
|
%
|
|||||||||||||
Revenue
|
$
|
45,041
|
100.0
|
%
|
$
|
47,734
|
100.0
|
%
|
||||||||
Cost of revenue
|
33,111
|
73.5
|
%
|
35,824
|
75.0
|
%
|
||||||||||
Gross profit
|
11,930
|
26.5
|
%
|
11,910
|
25.0
|
%
|
||||||||||
Operating expenses
|
||||||||||||||||
Selling, general and administrative
|
16,092
|
35.7
|
%
|
17,028
|
35.7
|
%
|
||||||||||
Research and development
|
572
|
1.3
|
%
|
611
|
1.3
|
%
|
||||||||||
Goodwill and intangible asset impairment charge
|
1,391
|
3.1
|
%
|
7,505
|
15.7
|
%
|
||||||||||
Depreciation
|
185
|
0.4
|
%
|
304
|
0.6
|
%
|
||||||||||
Amortization of definite-lived intangible assets
|
508
|
1.1
|
%
|
868
|
1.8
|
%
|
||||||||||
Total operating expenses
|
18,748
|
41.6
|
%
|
26,316
|
55.1
|
%
|
||||||||||
Operating loss
|
(6,818
|
)
|
(15.1
|
%)
|
(14,406
|
)
|
(30.2
|
%)
|
||||||||
Interest expense
|
(1,932
|
)
|
(4.3
|
%)
|
(1,272
|
)
|
(2.7
|
%)
|
||||||||
Change in fair value of derivative instruments, net
|
850
|
1.9
|
%
|
477
|
1.0
|
%
|
||||||||||
Other (loss) income, net
|
(802
|
)
|
-1.8
|
%
|
(91
|
)
|
(0.2
|
%)
|
||||||||
Loss before taxes
|
(8,702
|
)
|
(19.3
|
%)
|
(15,292
|
)
|
(32.0
|
%)
|
||||||||
Provision for income taxes
|
22
|
0.0
|
%
|
51
|
0.1
|
%
|
||||||||||
Net loss
|
$
|
(8,724
|
)
|
(19.4
|
%)
|
$
|
(15,343
|
)
|
(32.1
|
%)
|
(in thousands)
|
Year ended December 31,
|
|||||||||||||||
2023
|
2022
|
Change
|
||||||||||||||
Revenue:
|
$
|
%
|
||||||||||||||
Engineering
|
$
|
31,790
|
$
|
29,919
|
1,871
|
6.3
|
%
|
|||||||||
Workforce Solutions
|
13,251
|
17,815
|
(4,564
|
)
|
(25.6
|
)%
|
||||||||||
Total revenue
|
$
|
45,041
|
$
|
47,734
|
(2,693
|
)
|
(5.6
|
)%
|
($ in thousands)
|
Years ended December 31,
|
|||||||||||||||
2023
|
%
|
2022
|
%
|
|||||||||||||
Gross profit:
|
||||||||||||||||
Engineering
|
$
|
10,073
|
31.7
|
%
|
$
|
9,557
|
31.9
|
%
|
||||||||
Workforce Solutions
|
1,857
|
14.0
|
%
|
2,353
|
13.2
|
%
|
||||||||||
Consolidated gross profit
|
$
|
11,930
|
26.5
|
%
|
$
|
11,910
|
25.0
|
%
|
($ in thousands)
|
Years ended December 31,
|
|||||||||||||||
2023
|
%
|
2022
|
%
|
|||||||||||||
Selling, general and administrative expenses:
|
||||||||||||||||
Corporate charges
|
$
|
11,529
|
71.6
|
%
|
$
|
12,795
|
75.1
|
%
|
||||||||
Business development
|
3,866
|
24.0
|
%
|
3,256
|
19.1
|
%
|
||||||||||
Facility operation & maintenance (O&M)
|
451
|
2.8
|
%
|
737
|
4.3
|
%
|
||||||||||
Credit loss Expense
|
232
|
1.4
|
%
|
221
|
1.3
|
%
|
||||||||||
Other
|
14
|
0.1
|
%
|
19
|
0.1
|
%
|
||||||||||
Total
|
$
|
16,092
|
100.0
|
%
|
$
|
17,028
|
100.0
|
%
|
Three Months Ended
December 31,
|
Twelve Months Ended
December 31,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
(unaudited)
|
(unaudited)
|
audited
|
audited
|
|||||||||||||
Net (loss) income
|
$
|
(2,253
|
)
|
$
|
(1,516
|
)
|
$
|
(8,724
|
)
|
$
|
(15,343
|
)
|
||||
Interest expense, net
|
449
|
344
|
1,932
|
1,272
|
||||||||||||
Provision for income taxes
|
103
|
159
|
22
|
51
|
||||||||||||
Depreciation and amortization
|
223
|
344
|
1,015
|
1,511
|
||||||||||||
EBITDA
|
(1,478
|
)
|
(669
|
)
|
(5,755
|
)
|
(12,509
|
)
|
||||||||
Provision for legal settlement
|
260
|
-
|
1,010
|
-
|
||||||||||||
Goodwill and intangible asset impairment charge
|
454
|
-
|
1,391
|
7,505
|
||||||||||||
Advisory fees
|
28
|
-
|
288
|
-
|
||||||||||||
Loss on debt conversion payments
|
763
|
-
|
763
|
-
|
||||||||||||
Stock-based compensation expense
|
305
|
362
|
1,158
|
1,954
|
||||||||||||
Change in fair value of derivative instruments, net
|
(430
|
)
|
(100
|
)
|
(850
|
)
|
(477
|
)
|
||||||||
Adjusted EBITDA
|
$
|
(98
|
)
|
$
|
(407
|
)
|
$
|
(1,995
|
)
|
$
|
(3,527
|
)
|
Three Months ended
December 31,
|
Twelve Months ended
December 31,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
(unaudited)
|
(unaudited)
|
audited
|
audited
|
|||||||||||||
Net (loss) income
|
$
|
(2,253
|
)
|
$
|
(1,516
|
)
|
$
|
(8,724
|
)
|
$
|
(15,343
|
)
|
||||
Provision for legal settlement
|
260
|
-
|
1,010
|
-
|
||||||||||||
Goodwill and intangible asset impairment charge
|
454
|
-
|
1,391
|
7,505
|
||||||||||||
Advisory fees
|
28
|
-
|
288
|
-
|
||||||||||||
Loss on debt conversion payments
|
763
|
-
|
763
|
-
|
||||||||||||
Stock-based compensation expense
|
305
|
362
|
1,158
|
1,954
|
||||||||||||
Change in fair value of derivative instruments, net
|
(430
|
)
|
(100
|
)
|
(850
|
)
|
(477
|
)
|
||||||||
Amortization of intangible assets related to acquisitions
|
108
|
168
|
508
|
868
|
||||||||||||
Adjusted net loss
|
$
|
(765
|
)
|
$
|
(1,086
|
)
|
$
|
(4,456
|
)
|
$
|
(5,493
|
)
|
||||
Diluted (loss) earnings per common share
|
$
|
(0.82
|
)
|
$
|
(0.68
|
)
|
$
|
(3.51
|
)
|
$
|
(7.18
|
)
|
||||
Adjusted loss per common share – Diluted
|
$
|
(0.28
|
)
|
$
|
(0.49
|
)
|
$
|
(1.79
|
)
|
$
|
(2.57
|
)
|
||||
Weighted average shares outstanding – Diluted
|
2,744,901
|
2,213,631
|
2,486,550
|
2,136,290
|
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
• |
Obtained an understanding of management’s goodwill impairment assessment process, including management’s assessment of the significant inputs and assumptions
utilized in determining the reporting unit fair value.
