(Mark One)
|
|||
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended September 30, 2023
|
||
or
|
|||
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ____ to ____
|
Commission File Number 001-14785
|
GSE Systems, Inc.
|
(Exact name of registrant as specified in its charter)
|
Delaware
|
52-1868008
|
|
(State of incorporation)
|
(I.R.S. Employer Identification Number)
|
6940 Columbia Gateway Dr., Suite 470, Columbia MD
|
21046
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number, including area code: (410) 970-7800
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
Non-accelerated filer ☒
|
Smaller reporting company ☒
|
Emerging growth company ☐
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
Common Stock, $0.01 Par Value
|
GVP
|
The NASDAQ Capital Market
|
Page
|
||
PART I.
|
3
|
|
Item 1.
|
Financial Statements (unaudited)
|
|
3
|
||
4 | ||
5 | ||
6 | ||
8
|
||
9 | ||
Item 2.
|
28 | |
Item 3.
|
38 | |
Item 4.
|
39 | |
PART II.
|
39
|
|
Item 1.
|
39
|
|
Item 1A.
|
39
|
|
Item 2.
|
39
|
|
Item 3
|
39
|
|
Item 4
|
39
|
|
Item 5.
|
39
|
|
Item 6.
|
40
|
September 30, 2023
|
December 31, 2022
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
2,041
|
$
|
2,789
|
||||
Restricted cash, current
|
378 | 1,052 | ||||||
Contract receivables, net of allowance for credit loss
|
10,697
|
10,064
|
||||||
Prepaid expenses and other current assets
|
569
|
2,165
|
||||||
Total current assets
|
13,685
|
16,070
|
||||||
Equipment, software and leasehold improvements, net
|
648
|
772
|
||||||
Software development costs, net
|
698
|
574
|
||||||
Goodwill
|
5,362
|
6,299
|
||||||
Intangible assets, net
|
1,287
|
1,687
|
||||||
Restricted cash - long term | 1,081 | 535 | ||||||
Operating lease right-of-use assets, net
|
518
|
506
|
||||||
Other assets
|
42
|
53
|
||||||
Total assets
|
$
|
23,321
|
$
|
26,496
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term note
|
$
|
1,445
|
$
|
3,038
|
||||
Accounts payable
|
2,346
|
1,262
|
||||||
Accrued expenses
|
1,832
|
2,084
|
||||||
Accrued compensation
|
1,790
|
1,071
|
||||||
Billings in excess of revenue earned
|
4,215
|
4,163
|
||||||
Accrued warranty
|
265
|
370
|
||||||
Income taxes payable
|
1,629
|
1,774
|
||||||
Derivative liabilities
|
1,538 | 603 | ||||||
Other current liabilities
|
987
|
1,286
|
||||||
Total current liabilities
|
16,047
|
15,651
|
||||||
Long-term note, less current portion
|
942
|
310
|
||||||
Operating lease liabilities noncurrent
|
315
|
160
|
||||||
Other noncurrent liabilities
|
168
|
144
|
||||||
Total liabilities
|
17,472
|
16,265
|
||||||
Commitments and contingencies (Note 16)
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock $0.01 par value; 2,000,000 shares authorized; no
shares issued and outstanding
|
-
|
-
|
||||||
Common stock $0.01 par value; 60,000,000 shares authorized, 2,648,085
and 2,404,681 shares issued, 2,488,194
and 2,244,790 shares outstanding, respectively
|
26
|
24
|
||||||
Additional paid-in capital
|
85,196
|
83,127
|
||||||
Accumulated deficit
|
(76,455
|
)
|
(69,927
|
)
|
||||
Accumulated other comprehensive income
|
81
|
6
|
||||||
Treasury stock at cost, 159,891 shares
|
(2,999
|
)
|
(2,999
|
)
|
||||
Total stockholders’ equity
|
5,849
|
10,231
|
||||||
Total liabilities and stockholders’ equity
|
$
|
23,321
|
$
|
26,496
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
2023
|
September 30,
2022
|
September 30,
2023
|
September 30,
2022
|
|||||||||||||
Revenue
|
$
|
11,566
|
$
|
11,898
|
$
|
34,826
|
$
|
36,918
|
||||||||
Cost of revenue
|
7,850
|
8,642
|
25,500
|
28,063
|
||||||||||||
Gross profit
|
3,716
|
3,256
|
9,326
|
8,855
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Selling, general and administrative
|
4,301
|
4,336
|
12,742
|
13,253
|
||||||||||||
Research and development
|
139
|
186
|
474
|
510
|
||||||||||||
Goodwill and intangible asset impairment charge
|
937 | 7,505 | 937 | 7,505 | ||||||||||||
Depreciation
|
43
|
69
|
144
|
213
|
||||||||||||
Amortization of intangible assets
|
108
|
209
|
400
|
700
|
||||||||||||
Total operating expenses
|
5,528
|
12,305
|
14,697
|
22,181
|
||||||||||||
Operating loss
|
(1,812
|
)
|
(9,049
|
)
|
(5,371
|
)
|
(13,326
