(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.
|
3
|
|
Item 1.
|
Financial Statements (unaudited)
|
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
8
|
||
Item 2.
|
24
|
|
Item 3.
|
32
|
|
Item 4.
|
33
|
|
PART II.
|
33
|
|
Item 1.
|
33
|
|
Item 1A.
|
33
|
|
Item 2.
|
33
|
|
Item 3
|
33
|
|
Item 4
|
33
|
|
Item 5.
|
33
|
|
Item 6.
|
34
|
March 31, 2024
|
December 31, 2023
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash, current
|
||||||||
Contract receivables, net of allowance for credit loss
|
|
|
||||||
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:
|
||||||||
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 15)
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock $
|
|
|
||||||
Common stock $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Accumulated other comprehensive income
|
|
|
||||||
Treasury stock at cost,
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three months ended
|
||||||||
March 31, 2024
|
March 31, 2023
|
|||||||
Revenue
|
$ | $ | ||||||
Cost of revenue
|
||||||||
Gross profit
|
||||||||
Operating expenses:
|
||||||||
Selling, general and administrative
|
||||||||
Research and development
|
||||||||
Depreciation
|
||||||||
Amortization of intangible assets
|
||||||||
Total operating expenses
|
||||||||
Operating loss
|
( |
) | ( |
) | ||||
Interest expense, net
|
( |
) | ( |
) | ||||
Change in fair value of derivative instruments, net
|
( |
) | ||||||
Other loss, net
|
||||||||
Loss before income taxes
|
( |
) | ( |
) | ||||
Expense (benefit) from income taxes
|
( |
) | ||||||
Net loss
|
$ | ( |
) | $ | ( |
) | ||
Net loss per common share - basic and diluted
|
$ | ( |
) | $ | ( |
) | ||
Weighted average shares outstanding used to compute net loss per share - basic and diluted
|
Three months ended
|
||||||||
March 31, 2024
|
March 31, 2023
|
|||||||
Net loss
|
$ | ( |
) | $ | ( |
) | ||
Cumulative translation adjustment
|
( |
) | ||||||
Comprehensive loss
|
$ | ( |
) | $ | ( |
) |
Common Stock
|
Treasury Stock
|
|||||||||||||||||||||||||||||||
Three Months Ended
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Loss
|
Shares |
Amount
|
Total
|
||||||||||||||||||||||||
Balance, January 1, 2024
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
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, March 31, 2024
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Common Stock |
Treasury Stock |
|||||||||||||||||||||||||||||||
Three Months Ended |
Shares |
Amount |
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Loss
|
Shares |
Amount |
Total |
||||||||||||||||||||||||
Balance, January 1, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
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, March 31, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Three months ended
|
||||||||
March 31, 2024
|
March 31, 2023
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation
|
|
|
||||||
Amortization of intangible assets
|
|
|
||||||
Amortization of capitalized software development costs
|
|
|
||||||
Amortization of deferred financing costs
|
|
|
||||||
Amortization of debt discount
|
||||||||
Loss on debt settled in shares
|
||||||||
Stock-based compensation expense
|
|
|
||||||
Credit loss expense
|
|
|
||||||
Change in fair value of derivative instruments, net
|
|
(
|
)
|
|||||
Deferred income taxes
|
( |
) | ||||||
Changes in assets and liabilities:
|
||||||||
Contract receivables
|
|
(
|
)
|
|||||
Prepaid expenses and other assets
|
|
|
||||||
Accounts payable, accrued compensation and accrued expenses
|
|
|
||||||
Billings in excess of revenue earned
|
|
(
|
)
|
|||||
Accrued warranty
|
(
|
)
|
(
|
)
|
||||
Other liabilities
|
(
|
)
|
(
|
)
|
||||
Net cash 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:
|
||||||||
Repayment of insurance premium financing
|
(
|
)
|
(
|
)
|
||||
Principal repayment of convertible note
|
( |
) | ( |
) | ||||
Tax paid for shares withheld
|
(
|
)
|
(
|
)
|
||||
Net cash used in financing activities
|
(
|
)
|
(
|
)
|
||||
Effect of exchange rate changes on cash
|
(
|
)
|
|
|||||