|
• |
Evaluated management’s forecasted revenue growth rates and operating margins by comparing actual results to management’s historical forecasts.
|
• |
Assessed sensitivity analyses over management’s significant assumptions including forecasted revenue growth rates and operating margins when assessing the
overall impact on the estimate of fair value compared to the carrying value.
|
• |
Utilizing personnel with specialized knowledge and skills in valuation, we evaluated the significant assumptions in assessing the appropriateness of the fair
value methodology utilized, including:
|
• |
Evaluating the reasonableness of certain assumptions used in the discounted cash flow model including the discount rates used by management by comparing it to a
range of discount rates developed using existing market information, and
|
• |
Evaluating the mathematical accuracy of the calculations included in the fair value methodology.
|
• |
Obtained an understanding of management’s process for applying the cost-to-cost method to SDB contracts, including management’s process for developing and
revising accurate estimated costs to complete on contracts in process.
|
• |
For a sample of contracts, we evaluated inputs and assumptions requiring significant management judgments included within the Company’s estimation of costs to
complete and performed the following:
|
• |
Inspected the underlying contract, related amendments, and change orders, if any, to test the existence of customer arrangements and obtain an understanding of
the contractual requirements and related performance obligation(s).
|
• |
Tested actual costs incurred to date and assessed the relative progress toward satisfying the performance obligation(s) of the contract.
|
• |
Evaluated the estimation of costs to complete including anticipated direct labor, subcontract labor, and other direct cost by:
|
• |
Inquiring of financial and operational personnel of the Company and evaluating factors within the cost to complete estimates that may demonstrate indication of
potential management bias.
|
• |
Inspecting correspondences, if any, between the Company and the customer regarding actual to-date and expected performance.
|
• |
Evaluating the sufficiency of the Company’s assessment of contract performance risks included within the estimated costs to complete.
|
• |
Performing a “look back” analysis by comparing the Company’s historical estimates of costs to complete to actual costs incurred in subsequent documentation to
assess the Company’s ability to develop reliable cost estimates.
|
• |
Obtained account reconciliations of unbilled receivables and billings in excess of revenue earned as of December 31, 2023, evaluated the accuracy and
completeness of the schedules, agreed such reconciliations to the trial balance to determine whether reconciling items were appropriate and isolated and investigated all unbilled receivables with no recent activity.
|
• |
Obtained an understanding of management’s process for developing its projections including testing the completeness and accuracy of the underlying data used in
the cash flow forecast.
|
• |
Evaluated the probability of management’s plans to alleviate the substantial doubt that has been raised.
|
• |
Evaluated management’s growth rate assumptions used in the development of its forecast by assessing historical budget to actual comparisons.
|
• |
Assessed the sensitivity analysis over the projected growth rates and operating margins used in management’s cash flow projections.
|
• |
Evaluated the adequacy of the financial statement disclosure regarding the Company’s liquidity and compared the disclosure to other audit evidence obtained to
determine consistency with or contradictory to the Company’s liquidity disclosure.
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
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 SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Line of credit
|
$
|
|
$
|
|
||||
Current portion of long-term note
|
|
|
||||||
Accounts payable
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Accrued legal settlements
|
||||||||
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 21)
|
|
|
||||||
Shareholders’ equity:
|
||||||||
Preferred stock $
|
|
|
||||||
Common stock $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Accumulated other comprehensive income (loss)
|
|
|
||||||
Treasury stock at cost,
|
(
|
)
|
(
|
)
|
||||
Total shareholders’ equity
|
|
|
||||||
Total liabilities and shareholders’ equity
|
$
|
|
$
|
|
Years ended December 31,
|
||||||||
2023
|
2022
|
|||||||
Revenue
|
$
|
|
$
|
|
||||
Cost of revenue
|
|
|
||||||
Gross profit
|
|
|
||||||
Operating expenses
|
||||||||
Selling, general and administrative
|
|
|
||||||
Research and development
|
|
|
||||||
Goodwill and intangible asset impairment charge
|
|
|
||||||
Depreciation
|
|
|
||||||
Amortization of definite-lived intangible assets
|
|
|
||||||
Total operating expenses
|
|
|
||||||
Operating loss
|
(
|
)
|
(
|
)
|
||||
Other income and expenses, net
|
||||||||
Interest expense
|
(
|
)
|
(
|
)
|
||||
Change in fair value of derivative instruments, net
|
|
|
||||||
Other (loss) income, net
|
(
|
)
|
(
|
)
|
||||
Loss before taxes
|
(
|
)
|
(
|
)
|
||||
Provision for income taxes
|
|
|
||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Net loss per common share - basic
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Diluted loss per common share
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Weighted average shares outstanding used to compute net loss per share - basic
|
|
|
||||||
Weighted average shares outstanding - Diluted
|
|
|
Years ended December 31,
|
||||||||
2023
|
2022
|
|||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Cumulative translation adjustment
|
|
|
||||||
Comprehensive loss
|
$
|
(
|
)
|
$
|
(
|
)
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Accumulated