|
)
|
||||||||
Interest expense, net
|
(430
|
)
|
(422
|
)
|
(1,483
|
)
|
(928
|
)
|
||||||||
Change in fair value of derivative instruments, net
|
180
|
263
|
420
|
377
|
||||||||||||
Other loss, net
|
(30
|
)
|
(2
|
)
|
(118
|
)
|
(58
|
)
|
||||||||
Loss before income taxes
|
(2,092
|
)
|
(9,210
|
)
|
(6,552
|
)
|
(13,935
|
)
|
||||||||
Benefit from income taxes |
(70
|
)
|
(218
|
)
|
(81
|
)
|
(108
|
)
|
||||||||
Net loss
|
$
|
(2,022
|
)
|
$
|
(8,992
|
)
|
$
|
(6,471
|
)
|
$
|
(13,827
|
)
|
||||
Net loss per common share - basic and diluted
|
$
|
(0.82
|
)
|
$
|
(4.22
|
)
|
$
|
(2.70
|
)
|
$
|
(6.55
|
)
|
||||
Weighted average shares outstanding used to compute net loss
per share - basic and diluted
|
2,480,505
|
2,128,888
|
2,398,468
|
2,110,194
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||
Net loss
|
$
|
(2,022
|
)
|
$
|
(8,992
|
)
|
$
|
(6,471
|
)
|
$
|
(13,827
|
)
|
||||
Cumulative translation adjustment
|
15
|
91
|
75
|
166
|
||||||||||||
Comprehensive loss
|
$
|
(2,007
|
)
|
$
|
(8,901
|
)
|
$
|
(6,396
|
)
|
$
|
(13,661
|
)
|
|
Common Stock
|
|
Treasury Stock
|
|||||||||||||||||||||||||||||
Nine Months Ended
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated Other
Comprehensive Loss
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||||
Balance, January 1, 2023
|
2,405
|
$
|
24
|
$
|
83,127
|
$
|
(69,927
|
)
|
$
|
6
|
(160
|
)
|
$
|
(2,999
|
)
|
$
|
10,231
|
|||||||||||||||
Adoption of ASC 326 Current Expected Credit Losses (CECL)
|
- | - | - | (57 | ) | - | - | - | (57 | ) | ||||||||||||||||||||||
Adjusted balance, January 1, 2023
|
2,405 | 24 | 83,127 | (69,984 | ) | 6 | (160 | ) | (2,999 | ) | 10,174 | |||||||||||||||||||||
Stock-based compensation expense
|
-
|
-
|
865
|
-
|
-
|
-
|
-
|
865
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
46
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
-
|
(88
|
)
|
-
|
-
|
-
|
-
|
(88
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
75
|
-
|
-
|
75
|
||||||||||||||||||||||||
Repayment of convertible note in shares |
197 | 2 | 1,292 | - | - | - | - | 1,294 | ||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
(6,471
|
)
|
-
|
-
|
-
|
(6,471
|
)
|
||||||||||||||||||||||
Balance, September 30, 2023
|
2,648
|
$
|
26
|
$
|
85,196
|
$
|
(76,455
|
)
|
$
|
81
|
(160
|
)
|
$
|
(2,999
|
)
|
$
|
5,849
|
|||||||||||||||
Balance, January 1, 2022
|
2,253
|
$
|
23
|
$
|
80,708
|
$
|
(54,584
|
)
|
$
|
(104
|
)
|
(160
|
)
|
$
|
(2,999
|
)
|
$
|
23,043
|
||||||||||||||
Stock-based compensation expense
|
-
|
-
|
1,504
|
-
|
-
|
-
|
-
|
1,504
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
44
|
-
|
(1
|
)
|
-
|
-
|
-
|
-
|
(1
|
)
|
||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
-
|
(226
|
)
|
-
|
-
|
-
|
-
|
(226
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
166
|
-
|
-
|
166
|
||||||||||||||||||||||||
Repayment of
convertible note in shares |
34 | - | 320 | - | - | - | - | 320 | ||||||||||||||||||||||||
Net income
|
-
|
-
|
-
|
(13,827
|
)
|
-
|
-
|
-
|
(13,827
|
)
|
||||||||||||||||||||||
Balance, September 30, 2022
|
2,332
|
$
|
23
|
$
|
82,305
|
$
|
(68,411
|
)
|
$
|
62
|
(160
|
)
|
$
|
(2,999
|
)
|
$
|
10,980
|
|
Common Stock
|
|
Treasury Stock
|
|||||||||||||||||||||||||||||
Three Months Ended
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated Other
Comprehensive Loss
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||||
Balance, July 1, 2023
|
2,640
|
$
|
26
|
$
|
84,879
|
$
|
(74,433
|
)
|
$
|
66
|
(160
|
)
|
$
|
(2,999
|
)
|
$
|
7,539
|
|||||||||||||||
Stock-based compensation expense
|
-
|
-
|
327
|
-
|
-
|
-
|
-
|
327
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
8
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
-
|
(10
|
)
|
-
|
-
|
-
|
-
|
(10
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
15
|
-
|
-
|
15
|
||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
(2,022
|
)
|
-
|
-
|
-
|
(2,022
|
)
|
||||||||||||||||||||||
Balance, September 30, 2023
|
2,648
|
$
|
26
|
$
|
85,196
|
$
|
(76,455
|
)
|
$
|
81
|
(160
|
)
|
$
|
(2,999
|
)
|
$
|
5,849
|
|||||||||||||||
Balance, July 1, 2022
|
2,285
|
$
|
23
|
$
|
81,529
|
$
|
(59,419
|
)
|
$
|
(29
|
)
|
(160
|
)
|
$
|
