SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2024

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

13. SUBSEQUENT EVENTS

On August 8, 2024, GSE Systems, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Nuclear Engineering Holdings LLC, a Delaware limited liability company (“Parent”), and Gamma Nuclear Merger Sub LLC, a Delaware limited liability company and direct, wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, Merger Sub will merge with and into the Company with the Company continuing as a wholly owned subsidiary of Parent (the “Merger”). The Company’s board of directors (the “Board”), by unanimous vote, determined that it is advisable and in the best interests of the Company and its stockholders for the Company to enter into the Merger Agreement and recommended that the Company’s stockholders adopt the Merger Agreement and approve the Merger (see Form 8-K filed by the Company on August 8, 2024). Consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including adoption of the Merger Agreement by the Company’s stockholders and the absence of any statute, rule, regulation, order, or other legal or regulatory restraint preventing, prohibiting or enjoining the consummation of the Merger. Merger transactions may be subject to shareholder claims and merger objection lawsuits. We are not aware of any claims or a party to any legal proceedings related to this transaction as of August 14, 2024.

Pursuant to the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of the Company’s common stock, par value $0.01 per share (the “Company Common Stock”) (other than shares owned by the Company, Parent or Merger Sub or any direct or indirect wholly owned subsidiary of Parent or Merger Sub or by stockholders of the Company who have neither voted in favor of the Merger nor consented to the Merger in writing and who have properly and validly exercised their statutory rights of appraisal in respect of such shares of Company Common Stock in accordance with Section 262 of the General Corporation Law of the State of Delaware) will be cancelled and extinguished and automatically converted into the right to receive cash in an amount equal to $4.10 per share.

On August 7, 2024, the Company and Parent entered into that certain Senior Secured Promissory Note in the principal amount of $1,398,447.50 (the “Parent Note”). Pursuant to the terms of the Parent Note, interest accrues at a rate per annum equal to 12.50%. Interest payments under the Parent Note are due and payable on the last business day of each calendar month and on the Maturity Date (as defined below). Interest shall be paid, at the option of the Company, (x) in kind by capitalizing such interest and adding the unpaid amount thereof on each such payment date or (y) in cash. Upon an event of default, interest shall accrue at 14.50%. The Company shall pay the outstanding principal amount on the earlier to occur of (x) August 6, 2025 and (y) the occurrence of a Change of Control (the “Maturity Date”). The Company used the proceeds of the Parent Note to pay in full all outstanding indebtedness owed to Lind Global as further described in Note 8 - Debt. The Parent Note also included amounts owed to Parent’s counsel with respect to the Parent Note.

On August 7, 2024, the Company repaid in full, in cash and through the delivery of 114,976 shares of Company Common Stock, all outstanding indebtedness owed to Lind Global, which satisfied the 2023 Purchase Agreement, dated June 23, 2023, as amended, which was in the original principal amount of $1,800,000 (the “Lind Note”), and all ancillary agreements in connection therewith. In connection with the Company’s prepayment of the Lind Note, and pursuant to its terms, Lind Global elected to convert $314,000 of the outstanding principal amount of the Lind Note into Company Common Stock. In addition, at the time of conversion and based upon that certain Second Amendment to the Lind Note, dated February 12, 2024, Lind Global asserted that it was entitled to $360,000 in addition to the remaining principal balance due on the Lind Note of $1,500,000. The Company disputed this amount and, following negotiations among the parties, the Company agreed to pay $180,000 in full satisfaction of the claim.