Net 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 in shares
|
$ | $ |
(in thousands, except for share data)
|
Three months ended | |||||||
|
March 31,
|
|||||||
2024
|
2023
|
|||||||
Numerator:
|
||||||||
Net loss 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
|
||||||||
Total shares considered for dilution
|
(in thousands)
|
March 31, 2024
|
December 31, 2023
|
||||||
Billed receivables
|
$
|
|
$
|
|
||||
Unbilled receivables
|
|
|
||||||
Allowance for credit loss
|
(
|
)
|
(
|
)
|
||||
Total contract receivables, net
|
$
|
|
$
|
|
(in thousands)
|
||||
Beginning balance at January 1, 2024
|
$
|
|
||
Current period provision for expected credit (recovery) loss
|
|
|||
Write-offs charged against the allowance, net of recoveries
|
|
|||
Currency adjustment |
( |
) | ||
Balance at March 31, 2024
|
$
|
|
|
Goodwill
|
Accumulated
Impairment
|
Net
|
|||||||||
|
||||||||||||
Engineering
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Workforce Solutions
|
|
(
|
)
|
|
||||||||
Net book value at March 31,
2024
|
$
|
|
$
|
(
|
)
|
$
|
|
|
Goodwill
|
Accumulated
Impairment
|
Net
|
|||||||||
|
||||||||||||
Engineering
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Workforce Solutions
|
|
(
|
)
|
|
||||||||
Net book value at December 31, 2023
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
As of March 31, 2024
|
|||||||||||||||
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, 2023
|
|||||||||||||||
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)
|
||||
Years ended December 31:
|
||||
2024 remainder
|
$
|
|
||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
2028
|
|
|||
Thereafter
|
|
|||
Total
|
$
|
|
(in thousands)
|
||||||||
March 31, 2024
|
December 31, 2023
|
|||||||
Computer and equipment
|
$
|
|
$
|
|
||||
Software
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Furniture and fixtures
|
|
|
||||||
|
|
|||||||
Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
Equipment, software and leasehold improvements, net
|
$
|
|
$
|
|
Our convertible debt issued in February 2022, amended in June 2023 and our new convertible debt issued in June 2023 (see Note 9) includes certain embedded redemption features that are required to be bifurcated as embedded derivatives and measured at fair value on a recurring basis. We estimate the fair value using a Monte Carlo simulation based on estimates of our future stock price and assumptions about the possible redemption scenarios.
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)
|
(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)
|
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, 2023
|
$
|
|
$ | $ | $ | |||||||||||
Change in FV included in gain on
|
( |
) | ||||||||||||||
Stock compensation less payments made
|
||||||||||||||||
Balance at March 31, 2024
|
$
|
|
$ | $ | $ |
(in thousands) |
2022
Convertible
Note
|
2023
Convertible
Note
|
Total
Convertible
Notes
|
|||||||||
Amount
|
Amount | Amount | ||||||||||
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 Feature on issuance | ( |
) | ( |
) | ( |
) | ||||||
Allocated OID costs to Warrants | ||||||||||||
Additional OID costs not in original funds flow
|
( |
) | ||||||||||
Interest expense accrued on Convertible Note as of March 31, 2024 | ||||||||||||
Principal and interest payments through March 31, 2024 | ( |
) | ( |
) | ||||||||
Balance of Convertible Note as of March 31, 2024 | $ | $ | $ |
Years ended December 31:
|
||||
2024
|
$
|
|
||
2025
|
|
|||
Thereafter
|
|
|||
$
|
|
(in thousands) |
Principal
|
Debt Discounts
|
Net
|
|||||||||
Current portion of Long-Term Debt
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Long-Term Debt less current portion
|
|
(
|
)
|
|
||||||||
Balance of Convertible Notes as of March 31, 2024
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands) |
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
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
||||
Balance at January 1, 2024
|
$
|
|
||
Current period recovery
|
(
|
)
|
||
Current period claims
|
(
|
)
|
||
Currency adjustment
|
(
|
)
|
||