(2,999
|
)
|
$
|
19,105
|
||||||||||||||
Stock-based compensation expense
|
-
|
-
|
479
|
-
|
-
|
-
|
-
|
479
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
13
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
-
|
(23
|
)
|
-
|
-
|
-
|
-
|
(23
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
91
|
-
|
-
|
91
|
||||||||||||||||||||||||
Repayment of convertible note in shares |
34 | - | 320 | - | - | - | - | 320 | ||||||||||||||||||||||||
Net income
|
-
|
-
|
-
|
(8,992
|
)
|
-
|
-
|
-
|
(8,992
|
)
|
||||||||||||||||||||||
Balance, September 30, 2022
|
2,332
|
$
|
23
|
$
|
82,305
|
$
|
(68,411
|
)
|
$
|
62
|
(160
|
)
|
$
|
(2,999
|
)
|
$
|
10,980
|
Nine months ended
|
||||||||
September 30, 2023
|
September 30, 2022
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(6,471
|
)
|
$
|
(13,827
|
)
|
||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
||||||||
Goodwill and intangible asset impairment charge
|
937 | 7,505 | ||||||
Depreciation
|
144
|
213
|
||||||
Legal settlement
|
750 | - | ||||||
Amortization of intangible assets
|
400
|
700
|
||||||
Amortization of capitalized software development costs
|
248
|
255
|
||||||
Amortization of deferred financing costs
|
22
|
11
|
||||||
Amortization of debt discount
|
981 | 925 | ||||||
Loss on debt settled in shares
|
145 | 21 | ||||||
Stock-based compensation expense
|
853
|
1,592
|
||||||
Credit loss expense
|
24
|
97
|
||||||
Change in fair value of derivative instruments, net
|
(420
|
)
|
(377
|
)
|
||||
Foreign currency transaction (gain) loss
|
152 |
178 |
||||||
Deferred income taxes
|
3 | (80 | ) | |||||
Changes in assets and liabilities:
|
||||||||
Contract receivables, net
|
(736
|
)
|
922
|
|||||
Prepaid expenses and other assets
|
1,891
|
3,638
|
||||||
Accounts payable, accrued compensation and accrued expenses
|
1,572
|
539
|
||||||
Billings in excess of revenue earned
|
76
|
(818
|
)
|
|||||
Accrued warranty
|
(98
|
)
|
(163
|
)
|
||||
Other liabilities
|
(167
|
)
|
(581
|
)
|
||||
Net cash provided by operating activities
|
306
|
750
|
||||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(19
|
)
|
(171
|
)
|
||||
Capitalized software development costs
|
(372
|
)
|
(276
|
)
|
||||
Net cash used in investing activities
|
(391
|
)
|
(447
|
)
|
||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Repayment of line of credit
|
-
|
(1,817
|
)
|
|||||
Repayment of insurance premium financing
|
(729
|
)
|
(906
|
)
|
||||
Proceeds from issuance of long-term debt and warrants
|
1,800
|
5,750
|
||||||
Payments of debt issuance and original discount on issuance of long-term debt and warrants
|
(386 | ) | (968 | ) | ||||
Principal repayment of convertible note
|
(1,327 | ) | (319 | ) | ||||
Tax paid for shares withheld
|
(88
|
)
|
(226
|
)
|
||||
Net cash (used in) provided by financing activities
|
(730
|
)
|
1,514
|
|||||
Effect of exchange rate changes on cash
|
(61
|
)
|
(124
|
)
|
||||
Net (decrease) increase in cash, cash equivalents and restricted cash
|
(876
|
)
|
1,693
|
|||||
Cash, cash equivalents and restricted cash at beginning of the period
|
4,376
|
3,550
|
||||||
Cash, cash equivalents and restricted cash at the end of the period
|
$
|
3,500
|
$
|
5,243
|
||||
Cash and cash equivalents | $ | 2,041 | $ | 3,660 | ||||
Restricted cash, current | 378 | 651 | ||||||
Restricted cash included in other long-term assets | 1,081 | 932 | ||||||
Total cash, cash equivalents and restricted cash | $ | 3,500 | $ | 5,243 | ||||
Supplemental cash flow disclosures: | ||||||||
Non-cash financing activities
|
||||||||
Repayment of convertible note in shares
|
$ | 1,293 | $ | 320 | ||||
Establishment of new right-of-use assets
|
$ |
333 | $ |
60 | ||||
Establishment of new operating lease liability
|
$ |
(333 | ) | $ |
(58 | ) | ||
Discount on issuance of convertible note
|
$ | 300 | $ | 750 |
•
|
had met the market value of publicly held shares requirement for continuing listing,
|
•
|
had met all other listing requirements for NASDAQ (other than bid price requirement), and
|
•
|
had provided written notice to NASDAQ with a plan of how it intends to regain compliance with the bid price requirement during the
second 180-day period.