Other
Comprehensive
|
Treasury Stock
|
||||||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
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, December 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
|
||||||||||||||||||||||||||||||||
Adoption of Current Expected Credit Losses (CECL)
|
( |
) | ( |
) | ||||||||||||||||||||||||||||
Adjusted balance, January 1, 2023 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
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, December 31, 2023
|
( |
) | ( |
) | ( |
) |
Years ended December 31,
|
||||||||
2023
|
2022
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||
Goodwill and intangible asset impairment charge
|
|
|
||||||
Loss on debt settled in shares |
||||||||
Depreciation
|
|
|
||||||
Amortization of intangible assets
|
|
|
||||||
Amortization of capitalized software development costs
|
|
|
||||||
Amortization of debt discount
|
||||||||
Amortization of deferred financing costs |
||||||||
Stock-based compensation expense
|
|
|
||||||
Deferred income taxes |
( |
) | ||||||
Credit loss expense |
||||||||
Gain on derivative instruments, net
|
(
|
)
|
(
|
)
|
||||
Legal settlement
|
||||||||
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 operating activities
|
|
|
||||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(
|
)
|
(
|
)
|
||||
Capitalized software development costs
|
(
|
)
|
(
|
)
|
||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Repayment of line of credit
|
|
(
|
)
|
|||||
Repayment of insurance premium financing
|
(
|
)
|
(
|
)
|
||||
Proceeds from issuance of long-term debt and warrants
|
||||||||
Payments of debt issuance and original discount on issuance of long-term debt and warrants
|
(
|
)
|
(
|
)
|
||||
Principal repayment of convertible note
|
(
|
)
|
(
|
)
|
||||
Tax paid for shares withheld
|
( |
) |
(
|
)
|
||||
Net cash (used in) provided by financing activities
|
(
|
)
|
|
|||||
Effect of exchange rate changes on cash
|
(
|
)
|
(
|
)
|
||||
Net (decrease) increase in cash and cash equivalents
|
(
|
)
|
|
|||||
Cash, cash equivalents and restricted cash at beginning of year
|
|
|
||||||
Cash, cash equivalents and restricted cash at the end of year
|
$
|
|
$
|
|
||||
Cash and cash equivalents
|
$ | $ | ||||||
Restricted cash, current
|
||||||||
Restricted cash included in other long-term assets
|
||||||||
Total cash, cash equivalents and restricted cash
|
$ | $ |
(in thousands, except for per share data)
|
Years ended December 31,
|
|||||||
2023
|
2022
|
|||||||
Numerator:
|
||||||||
Net income (loss) attributed to common shareholders
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Denominator:
|
||||||||
Weighted-average shares outstanding for basic earnings per share
|
|
|
||||||
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share
|
|
|
||||||
Total shares considered for dilution
|
|
|
|
Twelve Months Ended December 31,
|
|||||||
2023
|
2022
|
|||||||
Engineering segment
|
||||||||
System Design and Build - Over time
|
$
|
|
$
|
|
||||
Software
|
|
|
||||||
Point in time
|
|
|
||||||
Over time
|
|
|
||||||
Training and Consulting Services
|
|
|
||||||
Point in time
|
|
|
||||||
Over time
|
|
|
||||||
Workforce Solutions segment
|
||||||||
Training and Consulting Services
|
|
|
||||||
Point in time
|
|
|
||||||
Over time
|
|
|
||||||
Total revenue
|
$
|
|
$
|
|
|
December 31, 2023
|
December 31, 2022
|
||||||
Billings in excess of revenue earned (BIE)
|
$
|
|
$
|
|
||||
Revenue recognized in the period from amounts included in BIE at the beginning of the period
|
$
|
|
$ |
|
(in thousands)
|
As of December 31, 2023
|
|||||||||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Impact of
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, 2022
|
|||||||||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Impact of
Impairment
|
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:
|
||||
2024
|
$
|
|
||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
2028
|
||||
Thereafter
|
|
|||
$
|
|
|
Goodwill
|
Impairment
|
Net
|
|||||||||
Engineering
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Workforce Solutions
|
|
(
|
)
|
|
||||||||
Net book value at December 31, 2023
|
$
|
|
$
|
(
|
)
|
$
|
|
|
Goodwill
|
Impairment
|
Net
|
|||||||||
Engineering
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Workforce Solutions
|
|
(
|
)
|
|
||||||||
Net book value at December 31, 2022
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
December 31,
|
|||||||
2023
|
2022
|
|||||||
Billed receivables
|
$
|
|
$
|
|
||||
Unbilled receivables
|
|
|
||||||
Allowance for credit loss
|
(
|
)
|
(
|
)
|
||||
Total contract receivables, net
|
$
|
|
$
|
|
(in thousands)
|
As of and for the
|
|||||||
Years ended December 31,
|
||||||||
2023
|
2022
|
|||||||
Beginning balance
|
$
|
|
$
|
|
||||
Adoption of ASC326 Current Expected Credit Losses (CECL)
|
||||||||
Adjusted beginning balance |
||||||||
Current period provision for expected credit loss
|
|
|
||||||
Write-offs charged against the allowance, net of recoveries
|
(
|
)
|
(
|
)
|
||||
Currency adjustment | ( |
) | ( |
) | ||||
Ending balance
|
$
|
|
$
|
|
(in thousands)
|
December 31,
|
|||||||
2023
|
2022
|
|||||||
Income tax receivable
|
$
|
|
$
|
|
||||
Prepaid expenses
|
|
|
||||||
ERC receivable |
||||||||
Other current assets
|
|
|
||||||
Total
|
$
|
|
$
|
|
(in thousands)
|
December 31,
|
|||||||
2023
|
2022
|
|||||||
Computer and equipment
|
$
|
|
$
|
|
||||
Software
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Furniture and fixtures
|
|
|
||||||
|
|
|||||||
Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
Equipment, software and leasehold improvements, net
|
$
|
|
$
|
|
(in thousands)
|
As of and for the
|
|||||||
years ended December 31,
|
||||||||
2023
|
2022
|
|||||||
Beginning balance
|
$
|
|
$
|
|
||||
Current year provision
|
(
|
)
|
(
|
)
|
||||
Current year claims
|
(
|
)
|
(
|
)
|
||||