Balance at March 31, 2024
|
$
|
|
|
Three months ended
|
|||||||
(in thousands) |
March 31, 2024
|
March 31, 2023
|
||||||
Engineering
|
||||||||
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
|
|||||||
March 31, 2024
|
March 31, 2023
|
|||||||
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
|
|||||||
March 31, 2024
|
March 31, 2023
|
|||||||
Loss before income taxes
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Expense (benefit) from income taxes
|
|
(
|
)
|
|||||
Effective tax rate
|
(
|
)%
|
|
%
|
As of | ||||||||||
Operating Leases
|
Classification
|
March 31, 2024
|
December 31, 2023
|
|||||||
Leased Assets
|
||||||||||
Operating lease - right of use assets
|
|
$
|
|
$
|
|
|||||
Lease Liabilities
|
||||||||||
Operating lease liabilities - Current
|
|
|
||||||||
Operating lease liabilities
|
|
|
|
|||||||
$
|
|
$
|
|
Three months ended
|
||||||||||
Lease Cost
|
Classification
|
March 31, 2024
|
March 31, 2023
|
|||||||
Operating lease cost (1)
|
Selling, general and administrative expenses
|
$
|
|
$
|
|
|||||
Short-term leases costs (2)
|
Selling, general and administrative expenses
|
|
|
|||||||
Net lease cost
|
$
|
|
$
|
|
(in thousands)
|
Gross Future
Minimum Lease
Payments
|
|||
2024 remainder
|
$
|
|
||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
2028
|
|
|||
Thereafter |
||||
Total lease payments
|
$
|
|
||
Less: Interest
|
|
|||
Present value of lease payments
|
$
|
|
Lease Term and Discount Rate
|
March 31, 2024
|
December 31, 2023
|
||||||
Weighted-average remaining lease term (years)
|
||||||||
Operating leases
|
|
|
||||||
Weighted-average discount rate
|
||||||||
Operating leases
|
% | % |
(in thousands)
|
Three months ended
|
|||||||
Cash paid for amounts included in
measurement of liabilities
|
March 31, 2024
|
March 31, 2023
|
||||||
Operating cash flows used in operating leases
|
$
|
|
$
|
|
|
Three months ended
|
|||||||
(in thousands)
|
March 31, 2024
|
March 31, 2023
|
||||||
Revenue:
|
||||||||
Engineering
|
$
|
|
$
|
|
||||
Workforce Solutions
|
|
|
||||||
Total revenue
|
$
|
|
$
|
|
||||
Gross Profit
|
||||||||
Engineering
|
$ | $ | ||||||
Workforce Solutions
|
||||||||
Total gross profit
|
$ | $ | ||||||
Operating loss
|
||||||||
Engineering
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Workforce Solutions
|
(
|
)
|
(
|
)
|
||||
Operating loss
|
$ |
(
|
)
|
$ |
(
|
)
|
||
Interest expense, net
|
(
|
)
|
(
|
)
|
||||
Change in fair value of derivative instruments, net |
(
|
)
|
|
|||||
Other loss, net
|
|
|
||||||
Loss before income taxes
|
$
|
(
|
)
|
$
|
(
|
)
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Three months ended
|
||||||||||||||||
(in thousands)
|
March 31, 2024
|
March 31, 2023
|
||||||||||||||
$ | |
%
|
$
|
%
|
||||||||||||
Revenue
|
$
|
11,283
|
100.0
|
%
|
$
|
10,873
|
100.0
|
%
|
||||||||
Cost of revenue
|
8,067
|
71.5
|
%
|
8,478
|
78.0
|
%
|
||||||||||
Gross profit
|
3,216
|
28.5
|
%
|
2,395
|
22.0
|
%
|
||||||||||
Operating expenses:
|
||||||||||||||||
Selling, general and administrative
|
4,360
|
38.6
|
%
|
4,788
|
44.0
|
%
|
||||||||||
Research and development
|
229
|
2.0
|
%
|
181
|
1.7
|
%
|
||||||||||
Depreciation
|
58
|
0.5
|
%
|
48
|
0.4
|
%
|
||||||||||
Amortization of intangible assets
|
99
|
0.9
|
%
|
161
|
1.5
|
%
|
||||||||||
Total operating expenses
|
4,746
|
42.1
|
%
|
5,178
|
47.6
|
%
|
||||||||||
Operating loss
|
(1,530
|
)
|
(13.7
|
)%
|
(2,783
|
)
|
(25.7
|
)%
|
||||||||
Interest expense, net
|
(459
|
)
|
(4.1
|
)%
|
(286
|
)
|
(2.6
|
)%
|
||||||||
Change in fair value of derivative instruments, net
|
(17
|
)
|
(0.2
|
)%
|
69
|
0.6
|
%
|
|||||||||
Other loss, net
|
54
|
0.5
|
%
|
10
|
0.1
|
%
|
||||||||||
Loss before income taxes
|
(1,952
|
)
|
(17.3
|
)%
|
(2,990
|
)
|
(27.5
|
)%
|
||||||||
Expense (benefit) from income taxes
|
40
|
0.4
|
%
|
(39
|
)
|
(0.4
|
)%
|
|||||||||
Net loss
|
$
|
(1,992
|
)
|
(17.7
|
)%
|
$
|
(2,951
|
)
|
(27.1
|
)%
|
Three months ended
|
||||||||||||||||
(in thousands)
|
March 31, 2024
|
March 31, 2023
|
Change
|
|||||||||||||
Revenue:
|
$
|
%
|
||||||||||||||