|
(in thousands, except for share data)
|
Three months ended
|
Nine months ended
|
||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net loss attributed to common stockholders
|
$
|
(2,022
|
)
|
$
|
(8,992
|
)
|
$
|
(6,471
|
)
|
$
|
(13,827
|
)
|
||||
Denominator:
|
||||||||||||||||
Weighted-average shares outstanding for basic earnings per share
|
2,480,505
|
2,128,888
|
2,398,468
|
2,110,194
|
||||||||||||
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share
|
2,480,505
|
2,128,888
|
2,398,468
|
2,110,194
|
||||||||||||
Total shares considered for dilution
|
1,103,556
|
520,376
|
1,176,007
|
520,376
|
(in thousands)
|
September 30, 2023
|
December 31, 2022
|
||||||
Billed receivables
|
$
|
4,385
|
$
|
6,074
|
||||
Unbilled receivables
|
6,755
|
5,146
|
||||||
Allowance for credit loss
|
(443
|
)
|
(1,156
|
)
|
||||
Total contract receivables, net
|
$
|
10,697
|
$
|
10,064
|
(in thousands)
|
||||
Beginning balance at January 1, 2023
|
$
|
1,156
|
||
Adoption of ASC326 Current Expected Credit Losses (CECL)
|
57 | |||
Adjusted balance at January 1, 2023
|
1,213 | |||
Current period provision for expected credit (recovery) loss
|
(1
|
)
|
||
Write-offs charged against the allowance, net of recoveries
|
(729
|
)
|
||
Currency adjustment |
(40 | ) | ||
Balance at September 30, 2023
|
$
|
443
|
|
Goodwill
|
Accumulated
Impairment
|
Net
|
|||||||||
|
||||||||||||
Engineering
|
$
|
8,278
|
$
|
(3,370
|
)
|
$
|
4,908
|
|||||
Workforce Solutions
|
8,431
|
(7,977
|
)
|
454
|
||||||||
Net book value at September 30,
2023
|
$
|
16,709
|
$
|
(11,347
|
)
|
$
|
5,362
|
|
Goodwill
|
Accumulated
Impairment
|
Net
|
|||||||||
|
||||||||||||
Engineering
|
$
|
8,278
|
$
|
(3,370
|
)
|
$
|
4,908
|
|||||
Workforce Solutions
|
8,431
|
(7,040
|
)
|
1,391
|
||||||||
Net book value at December 31, 2022
|
$
|
16,709
|
$
|
(10,410
|
)
|
$
|
6,299
|
(in thousands)
|
As of September 30, 2023
|
|||||||||||||||
Gross Carrying
Amount
|
Accumulated
Amortization
|
Impairment |
Net
|
|||||||||||||
Amortized intangible assets:
|
||||||||||||||||
Customer relationships
|
$
|
8,628
|
$
|
(7,318
|
)
|
$ | (464 | ) |
$
|
846
|
||||||
Trade names
|
1,689
|
(1,261
|
)
|
- |
428
|
|||||||||||
Developed technology
|
471
|
(471
|
)
|
- |
-
|
|||||||||||
Non-contractual customer relationships
|
433
|
(433
|
)
|
- |
-
|
|||||||||||
Noncompete agreement
|
527
|
(514
|
)
|
- |
13
|
|||||||||||
Alliance agreement
|
527
|
(527
|
)
|
- |
-
|
|||||||||||
Others
|
167
|
(167
|
)
|
- |
-
|
|||||||||||
Total
|
$
|
12,442
|
$
|
(10,691
|
)
|
$ | (464 | ) |
$
|
1,287
|
(in thousands)
|
As of December 31, 2022
|
|||||||||||||||
Gross Carrying
Amount
|
Accumulated Amortization
|
Impairment
|
Net
|
|||||||||||||
Amortized intangible assets:
|
||||||||||||||||
Customer relationships
|
$
|
8,628
|
$
|
(7,050
|
)
|
$
|
(464
|
)
|
$
|
1,114
|
||||||
Trade names
|
1,689
|
(1,196
|
)
|
-
|
493
|
|||||||||||
Developed technology
|
471
|
(471
|
)
|
-
|
-
|
|||||||||||
Non-contractual customer relationships
|
433
|
(433
|
)
|
-
|
-
|
|||||||||||
Noncompete agreement
|
527
|
(486
|
)
|
-
|
41
|
|||||||||||
Alliance agreement
|
527
|
(488
|
)
|
-
|
39
|
|||||||||||
Others
|
167
|
(167
|
)
|
-
|
-
|
|||||||||||
Total
|
$
|
12,442
|
$
|
(10,291
|
)
|
$
|
(464
|
)
|
$
|
1,687
|
(in thousands)
|
||||
Years ended December 31:
|
||||
2023 remainder
|
$
|
108
|
||
2024
|
332
|
|||
2025
|
255
|
|||
2026
|
204
|
|||
2027
|
169
|
|||
Thereafter
|
219
|
|||
Total
|
$
|
1,287
|
(in thousands)
|
||||||||
September 30, 2023
|
December 31, 2022
|
|||||||
Computer and equipment
|
$
|
2,375
|
$
|
2,363
|
||||
Software
|
2,292
|
2,291
|
||||||
Leasehold improvements
|
660
|
659
|
||||||
Furniture and fixtures
|
840
|
838
|
||||||
6,167
|
6,151
|
|||||||
Accumulated depreciation