Currency adjustment
|
(
|
)
|
(
|
)
|
||||
Ending balance
|
$
|
|
$
|
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Current
|
$
|
|
$
|
|
||||
Non-current
|
|
|
||||||
Total Warranty
|
$
|
|
$
|
|
Amended 2022
Convertible Note
|
The “2022
Warrants”
|
2023
Convertible Note
|
The “2023
Warrants”
|
|||||||||||||
Exercise Price
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Common Stock Price
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Risk Free Rate
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
Volatility
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
Term (in years)
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
|
Significant
Other Observable
Inputs
|
Significant
Unobservable
Inputs
|
||||||||||||||
(in thousands)
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
||||||||||||
Derivative liability
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Warrant liability
|
|
|
|
|
||||||||||||
Cash settled performance-vesting
restricted stock units
|
|
|
|
|
||||||||||||
Balance at December 31, 2023
|
$
|
|
$
|
|
$
|
|
$
|
|
Quoted Prices in
Active Markets
for Identical
Assets
|
Significant
Other Observable
Inputs
|
Significant
Unobservable
Inputs
|
||||||||||||||
(in thousands)
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
Level 3 Total
|
||||||||||||
Derivative liability
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Warrant liability
|
|
|
|
|
||||||||||||
Cash settled performance-vesting restricted stock units
|
|
|
|
|
||||||||||||
Balance at December 31, 2022 |
$
|
|
$
|
|
$
|
|
$
|
|
(in thousands)
|
Embedded
Redemption
Features
|
Warrant
|
Cash Settled PRSUs
|
Level 3 Total
|
||||||||||||
Balance at December 31, 2022
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
FV of derivatives with new convertible note issuance
|
||||||||||||||||
Change in FV included in gain on
|
|
(
|
)
|
|
(
|
)
|
||||||||||
Stock compensation less payments made
|
|
|
(
|
)
|
(
|
)
|
||||||||||
Balance at December 31, 2023
|
$
|
|
$
|
|
$
|
|
$
|
|
(in thousands)
|
2022
Convertible
Note
|
2023
Convertible
Note
|
Total
Convertible
Notes
|
|||||||||
Amount
|
Amount
|
Amount
|
||||||||||
2022 Convertible Note issued
|
$
|
|
$
|
|
$
|
|
||||||
Debt discount
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Issuance cost:
|
||||||||||||
Commitment fee
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Balance of investor’s counsel fees
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Net proceeds of Convertible Note
|
$
|
|
$
|
|
$
|
|
||||||
Additional OID costs not in original funds flow
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Fair value of Warrant Liabilities on issuance
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Fair value of Conversion Features on issuance
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Allocated OID costs to Convertible Note
|
|
|
|
|||||||||
Allocation of Discounts on Troubled Debt Restructuring
|
(
|
)
|
|
|
||||||||
Interest expense accrued on Convertible Note as of December 31, 2023
|
|
|
|
|||||||||
Principal and interest payments as of December 31, 2023
|
(
|
)
|
|
(
|
)
|
|||||||
Balance of 2022 Convertible Note as of December 31, 2023
|
$
|
|
$
|
|
$
|
|
(in thousands)
|
||||
Years ended December 31:
|
||||
2024
|
$
|
|
||
2025
|
|
|||
Thereafter
|
|
|||
$
|
|
Principal
|
Debt Discounts
|
Net
|
||||||||||
Current portion of Long-Term Debt
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Long-Term Debt less current portion
|
|
(
|
)
|
|
||||||||
Balance of Convertible Notes as of December 31, 2023
|
$
|
|
$
|
(
|
)
|
$
|
|
Principal
|
Debt Discounts
|
Net
|
||||||||||
Current portion of Long-Term Debt
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Long-Term Debt less current portion
|
|
(
|
)
|
|
||||||||
Balance of Convertible Notes as of December 31, 2022
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
Years ended December 31,
|
|||||||
2023
|
2022
|
|||||||
Domestic
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Foreign
|
(
|
)
|
(
|
)
|
||||
Total
|
$
|
(
|
)
|
$
|
(
|
)
|
(in thousands)
|
Years ended December 31,
|
|||||||
2023
|
2022
|
|||||||
Current:
|
||||||||
Federal
|
$
|
|
$
|
|
||||
State
|
|
|
||||||
Foreign
|
(
|
)
|
|
|||||
Subtotal
|
|
|
||||||
Deferred:
|
||||||||
Federal
|
|
(
|
)
|
|||||
State
|
|
(
|
)
|
|||||
Foreign
|
|
|
||||||
Subtotal
|
|
(
|
)
|
|||||
Total
|
$
|
|
$
|
|
Effective Tax Rate percentage (%)
|
||||||||
Years ended December 31,
|
||||||||
2023
|
2022
|
|||||||
Statutory federal income tax rate
|
|
%
|
|
%
|
||||
State income taxes, net of federal tax benefit
|
|
%
|
|
%
|
||||
Effect of foreign operations
|
(
|
)%
|
(
|
)%
|
||||
Change in valuation allowance
|
(
|
)%
|
(
|
)%
|
||||
Stock-based compensation
|
(
|
)%
|
(
|
)%
|
||||
Convertible Note transactions | ( |
)% | ( |
)% | ||||
Uncertain tax positions
|
|
%
|
(
|
)%
|
||||
Other
|
(
|
)%
|
|
%
|
||||
Effective tax rate
|
(
|
)%
|
(
|
)%
|
(in thousands)
|
As of December 31,
|
|||||||
2023
|
2022
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carryforwards
|
$
|
|
$
|
|
||||
Accruals
|
|
|
||||||
Reserves
|
|
|
||||||
Stock-based compensation expense
|
|
|
||||||
Intangible assets
|
|
|
||||||
Goodwill
|
|
|
||||||
Operating lease liability
|
|
|
||||||
Fixed assets
|
||||||||
Sec. 174 R&D costs | ||||||||
Other
|
|
|
||||||
Total deferred tax asset
|
|
|
||||||
Valuation allowance
|
(
|
)
|
(
|
)
|
||||
Total deferred tax asset less valuation allowance
|
|
|
||||||
Deferred tax liabilities:
|
||||||||
Software development costs
|
(
|
)
|
(
|
)
|
||||
Indefinite-lived intangibles
|
(
|
)
|
(
|
)
|
||||
Operating lease - right of use asset
|
(
|
)
|
(
|
)
|
||||
Other
|
|
|
||||||
Total deferred tax liability
|
(
|
)
|
(
|
)
|
||||
Net deferred tax liability
|
$
|
(
|
)
|
$
|
(
|
)
|
China
|
South Korea
|
UK
|
||||||||||||||||||||||||||
(in thousands)
|
Tax
|
Interest and Penalties