Engineering
|
$
|
8,729
|
$
|
6,942
|
1,787
|
26
|
%
|
|||||||||
Workforce Solutions
|
2,554
|
3,931
|
(1,377
|
)
|
(35
|
)%
|
||||||||||
Total revenue
|
$
|
11,283
|
$
|
10,873
|
410
|
4
|
%
|
Three months ended
|
||||||||||||||||
March 31, 2024
|
March 31, 2023
|
|||||||||||||||
(in thousands)
|
$
|
%
|
$
|
%
|
||||||||||||
Gross profit:
|
||||||||||||||||
Engineering
|
$
|
2,905
|
33.3
|
%
|
$
|
1,880
|
27.1
|
%
|
||||||||
Workforce Solutions
|
311
|
12.2
|
%
|
515
|
13.1
|
%
|
||||||||||
Total gross profit
|
$
|
3,216
|
28.5
|
%
|
$
|
2,395
|
22.0
|
%
|
Three months ended
|
||||||||||||||||
(in thousands)
|
March 31, 2024
|
%
|
March 31, 2023
|
%
|
||||||||||||
Selling, general and administrative expenses:
|
||||||||||||||||
Corporate charges
|
$
|
3,496
|
80.2
|
%
|
$
|
3,486
|
72.8
|
%
|
||||||||
Business development
|
766
|
17.6
|
%
|
1,116
|
23.3
|
%
|
||||||||||
Facility operation & maintenance (O&M)
|
39
|
0.9
|
%
|
141
|
2.9
|
%
|
||||||||||
Credit loss expense (recovery)
|
56
|
1.3
|
%
|
32
|
0.7
|
%
|
||||||||||
Other
|
3
|
0.1
|
%
|
13
|
0.3
|
%
|
||||||||||
Total
|
$
|
4,360
|
100.0
|
%
|
$
|
4,788
|
100.0
|
%
|
Three months ended
|
||||||||
March 31, 2024
|
March 31, 2023
|
|||||||
Net loss
|
$
|
(1,992
|
)
|
$
|
(2,951
|
)
|
||
Interest expense, net
|
459
|
286
|
||||||
Expense (benefit) from income taxes
|
40
|
(39
|
)
|
|||||
Depreciation and amortization
|
259
|
294
|
||||||
EBITDA
|
(1,234
|
)
|
(2,410
|
)
|
||||
Stock-based compensation expense
|
294
|
285
|
||||||
Advisory fees
|
476
|
-
|
||||||
Change in fair value of derivative instruments, net
|
17
|
(69
|
)
|
|||||
Adjusted EBITDA
|
$
|
(447
|
)
|
$
|
(2,194
|
)
|
(in thousands)
|
Three months ended
|
|||||||
March 31, 2024
|
March 31, 2023
|
|||||||
Net loss
|
$
|
(1,992
|
)
|
$
|
(2,951
|
)
|
||
Stock-based compensation expense
|
294
|
285
|
||||||
Advisory fees
|
476
|
-
|
||||||
Change in fair value of derivative instruments, net
|
17
|
(69
|
)
|
|||||
Amortization of intangible assets related to acquisitions
|
99
|
161
|
||||||
Adjusted net loss
|
$
|
(1,106
|
)
|
$
|
(2,574
|
)
|
||
Loss per share - diluted
|
$
|
(0.63
|
)
|
$
|
(1.29
|
)
|
||
Add back: Effect of stock-based compensation expense
|
0.09
|
0.13
|
||||||
Add back: Effect of advisory fees
|
0.15
|
-
|
||||||
Add back: Effect of change in fair value of derivative instruments, net
|
0.01
|
(0.03
|
)
|
|||||
Add back: Effect of amortization of intangible assets related to acquisitions
|
0.03
|
0.07
|
||||||
Adjusted loss per common share – Diluted
|
$
|
(0.35
|
)
|
$
|
(1.12
|
)
|
||
Weighted average shares outstanding used to compute adjusted net loss per share - basic and diluted(1)
|
3,148,806
|
2,293,389
|
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
|
10.1 |
Employment Agreement, dated January 1, 2019, by and between GSE Systems, Inc. and Ravi Khanna.
Incorporated herein by reference to Exhibit 10.1 of Form 8-K filed with the Securities and Exchange Commission on April 30, 2024.
|
|
|
||
10.2 |
Amendment to Employment Agreement, dated November 24, 2020, by and between GSE Systems, Inc. and Ravi
Khanna. Incorporated herein by reference to Exhibit 10.2 of Form 8-K filed with the Securities and Exchange Commission on April 30, 2024.
|
|
10.3 |
Letter Agreement, dated April 30, 2024, by and between GSE Systems, Inc. and Ravi Khanna. Incorporated herein by reference to Exhibit 10.3 of Form 8-K filed with the Securities and Exchange Commission on April 30, 2024.
|
|
10.4 |
Separation Agreement, dated April 30, 2024, including Amendment to Restricted Share Unit Agreements (attached as Exhibit A), by and between GSE
Systems, Inc. and Kyle J. Loudermilk. Incorporated herein by reference to Exhibit 10.4 of Form 8-K filed with the Securities and Exchange Commission
on April 30, 2024.
|
|
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: May 15, 2024
|
|
GSE SYSTEMS, INC.
|
|
/S/ RAVI KHANNA
|
|
Ravi Khanna
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
/S/ EMMETT A. PEPE
|
|
Emmett A. Pepe
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|