|
(5,519
|
)
|
(5,379
|
)
|
||||
Equipment, software and leasehold improvements, net
|
$
|
648
|
$
|
772
|
|
Amended 2022
Convertible Note
|
2023 Convertible
Note
|
||||||
|
||||||||
Exercise Price
|
$ | 19.40 | $ | 5.00 | ||||
Common Stock Price
|
$ | 2.02 |
$
|
2.02
|
||||
Risk Free Rate
|
4.7 | % | 4.13 | % | ||||
Volatility
|
80.0 | % | 80.0 | % | ||||
Term (in years)
|
3.4 yrs. | 4.7 yrs. |
(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 | $ | - | $ | - | $ | 1,064 | $ | 1,064 | ||||||||
Warrant liability |
- | - | 474 | 474 | ||||||||||||
Cash settled performance-vesting restricted stock units
|
- | - | 82 | 82 | ||||||||||||
Total liabilities | $ | - | $ | - | $ | 1,620 | $ | 1,620 |
(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 | $ | - | $ | - | $ | 285 | $ | 285 | ||||||||
Warrant liability |
- | - | 267 | 267 | ||||||||||||
Cash settled performance-vesting restricted stock units
|
- | - | 51 | 51 | ||||||||||||
Total liabilities | $ | - | $ | - | $ | 603 | $ | 603 |
(in thousands)
|
Embedded
Redemption
Features
|
Warrant |
Cash Settled
PRSUs
|
Level 3 Total |
||||||||||||
Balance at December 31, 2022
|
$
|
285
|
$ | 267 | $ | 51 | $ | 603 | ||||||||
FV of derivatives with new convertible note issuance
|
286 | 1,120 | - | 1,406 | ||||||||||||
Change in FV included in gain on derivative instruments, net
|
493 | (913 | ) | - | (420 | ) | ||||||||||
Stock compensation less payments made
|
- |
- |
31 |
31 |
||||||||||||
Balance at September 30, 2023
|
$
|
1,064
|
$ | 474 | $ | 82 | $ | 1,620 |
(in thousands) |
2022
Convertible
Note
|
2023
Convertible
Note
|
Total
Convertible
Notes
|
|||||||||
Amount
|
Amount | Amount | ||||||||||
Convertible Note issued
|
$ | 5,750 | $ | 1,800 | $ | 7,550 | ||||||
Debt discount
|
(750 | ) | (300 | ) | (1,050 | ) | ||||||
Issuance cost:
|
||||||||||||
Commitment fee
|
(175 | ) | (52 | ) | (227 | ) | ||||||
Balance of investor’s counsel fees
|
(43 | ) | (34 | ) | (77 | ) | ||||||
Net proceeds of Convertible Note
|
$ | 4,782 | $ | 1,414 | $ | 6,196 | ||||||
Additional OID costs not in original funds flow | (121 | ) | (15 | ) | (136 | ) | ||||||
Fair value of Warrant Liabilities on issuance | (724 | ) | (1,119 | ) | (1,843 | ) | ||||||
Fair value of Conversion Feature on issuance | (306 | ) | (286 | ) | (592 | ) | ||||||
Allocated OID costs to Warrants | 25 | 30 | 55 | |||||||||
Additional OID costs not in original funds flow
|
(660 | ) | 660 | - | ||||||||
Interest expense accrued on Convertible Note as of September 30, 2023 | 2,645 | 135 | 2,780 | |||||||||
Principal and interest payments through September 30, 2023 | (4,073 | ) | - | (4,073 | ) | |||||||
Balance of Convertible Note as of September 30, 2023 | $ | 1,568 | $ | 819 | $ | 2,387 |
(in thousands)
|
||||
Balance at January 1, 2023
|
$
|
503
|
||
Current period recovery
|
(73
|
)
|
||
Current period claims
|
(29
|
)
|
||
Currency adjustment
|
1
|
|||
Balance at September 30, 2023
|
$
|
402
|
(in thousands)
|
Three months ended
|
Nine months ended
|
||||||||||||||
September 30,
2023
|
September 30,
2022
|
September 30,
2023
|
September 30,
2022
|
|||||||||||||
Engineering
|
||||||||||||||||
System Design and Build
|
$
|
1,192
|
$
|
1,537
|
$
|
4,801
|
$
|
4,991
|
||||||||
Over time | 1,192 | 1,537 | 4,801 | 4,991 | ||||||||||||
Software and Support
|
1,373
|
2,010
|
3,662
|
3,560
|
||||||||||||
Point in time
|
259
|
530
|
627
|
662
|
||||||||||||
Over time
|
1,114
|
1,480
|
3,035
|
2,898
|
||||||||||||
Training and Consulting Services
|
6,092
|
4,505
|
16,180
|
13,851
|
||||||||||||
Point in time
|
131
|
195
|
428
|
428
|
||||||||||||
Over time
|
5,961
|
4,310
|
15,752
|
15,752
|
||||||||||||
Workforce Solutions | ||||||||||||||||
Training and Consulting Services
|