|
Tax
|
Interest and Penalties
|
Tax
|
Interest and Penalties
|
Total
|
|||||||||||||||||||||
Balance, January 1, 2022
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||
Increases
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Decreases
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||
Balance, December 31, 2022
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||
Increases
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Decreases
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||
Balance, December 31, 2023
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Number of Shares
|
Weighted Average
Fair Value
|
|||||||
Nonvested RSUs at January 1, 2022
|
|
$
|
|
|||||
RSUs granted
|
|
|
||||||
RSUs forfeited
|
(
|
)
|
|
|||||
RSUs vested
|
(
|
)
|
|
|||||
Nonvested RSUs at December 31, 2022
|
|
$
|
|
|||||
Nonvested RSUs at January 1, 2023
|
|
$
|
|
|||||
RSUs granted
|
|
|
||||||
RSUs forfeited
|
(
|
)
|
|
|||||
RSUs vested
|
(
|
)
|
|
|||||
Nonvested RSUs at December 31, 2023
|
|
$
|
|
Operating Leases
|
Classification
|
December 31, 2023
|
December 31, 2022
|
|||||||
Leased Assets
|
|
|||||||||
Operating lease - right of use assets
|
|
$
|
|
$ |
|
|||||
|
|
|||||||||
Lease Liabilities
|
|
|||||||||
Operating lease liabilities - Current
|
|
|
|
|||||||
Operating lease liabilities
|
|
|||||||||
|
|
$ |
$ |
Lease Cost
|
Classification
|
Twelve months
ended, December
31, 2023
|
Twelve months
ended, December
31, 2022
|
|||||||
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
|
||||
2024
|
$
|
|
||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
2028
|
||||
Thereafter
|
|
|||
Total
|
$
|
|
||
Less: Interest
|
|
|||
Present value of lease payments
|
$
|
|
Lease Term and Discount Rate
|
Twelve months ended
December 31, 2023
|
|||
Weighted-average remaining lease term (years)
|
||||
Operating leases
|
|
|||
Weighted-average discount rate
|
||||
Operating leases
|
|
%
|
Twelve months ended December 31,
|
||||||||
Cash paid for amounts included in measurement of liabilities
|
2023
|
2022
|
||||||
Cash paid for amounts included in measurement of liabilities
|
$
|
|
$
|
|
(in thousands)
|
Years ended December 31,
|
|||||||
2023
|
2022
|
|||||||
Revenue:
|
||||||||
Engineering
|
$
|
|
$
|
|
||||
Workforce Solutions
|
|
|
||||||
Total revenue
|
|
|
||||||
Gross profit |
||||||||
Engineering | ||||||||
Workforce Solutions
|
||||||||
Total gross profit
|
||||||||
Operating loss
|
||||||||
Engineering
|
(
|
)
|
(
|
)
|
||||
Workforce Solutions
|
(
|
)
|
(
|
)
|
||||
Operating loss
|
(
|
)
|
(
|
)
|
||||
Interest expense
|
(
|
)
|
(
|
)
|
||||
Change in fair value of derivative instruments, net
|
|
|
||||||
Other (loss) income, net
|
(
|
)
|
(
|
)
|
||||
Loss before taxes
|
$
|
(
|
)
|
$
|
(
|
)
|
(in thousands)
|
December 31,
|
|||||||
2023
|
2022
|
|||||||
Engineering
|
$
|
|
$
|
|
||||
Workforce Solutions
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
(in thousands)
|
Year ended December 31, 2023
|
|||||||||||
United States
|
Asia
|
Consolidated
|
||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
||||||
Operating loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
Net assets, at December 31
|
$
|
|
$
|
|
$
|
|
(in thousands)
|
Year ended December 31, 2022
|
|||||||||||
United States
|
Asia
|
Consolidated
|
||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
||||||
Operating loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
Net assets, at December 31
|
$
|
|
$
|
|
$
|
|
(in thousands)
|
Year ended December 31,
|
|||||||
2023
|
2022
|
|||||||
Cash paid for interest and income taxes:
|
||||||||
Interest
|
$
|
|
$
|
|
||||
Income taxes
|
$
|
|
$
|
|
||||
Non-cash financing activities:
|
||||||||
Repayment of convertible note in shares
|
$ | $ | ||||||
Establishment of new right-of-use assets
|
||||||||
Establishment of new operating lease liability
|
( |
) | ( |
) | ||||
Discount on issuance of convertible note
|
$
|
|
$
|
|
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|
ITEM 9A. |
CONTROLS AND PROCEDURES.
|
ITEM 9B. |
OTHER INFORMATION.
|
ITEM 9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION.
|
ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
ITEM 11. |
EXECUTIVE COMPENSATION.
|
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.
|
Plan Category
|
1
|
Number of
Securities to
be Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
(a)
|
Weighted
Average Exercise
Price of
Outstanding
Options, Warrants
and Rights
(b)
|
Number of
Securities
Remaining
Available for Future
Issuance Under
Equity
Compensation Plans
(Excluding
Securities
Reflected in
Column (a))
(c)
|
||||||||||||||
Equity compensation plans approved by security holders
|
Options
|
-
|
$
|
-
|
||||||||||||||
1
|
RSUs
|
174,837
|
7.29
|
|||||||||||||||
174,837
|
$
|
7.29
|
-
|
|||||||||||||||
Equity compensation plans not approved by security holders
|
-
|
$
|
-
|
-
|
||||||||||||||
Total
|
174,837
|
$
|
7.29
|
-
|
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
|
ITEM 14. |
PRINCIPAL ACCOUNTING FEES AND SERVICES.
|
ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|
GSE Systems, Inc. and Subsidiaries
|
|
Report of Independent Registered Public Accounting Firms (PCAOB ID )
|
|
Consolidated Balance Sheets as of December 31, 2023 and 2022
|
|
Consolidated Statements of Operations for the years ended December 31, 2023 and 2022
|
|
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023 and 2022
|
|
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2023 and 2022
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022
|
|
Notes to Consolidated Financial Statements
|
Exhibit
|
Description of Exhibits
|
2.
|
Plan of acquisition, reorganization, arrangement, liquidation, or succession
|
Membership Interests Purchase Agreement, dated as of November 14, 2014, by and between Dale Jennings, Paul Abbott, Shawn McKeever and Mickey Ellis and GSE Performance Solutions, Inc.