2,909
|
3,846
|
10,183
|
14,516
|
||||||||||||
Point in time
|
16
|
52
|
225
|
52
|
||||||||||||
Over time
|
2,893
|
3,794
|
9,958
|
14,464
|
||||||||||||
Total revenue
|
$
|
11,566
|
$
|
11,898
|
$
|
34,826
|
$
|
36,918
|
(in thousands)
|
Three months ended
|
Nine months ended
|
||||||||||||||
September 30,
2023
|
September 30,
2022
|
September 30,
2023
|
September 30,
2022
|
|||||||||||||
Revenue recognized in the period from amounts included in billings in excess of revenue earned at the beginning of the period
|
$
|
466
|
$
|
174
|
$
|
3,571
|
$
|
2,666
|
(in thousands)
|
Three months ended
|
Nine months ended
|
||||||||||||||
September 30,
2023
|
September 30,
2022
|
September 30,
2023
|
September 30,
2022
|
|||||||||||||
Loss before income taxes
|
$
|
(2,092
|
)
|
$
|
(9,210
|
)
|
$
|
(6,552
|
)
|
$
|
(13,935
|
)
|
||||
Benefit from income taxes
|
(70
|
)
|
(218
|
)
|
(81
|
)
|
(108
|
)
|
||||||||
Effective tax rate
|
3.35
|
%
|
2.4
|
%
|
1.24
|
%
|
0.8
|
%
|
As of | ||||||||||
Operating Leases
|
Classification
|
September 30, 2023
|
December 31, 2022
|
|||||||
Leased Assets
|
||||||||||
Operating lease - right of use assets
|
Long term assets
|
$
|
518
|
$
|
506
|
|||||
Lease Liabilities
|
||||||||||
Operating lease liabilities - Current
|
Other current liabilities |
226
|
418
|
|||||||
Operating lease liabilities
|
Long term liabilities
|
315
|
160
|
|||||||
$
|
541
|
$
|
578
|
Three months ended
|
Nine months ended |
|||||||||||||||||
Lease Cost
|
Classification
|
September 30, 2023
|
September 30, 2022
|
September 30, 2023 | September 30, 2022 | |||||||||||||
Operating lease cost (1)
|
Selling, general and administrative expenses
|
$
|
90
|
$
|
174
|
$ | 333 | $ | 534 | |||||||||
Short-term leases costs (2)
|
Selling, general and administrative expenses
|
2
|
15
|
27 | 45 | |||||||||||||
Sublease income (3)
|
Selling, general and administrative expenses
|
-
|
(18
|
)
|
- | (55 | ) | |||||||||||
Net lease cost
|
$
|
92
|
$
|
171
|
$ | 360 | $ | 524 |
(in thousands)
|
Gross Future
Minimum Lease
Payments
|
|||
2023 remainder
|
$
|
62
|
||
2024
|
220
|
|||
2025
|
96
|
|||
2026
|
91
|
|||
2027
|
142
|
|||
Thereafter |
- | |||
Total lease payments
|
$
|
611
|
||
Less: Interest
|
70
|
|||
Present value of lease payments
|
$
|
541
|
Lease Term and Discount Rate
|
September 30, 2023
|
December 31, 2022
|
||||||
Weighted-average remaining lease term (years)
|
|
|
||||||
Operating leases
|
3.59
|
1.51
|
||||||
Weighted-average discount rate
|
||||||||
Operating leases
|
6.21 | % | 5.00 | % |
(in thousands)
|
Nine months ended
|
|||||||
Cash paid for amounts included in
measurement of liabilities
|
September 30, 2023
|
September 30, 2022
|
||||||
Operating cash flows used in operating leases
|
$
|
410
|
$
|
934
|
Three months ended
|
Nine months ended
|
|||||||||||||||
(in thousands)
|
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
||||||||||||
Revenue:
|
||||||||||||||||
Engineering
|
$
|
8,657
|
$
|
8,052
|
$
|
24,643
|
$
|
22,402
|
||||||||
Workforce Solutions
|
2,909
|
3,846
|
10,183
|
14,516
|
||||||||||||
Total revenue
|
11,566
|
11,898
|
34,826
|
36,918
|
||||||||||||
Gross Profit
|
||||||||||||||||
Engineering
|
3,346 |
2,654 |
7,968 |
7,037 |
||||||||||||
Workforce Solutions
|
370 | 602 | 1,358 | 1,818 | ||||||||||||
Total gross profit
|
3,716 | 3,256 | 9,326 | 8,855 | ||||||||||||
Operating loss
|
||||||||||||||||
Engineering
|
(7
|
)
|
(1,403
|
)
|
(3,048
|
)
|
(5,511
|
)
|
||||||||
Workforce Solutions
|
(1,055
|
)
|
(7,646
|
)
|
(1,573
|
)
|
(7,815
|
)
|
||||||||
Provision for legal settlement | (750 | ) | - | (750 | ) | - | ||||||||||
Operating loss
|
(1,812
|
)
|
(9,049
|
)
|
(5,371
|
)
|
(13,326
|
)
|
||||||||
Interest expense, net
|
(430
|
)
|
(422
|
)
|
(1,483
|
)
|
(928
|
)
|
||||||||
Change in fair value of derivative instruments, net |
180
|
263
|
420
|
377
|
||||||||||||
Other loss, net
|
(30
|
)
|
(2
|
)
|
(118
|
)
|
(58
|
)
|
||||||||
Loss before income taxes
|
$
|
(2,092
|
)
|
$
|
(9,210
|
)
|
$
|
(6,552
|
)
|
$
|
(13,935
|
)
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||||||||||||||||||
(in thousands)
|
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
||||||||||||||||||||||||||||
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
|||||||||||||||||||||
Revenue
|
$
|
11,566
|
100.0
|
%
|
$
|
11,898
|
100.0
|
%
|
$
|
34,826
|
100.0
|
%
|
$
|
36,918
|
100.0
|
%
|
||||||||||||||||
Cost of revenue
|
7,850
|
67.9
|
%
|
8,642
|
72.6
|
%
|
25,500
|
73.2
|
%
|
28,063
|
76.0
|
%
|
||||||||||||||||||||
Gross profit
|
3,716
|
32.1
|
%
|
3,256
|
27.4
|
%
|
9,326
|
26.8
|
%
|
8,855
|
24.0
|
%
|
||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Selling, general and administrative
|
4,301
|
37.2
|
%
|
4,336
|
36.4
|
%
|
12,742
|
36.6
|
%
|
13,253
|
35.9
|
%
|
||||||||||||||||||||
Research and development
|
139
|
1.2
|
%
|
186
|
1.6
|
%
|
474
|
1.4
|
%
|
510
|
1.4
|
%
|
||||||||||||||||||||
Goodwill and intangible asset impairment charge
|
937
|
8.1
|
%
|
7,505
|
63.1
|
%
|
937
|
2.7
|
%
|
7,505
|
20.3
|
%
|
||||||||||||||||||||
Depreciation
|
43
|
0.4
|
%
|
69
|
0.6
|
%
|
144
|
0.4
|
%
|
213
|
0.6
|
%
|
||||||||||||||||||||
Amortization of intangible assets
|
108
|
0.9
|
%
|
209
|
1.8
|
%
|
400
|
1.1
|
%
|
700
|
1.9
|
%
|
||||||||||||||||||||
Total operating expenses
|
5,528
|
47.8
|
%
|
12,305
|
103.4
|
%
|
14,697
|
42.2
|
%
|
22,181
|
60.1
|
%
|
||||||||||||||||||||
Operating loss
|
(1,812
|
)
|
(15.7
|
)%
|
(9,049
|
)
|
(76.1
|
)%
|
(5,371
|
)
|
(15.5
|
)%
|
(13,326
|
)
|
(36.2
|
)%
|
||||||||||||||||
Interest expense, net
|
(430
|
)
|
(3.7
|
)%
|
(422
|
)
|
(3.5
|
)%
|
(1,483
|
)
|
(4.3
|
)%
|
(928
|
)
|
(2.5
|
)%
|
||||||||||||||||
Change in fair value of derivative instruments, net
|
180
|
1.6
|
%
|
263
|
2.2
|
%
|
420
|
1.2
|
%
|
377
|
1.0
|
%
|
||||||||||||||||||||
Other loss, net
|
(30
|
)
|
(0.3
|
)%
|
(2
|
)
|
0.0
|
%
|
(118
|
)
|
(0.3
|
)%
|
(58
|
)
|
(0.2
|
)%
|
||||||||||||||||
Loss before income taxes
|
(2,092
|
)
|
(18.1
|
)%
|
(9,210
|
)
|
(77.4
|
)%
|
(6,552
|
)
|
(18.8
|
)%
|
(13,935
|
)
|
(37.7
|
)%
|
||||||||||||||||
Benefit from income taxes
|
(70
|
)
|
(0.6
|
)%
|
(218
|
)
|
(1.8
|
)%
|
(81
|
)
|
(0.2
|
)%
|
(108
|
)
|
(0.3
|
)%
|
||||||||||||||||
Net loss
|
$
|
(2,022
|
)
|
(17.5
|
)%
|
$
|
(8,992
|
)
|
(75.6
|
)%
|
$
|
(6,471
|
)
|
(18.6
|
)%
|
$
|
(13,827
|
)
|
(37.5
|
)%
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||||||||||||||||||
(in thousands)
|
September 30, 2023
|
September 30, 2022
|
Change
|
September 30, 2023
|
September 30, 2022
|
Change
|
||||||||||||||||||||||||||
Revenue:
|
$ |
|
%
|
$ |
|
%
|
||||||||||||||||||||||||||
Engineering
|
$
|
8,657
|
$
|
8,052
|
605
|
8
|
%
|
$
|
24,643
|
$
|
22,402
|
2,241
|
10
|
%
|
||||||||||||||||||
Workforce Solutions
|
2,909
|
3,846
|
(937
|
)
|
(24
|
)%
|
10,183
|
14,516
|
(4,333
|
)
|
(30
|
)%
|
||||||||||||||||||||
Total revenue
|
$
|
11,566
|
$
|
11,898
|
(332
|
)
|
(3
|
)%
|
$
|
34,826
|
$
|
36,918
|
(2,092
|
)
|
(6
|
)%
|
(in thousands)
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||||||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||||||||||||||||||
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
|||||||||||||||||||||
Gross profit:
|
||||||||||||||||||||||||||||||||
Engineering
|
$
|
3,346
|
38.7
|
%
|
$
|
2,654
|
33.0
|
%
|
$
|
7,968
|
32.3
|
%
|
$
|
7,037
|
31.4
|
%
|
||||||||||||||||
Workforce Solutions
|
370
|
12.7
|
%
|
602
|
15.7
|
%
|
1,358
|
13.3
|
%
|
1,818
|
12.5
|
%
|
||||||||||||||||||||
Total gross profit
|
$
|
3,716