Incorporated herein by reference to Exhibit 2.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on November 17, 2014.
|
|
Amendment to Membership Interests Purchase Agreement, dated as of May 13, 2015. Incorporated herein by reference to Exhibit 10.2 of GSE Systems, Inc. Form 10-Q filed with the Securities and
Exchange Commission on May 14, 2015.
|
|
Stock Purchase Agreement, dated as of September 20, 2017, by and among GSE Systems, Inc., through its wholly owned subsidiary GSE Performance Solutions, Inc., Richard and Cynthia Linton (and
certain trusts owned thereby) and Absolute Consulting, Inc. Incorporated herein by reference to Exhibit 2.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on September 20, 2017.
|
|
Membership Interest Purchase Agreement, dated as of May 11, 2018, between True North Consulting LLC, Donald R. Horn, Jenny C. Horn, GSE Performance Solutions, Inc., and Donald R. Horn in his
capacity as Seller Representative. Incorporated herein by reference to Exhibit 2.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on May 14, 2018.
|
|
Membership Interest Purchase Agreement, dated as of February 15, 2019, between DP Engineering Co. Ltd., Steven L. Pellerin, Christopher A. Davenport, GSE Performance Solutions, Inc., and Steven
L. Pellerin in his capacity as Seller Representative. Incorporated herein by reference to Exhibit 2.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on February 19, 2019.
|
|
3.
|
Certificate of Incorporation and Bylaws
|
Restatement of Certificate of Incorporation dated November 14, 2016. Incorporated herein by reference to Exhibit 3.1 of GSE Systems, Inc. Form 10-Q filed with the Securities and Exchange
Commission on November 14, 2016.
|
|
Amendment to the Certificate of Incorporation of GSE Systems, Inc. Incorporated herein by reference to Exhibit 3.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission
on June 15, 2018.
|
|
Third Amended and Restated Bylaws of GSE Systems, Inc. Incorporated herein by reference to Exhibit 3.2 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on
September 16, 2016.
|
|
First Amendment to the Third Amended and Restated Bylaws of GSE Systems, Inc. Incorporated herein by reference to Exhibit 3.2 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange
Commission on June 15, 2018.
|
|
3.5 |
Certificate of Amendment to the Restated Certificate of Incorporation of GSE Systems, Inc. Incorporated herein by reference to Exhibit 3.1 of GSE
Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on October 26, 2023.
|
10.
|
Material Contracts
|
Office Lease Agreement between 1332 Londontown, LLC and GSE Systems, Inc. (dated as of February 27, 2008). Incorporated herein by reference to Exhibit 10.1 of GSE Systems, Inc. Form 8-K filed
with the Securities and Exchange Commission on March 11, 2008.
|
|
Amendment of Lease to Office Lease Agreement, dated May 28, 2008. Incorporated herein by reference to Exhibit 10.20 of GSE Systems, Inc. Form 10-K filed with the Securities and Exchange
Commission on March 19, 2015.
|
|
Second Amendment of Lease to Office Lease Agreement, dated July 22, 2010. Incorporated herein by reference to Exhibit 10.21 of GSE Systems, Inc. Form 10-K filed with the Securities and Exchange
Commission on March 19, 2015.
|
|
Third Amendment of Lease to Office Lease Agreement, dated May 15, 2012. Incorporated herein by reference to Exhibit 10.22 of GSE Systems, Inc. Form 10-K filed with the Securities and Exchange
Commission on March 19, 2015.
|
Fourth Amendment of Lease to Office Lease Agreement, dated April 15, 2014. Incorporated herein by reference to Exhibit 10.1 of GSE Systems, Inc. Form 10-Q filed with the Securities and Exchange
Commission on May 15, 2014.
|
|
GSE Systems, Inc. 1995 Long-Term Incentive Plan, amended and restated, dated as of March 6, 2014. Incorporated herein by reference to Exhibit A of GSE Systems, Inc. Form DEF 14A filed with the
Securities and Exchange Commission on April 29, 2014.*
|
|
Form of Option Agreement Under the GSE Systems, Inc. 1995 Long-Term Incentive Plan. Incorporated herein by reference to GSE Systems, Inc. Form 10-K filed with the Securities and Exchange
Commission on March 31, 1997. *
|
|
Form of Restricted Share Unit Agreement pursuant to the GSE Systems, Inc. 1995 Long-Term Incentive Plan, as amended and restated, dated as of April 22, 2016. Incorporated herein by reference to
Exhibit 10.2 of GSE Systems, Inc. Form 10-Q filed with the Securities and Exchange Commission on November 14, 2016.*
|
|
Form of Amendment to Restricted Share Unit Agreement, dated July 1, 2016. Incorporated herein by reference to Exhibit 99.8 of GSE Systems, Inc. Form 8-K filed with the
Securities and Exchange Commission on July 1, 2016. *
|
|
Employment Agreement, dated July 1, 2016, between GSE Systems, Inc. and Emmett A. Pepe. Incorporated herein by reference to Exhibit 99.2 of GSE Systems, Inc. Form 8-K filed
with the Securities and Exchange Commission on July 5, 2016. *
|
|
Amendment to Employment Agreement between Emmett Pepe and GSE Systems, Inc. dated as of June 12, 2017. Incorporated herein by reference to Exhibit 99.4 of GSE Systems, Inc. Form 8-K filed with
the Securities and Exchange Commission on June 16, 2017.*
|
|
Amendment No. 2 to Employment Agreement between GSE Systems, Inc. and Emmett Pepe, dated as of January 11, 2019. Incorporated herein by reference to Exhibit 99.3 of GSE Systems, Inc. Form 8-K
filed with the Securities and Exchange Commission on January 11, 2019.*
|
|
Employment Agreement between Bahram Meyssami and GSE Systems, Inc. dated as of December 1, 2015. Incorporated herein by reference to Exhibit 10.1 of GSE Systems, Inc. Form 10-Q filed with the
Securities and Exchange Commission on May 15, 2017.*
|
|
Amendment to Employment Agreement between Bahram Meyssami and GSE Systems, Inc. dated as of June 12, 2017. Incorporated herein by reference to Exhibit 99.3 of GSE Systems, Inc. Form 8-K filed
with the Securities and Exchange Commission on June 16, 2017.*
|
|
Employment Agreement between Kyle J. Loudermilk and GSE Systems, Inc., dated as of July 1, 2015. Incorporated herein by reference to Exhibit 10.1 of GSE Systems, Inc. Form 8-K filed with the
Securities and Exchange Commission on July 31, 2015. *
|
|
Amendment to Employment Agreement between Kyle J. Loudermilk and GSE Systems, Inc., dated as of June 12, 2017. Incorporated herein by reference to Exhibit 99.1 of GSE Systems, Inc. Form 8-K
filed with the Securities and Exchange Commission on July 1, 2016.*
|
|
Amendment No. 2 to Employment Agreement between Kyle Loudermilk and GSE Systems, Inc. dated as of June 12, 2017. Incorporated herein by reference to Exhibit 99.1 of GSE Systems, Inc. Form 8-K
filed with the Securities and Exchange Commission on June 16, 2017.*
|
|
Amendment No. 3 to Employment Agreement, dated January 11, 2019, between GSE Systems, Inc. and Kyle J. Loudermilk. Incorporated herein by reference to Exhibit 99.1 of GSE Systems, Inc. Form 8-K
filed with the Securities and Exchange Commission on January 11, 2019.*
|
|
Restricted Share Unit Agreement between Kyle J. Loudermilk and GSE Systems, Inc., dated as of July 1, 2015. Incorporated herein by reference to Exhibit 10.2 of GSE Systems, Inc. Form 8-K filed
with the Securities and Exchange Commission on July 31, 2015.*
|
Amendment to Restricted Share Unit Agreement between Kyle J. Loudermilk and GSE Systems, Inc., dated as of July 1, 2016. Incorporated herein by reference to Exhibit 99.2 of GSE Systems, Inc.