|
32.1
|
%
|
$
|
3,256
|
27.4
|
%
|
$
|
9,326
|
26.8
|
%
|
$
|
8,855
|
24.0
|
%
|
Three months ended
|
Nine months ended
|
|||||||||||||||
(in thousands)
|
September 30,
2023
|
September 30,
2022
|
September 30,
2023
|
September 30,
2022
|
||||||||||||
Corporate charges
|
$
|
3,320
|
$
|
3,201
|
$
|
9,252
|
$
|
10,058
|
||||||||
Business development
|
902
|
951
|
3,080
|
2,511
|
||||||||||||
Facility operation & maintenance (O&M)
|
85
|
182
|
372
|
575
|
||||||||||||
Credit loss expense (recovery)
|
(6
|
)
|
-
|
24
|
97
|
|||||||||||
Other
|
-
|
2
|
14
|
12
|
||||||||||||
Total
|
$
|
4,301
|
$
|
4,336
|
$
|
12,742
|
$
|
13,253
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
2023
|
September 30,
2022
|
September 30,
2023
|
September
30, 2022
|
|||||||||||||
Net loss
|
$
|
(2,022
|
)
|
$
|
(8,992
|
)
|
$
|
(6,471
|
)
|
$
|
(13,827
|
)
|
||||
Interest expense, net
|
430
|
422
|
1,483
|
928
|
||||||||||||
Benefit from income taxes
|
(70
|
)
|
(218
|
)
|
(81
|
)
|
(108
|
)
|
||||||||
Depreciation and amortization
|
232
|
365
|
792
|
1,167
|
||||||||||||
EBITDA
|
(1,430
|
)
|
(8,423
|
)
|
(4,277
|
)
|
(11,840
|
)
|
||||||||
Stock-based compensation expense
|
322
|
491
|
853
|
1,592
|
||||||||||||
Change in fair value of derivative instruments, net
|
(180
|
)
|
(263
|
)
|
(420
|
)
|
(377
|
)
|
||||||||
Goodwill and intangible asset impairment charge
|
937
|
7,505
|
937
|
7,505
|
||||||||||||
Advisory fees
|
260
|
-
|
260
|
-
|
||||||||||||
Provision for legal settlement
|
750
|
-
|
750
|
-
|
||||||||||||
Adjusted EBITDA
|
$
|
659
|
$
|
(690
|
)
|
$
|
(1,897
|
)
|
$
|
(3,120
|
)
|
(in thousands)
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||
Net loss
|
$
|
(2,022
|
)
|
$
|
(8,992
|
)
|
$
|
(6,471
|
)
|
$
|
(13,827
|
)
|
||||
Stock-based compensation expense
|
322
|
491
|
853
|
1,592
|
||||||||||||
Change in fair value of derivative instruments, net
|
(180
|
)
|
(263
|
)
|
(420
|
)
|
(377
|
)
|
||||||||
Goodwill and intangible asset impairment charge
|
937
|
7,505
|
937
|
7,505
|
||||||||||||
Advisory fees
|
260
|
-
|
260
|
-
|
||||||||||||
Provision for legal settlement
|
750
|
-
|
750
|
-
|
||||||||||||
Amortization of intangible assets related to acquisitions
|
108
|
209
|
400
|
700
|
||||||||||||
Adjusted net loss
|
$
|
175
|
$
|
(1,050
|
)
|
$
|
(3,691
|
)
|
$
|
(4,407
|
)
|
|||||
Adjusted net loss per common share – diluted
|
$
|
0.07
|
$
|
(0.49
|
)
|
$
|
(1.54
|
)
|
$
|
(2.09
|
)
|
|||||
Weighted average shares outstanding used to compute adjusted net loss per share - diluted(1)
|
2,480,505
|
2,128,888
|
2,398,468
|
2,110,194
|
Item 3. |
Quantitative and Qualitative Disclosure about Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002, filed herewith.
|
|
|
|
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|
|
|
|
|
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
|
|
|
|
|
|
101.INS*
|
XBRL Instance Document
|
|
|
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase
|
1. |
I have reviewed this quarterly report on Form 10-Q of GSE Systems, Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors:
|
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting;
|
Date: November 14, 2023
|
/s/ Kyle J. Loudermilk
|
Kyle J. Loudermilk
|
|
Chief Executive Officer
(Principal Executive Officer)
|
1. |
I have reviewed this quarterly report on Form 10-Q of GSE Systems, Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors:
|
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting;
|
Date: November 14, 2023
|
/s/ Emmett A. Pepe
|
Emmett A. Pepe
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
|
Date: November 14, 2023
|
/s/ Kyle J. Loudermilk
|
/s/ Emmett A. Pepe
|
||
Kyle J. Loudermilk
|
Emmett A. Pepe
|
|||
Chief Executive Officer
|
Chief Financial Officer
|
|||