Form 8-K filed with the Securities and Exchange Commission on July 1, 2016.*
|
|
Restricted Share Unit Agreement (Cash Award) between Kyle J. Loudermilk and GSE Systems, Inc., dated as of July 1, 2016. Incorporated herein by reference to Exhibit 99.3 of GSE Systems, Inc.
Form 8-K filed with the Securities and Exchange Commission on July 1, 2016.*
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Restricted Share Unit Agreement (Common Stock Award) between Kyle J. Loudermilk and GSE Systems, Inc., dated as of July 1, 2016. Incorporated herein by reference to Exhibit 99.4 of GSE Systems,
Inc. Form 8-K filed with the Securities and Exchange Commission on July 1, 2016.*
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Restricted Share Unit Agreement between Emmett A. Pepe and GSE Systems, Inc., dated as of July 1, 2016. Incorporated herein by reference to Exhibit 99.3 of GSE Systems, Inc. Form 8-K filed with
the Securities and Exchange Commission on July 5, 2016.*
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Restricted Share Unit Agreement between Bahram Meyssami and GSE Systems, Inc. dated as of December 1, 2015. Incorporated herein by reference to Exhibit 10.2 of GSE Systems, Inc. Form 10-Q filed
with the Securities and Exchange Commission on May 15, 2017.*
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Amendment to Restricted Share Unit Agreement between Bahram Meyssami and GSE Systems, Inc. dated as of July 1, 2016. Incorporated herein by reference to Exhibit 10.3 of GSE Systems, Inc. Form
10-Q filed with the Securities and Exchange Commission on May 15, 2017.*
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Credit and Security Agreement, by and between Citizens Bank, National Association, GSE Systems, Inc. and GSE Performance Solutions, Inc., dated December 29, 2016. Incorporated herein by
reference to Exhibit 99.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on January 4, 2017.
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Amended and Restated Credit and Security Agreement, dated as of May 11, 2018, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions,
Inc., as Borrower. Incorporated herein by reference to Exhibit 99.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on May 14, 2018.
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Amendment and Reaffirmation Agreement, dated February 22, 2017, and effective as of December 29, 2016. Incorporated herein by reference to Exhibit 10.36 of GSE Systems, Inc. Form 10-K filed with
the Securities and Exchange Commission on March 28, 2017.
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Second Amendment and Reaffirmation Agreement dated as of May 25, 2018. Incorporated herein by reference to Exhibit 10.35 of Form 10-K filed with the Securities and Exchange Commission on June
11, 2020.
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Third Amendment and Reaffirmation Agreement dated as of February 15, 2019, by and among GSE Systems, Inc. and GSE Performance Solutions, Inc., as Borrowers, GSE True North Consulting, LLC,
Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering Ltd. Co., as Guarantors, and Citizens Bank, National Association, as Bank. Incorporated herein by reference to Exhibit 99.1 of GSE Systems, Inc. Form 8-K filed with the Securities
and Exchange Commission on February 19, 2019.
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Form of Indemnification Agreement. Incorporated herein by reference to Exhibit 10.38 of Form 10-K filed with the Securities and Exchange Commission on June 11, 2020.
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Fourth Amendment and Reaffirmation Agreement dated as of March 20, 2019, by and among GSE Systems, Inc., and GSE Performance Solutions, Inc., as Borrowers, GSE True North Consulting, LLC, Hyperspring, LLC,
Absolute Consulting, Inc., and DP Engineering LLC, as Guarantors, and Citizens Bank, National Association, as Bank. Incorporated herein by reference to Exhibit 10.39 of Form 10-K filed with the Securities and
Exchange Commission on June 11, 2020.
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Fifth Amendment and Reaffirmation Agreement, dated as of June 28, 2019, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions, Inc. as Borrower, GSE True
North Consulting, LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering, LLC as Guarantor. Incorporated herein by reference to Exhibit 99.1 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on
July 1, 2019.
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Settlement and Release Agreement, dated as of December 30, 2019, by GSE Performance Solutions, Inc., GSE Systems, Inc. and their subsidiaries and affiliate, on the one hand, and Christopher A. Davenport and
Steven L. Pellerin, on the other hand, incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 6, 2020.
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Sixth Amendment and Reaffirmation Agreement, dated as of December 31, 2019, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions, Inc. as Borrower, GSE
True North Consulting, LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering, LLC as Guarantor. Incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Securities and Exchange Commission
on January 8, 2020.
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Seventh Amendment and Reaffirmation Agreement, dated as of March 31, 2020, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions, Inc. as Borrower, GSE
True North Consulting, LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering, LLC as Guarantor. Incorporated herein by reference to Exhibit 99.1 of our Current Report on Form 8-K filed with the Securities and Exchange Commission
on April 17, 2020.
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Collateral assignment of Rights Under Escrow Agreement dated March 31, 2020, is made by GSE Performance Solutions Inc., in favor of Citizens Bank, National Association. Incorporated herein by
reference to Exhibit 10.45 of Form 10-K filed with the Securities and Exchange Commission on June 11, 2020.
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Eighth Amendment and Reaffirmation Agreement, dated as of June 29, 2020, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions, Inc. as
Borrower, GSE True North Consulting, LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering, LLC as Guarantor. Incorporated herein by reference to Exhibit 10.1 of Form 10-Q filed with the Securities and Exchange Commission on
November 16, 2020.
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Ninth Amendment and Reaffirmation Agreement, dated as of March 29, 2021, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions, Inc. as
Borrower, GSE True North Consulting, LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering, LLC as Guarantor. Incorporated herein by reference to Exhibit 99.1 of our Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 2, 2021.
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Paycheck Protection Note, by and between GSE Systems, Inc. and Citizens Bank, N.A., dated April 23, 2020,. Incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K
filed with the Securities and Exchange Commission on April 30, 2020.
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Tenth Amendment and Reaffirmation Agreement, dated as of November 12, 2021. Incorporated herein by reference to Exhibit 10.41 of Form 10-K filed with the Securities and Exchange Commission on
March 31, 2022.
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Securities Purchase Agreement, dated as of February 23, 2022, by and between GSE Systems, Inc. and Lind Global Fund II LP, Incorporated herein by reference to Exhibit 10.1 of our Current Report
on Form 8-K filed with the Securities and Exchange Commission on February 28, 2022.
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Senior Convertible Promissory Note due February 23, 2024 made by GSE Systems, Inc. in favor of Lind Global Fund II LP, dated February 23, 2022. Incorporated herein by reference to Exhibit 10.2
of our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 28, 2022.
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Common Stock Purchase Warrant issued by GSE Systems, Inc. to Lind Global Fund II LP. Incorporated herein by reference to Exhibit 10.3 of our Current Report on Form 8-K filed with the Securities
and Exchange Commission on February 28, 2022.
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First Amendment, dated as of March 9, 2022, to Securities Purchase Agreement, dated February 23, 2022 by and between GSE Systems, Inc. and Lind Global Fund II LP. Incorporated herein by
reference to Exhibit 10.45 of Form 10-K filed with the Securities and Exchange Commission on March 31, 2022.
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10.46 |
Securities Purchase Agreement, dated as of June 23, 2023, by and between GSE Systems, Inc. and Lind Global Fund II LP, Incorporated herein
by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 26, 2023.
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10.47 |
Senior Convertible Promissory Note, dated June 23, 2023, made by GSE Systems, Inc. in favor of Lind Global Fund II LP. Incorporated herein
by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 26, 2023.
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10.48 |
Amended and Restated Convertible Promissory Note, dated June 23, 2023, made by GSE Systems, Inc. in favor of Lind Global Fund II LP.
Incorporated herein by reference to Exhibit 10.3 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 26, 2023.
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Common Stock Purchase Warrant issued by GSE Systems, Inc. to Lind Global Fund II LP, dated June 23, 2023. Incorporated herein by reference
to Exhibit 10.4 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 26, 2023.
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10.50 |
First Amendment to Senior Convertible Promissory Note, by and between GSE Systems, Inc. and Lind Global Fund II LP, dated October 6, 2023.
Incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 6, 2023.
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10.51 |
First Amendment to Amended and Restated Senior Convertible Promissory Note, by and between GSE Systems, Inc. and Lind Global Fund II LP,
dated October 6, 2023. Incorporated herein by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 6, 2023.
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10.52 |
Second Amendment to Senior Convertible Promissory Note, by and between GSE Systems, Inc. and Lind Global Fund II LP, dated February 12,
2024. Incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 13, 2024.
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10.53 |
Second Amendment to Amended and Restated Senior Convertible Promissory Note, by and between GSE Systems, Inc. and Lind Global Fund II LP,
dated February 12, 2024. Incorporated herein by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 13, 2024.
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10.54 |
Letter Agreement between GSE Systems, Inc. and Kyle J. Loudermilk, dated July 28, 2023. Incorporated herein by reference to Exhibit 10.1 of
Form 8-K filed with the Securities and Exchange Commission on July 28, 2023.
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14
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Code of Ethics
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Code of Ethics for the Principal Executive Officer and Senior Financial Officers. Previously filed in connection with the GSE Systems, Inc. Form 10-K filed with the Securities and Exchange
Commission on March 31, 2006 and incorporated herein by reference.
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21
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Subsidiaries.
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List of Subsidiaries of Registrant at December 31, 2020, filed herewith.
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23
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Consent of Independent Registered Public Accounting Firm
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Consent of FORVIS LLP, filed herewith.
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24
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Power of Attorney
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Power of Attorney for Directors’ and Officers’ Signatures on SEC Form 10-K, filed herewith.
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31
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Certifications
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Certification of Chief Executive Officer of the Company pursuant to Securities and Exchange Act Rule 13d-14(a)/15(d-14(a), as adopted pursuant to Section 302 and 404 of the Sarbanes-Oxley Act of
2002, filed herewith.
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Certification of Chief Financial Officer of the Company pursuant to Securities and Exchange Act Rule 13d-14(a)/15(d-14(a), as adopted pursuant to Section 302 and 404 of the Sarbanes-Oxley Act of
2002, filed herewith.
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32
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Section 1350 Certifications
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Certification of Chief Executive Officer and Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, file
herewith.
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97 |
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97.1 |
GSE Systems, Inc. Amended and Restated Clawback Policy, filed herewith. |
* Management contracts or compensatory plans required to be filed as exhibits pursuant to Item 15(b) of this report.
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ITEM 16. |
FORM 10-K SUMMARY.
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GSE Systems, Inc.
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|||
By:
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/ s / Kyle J. Loudermilk
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Chief Executive Officer
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Date: April 2, 2024
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/s / KYLE J. LOUDERMILK
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Kyle J. Loudermilk, Chief Executive Officer
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(Principal Executive Officer)
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Date: April 2, 2024
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/ s / EMMETT A. PEPE
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Emmett A. Pepe, Chief Financial Officer
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(Principal Financial and Accounting Officer)
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Date: April 2, 2024
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(Kathryn O’Connor Gardner, Chairman of the Board)
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By:
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/ s / EMMETT A. PEPE
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(William Corey, Chairman of the Audit Committee)
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Emmett A. Pepe
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(Thomas J. Dougherty, Director)
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Attorney-in-Fact
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(Suresh Sundaram, Director)
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(Kyle Loudermilk, Director)
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