-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MocylOgo32uYzuD2I5pIpUP1Me3x9xW3dtOtkUmP6SLgLNL3qj4UJprFHnfue8wR 9ySXeHq9w/oSjHb2wMHZ0Q== 0000950155-05-000150.txt : 20050611 0000950155-05-000150.hdr.sgml : 20050611 20050602194527 ACCESSION NUMBER: 0000950155-05-000150 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20050603 DATE AS OF CHANGE: 20050602 GROUP MEMBERS: DOLPHIN ADVISORS, LLC GROUP MEMBERS: DOLPHIN DIRECT EQUITY PARTNERS, LP GROUP MEMBERS: DOLPHIN MANAGEMENT, INC. GROUP MEMBERS: PETER E. SALAS SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GSE SYSTEMS INC CENTRAL INDEX KEY: 0000944480 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 521868008 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-45371 FILM NUMBER: 05875597 BUSINESS ADDRESS: STREET 1: 9189 RED BRANCH ROAD CITY: COLUMBIA STATE: MD ZIP: 21045 BUSINESS PHONE: 4107723500 MAIL ADDRESS: STREET 1: 9189 RED BRANCH ROAD STREET 2: 9189 RED BRANCH ROAD CITY: COLUMBIA STATE: MD ZIP: 21045 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DOLPHIN DIRECT EQUITY PARTNERS L P CENTRAL INDEX KEY: 0001282815 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 129 E 17TH ST CITY: NEW YORK STATE: NY ZIP: 10003 BUSINESS PHONE: 212-982-5071 SC 13D 1 e953960sch13d.htm SCHEDULE 13D SCHEDULE 13D
                             UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, D.C. 20549

                             SCHEDULE 13D

               UNDER THE SECURITIES EXCHANGE ACT OF 1934
                          (AMENDMENT NO. __)

                           GSE SYSTEMS, INC.
- --------------------------------------------------------------------------------
                           (Name of Issuer)

                      Common Stock, no par value
- --------------------------------------------------------------------------------
                    (Title of Class of Securities)

                               36227K106
            -----------------------------------------------
                            (CUSIP Number)

                             May 26, 2005
            -----------------------------------------------
        (Date of Event which Requires Filing of this Statement)

                  Dolphin Direct Equity Partners, LP
                  c/o Dolphin Asset Management Corp.
                         129 East 17th Street
                       New York, New York 10003
                       Telephone: (212) 982-5071
                         Attn: Peter E. Salas

                            with a copy to:

                             Gary J. Simon
                       Hughes Hubbard & Reed LLP
                        One Battery Park Plaza
                       New York, New York 10004
                       Telephone: (212) 837-6000
- --------------------------------------------------------------------------------
  (Name, Address and Telephone Number of Person Authorized to Receive
                      Notices and Communications)


          If the filing person has previously  filed a statement on Schedule 13G
to report the  acquisition  that is the  subject of this  Schedule  13D,  and is
filing  this   schedule   because  of  secs.   240.13d-1(e),   240.13d-1(f)   or
240.13d-1(g), check the following box [ ].

          *The  remainder of this cover page shall be filled out for a reporting
person's  initial  filing on this  form with  respect  to the  subject  class of
securities,  and for any subsequent amendment containing information which would
alter  disclosures  provided in a prior cover page.

          The information  required on this cover page shall not be deemed to be
"filed" for the  purposes of Section 18 of the  Securities  Exchange Act of 1934
("Act") or otherwise  subject to the liabilities of the Act but shall be subject
to all other provisions of the Act (however, see the Notes).




                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 2 OF 13        |
 -----------------------                                  ---------------------

 ------------------------------------------------------------------------------
| 1  | NAME OF REPORTING PERSONS                                               |
|    | Peter E. Salas                                                          |
|    | S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS                      |
|    | (Intentionally Omitted)                                                 |
|----|-------------------------------------------------------------------------|
| 2  | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*            (a)  |X|   |
|    |                                                              (b)  |_|   |
|----|-------------------------------------------------------------------------|
| 3  | SEC USE ONLY                                                            |
|----|-------------------------------------------------------------------------|
| 4  | SOURCE OF FUNDS                                                         |
|    | AF                                                                      |
|----|-------------------------------------------------------------------------|
| 5  | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED                |
|    | PURSUANT TO ITEMS 2(d) OR 2(e)                                    |_|   |
|----|-------------------------------------------------------------------------|
| 6  | CITIZENSHIP OR PLACE OF ORGANIZATION                                    |
|    | U.S.                                                                    |
|----------------------------------------------------------------------------- |
|                      |  7 | SOLE VOTING POWER                                |
|                      |    | 1,419,913                                        |
|     NUMBER OF        |----|--------------------------------------------------|
|      SHARES          |  8 | SHARED VOTING POWER                              |
|   BENEFICIALLY       |    | 0                                                |
|     OWNED BY         |----|--------------------------------------------------|
|       EACH           |  9 | SOLE DISPOSITIVE POWER                           |
|    REPORTING         |    | 1,419,913                                        |
|   PERSON WITH        |----|--------------------------------------------------|
|                      | 10 | SHARED DISPOSITIVE POWER                         |
|                      |    | 0                                                |
|----------------------------------------------------------------------------- |
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON            |
|    | 1,419,913                                                               |
|----|-------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN    |_|   |
|    | SHARES*                                                                 |
|----|-------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)                      |
|    | 13.6%                                                                   |
|----|-------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON*                                               |
|    | IN                                                                      |
 ------------------------------------------------------------------------------


                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 3 OF 13        |
 -----------------------                                  ---------------------

 ------------------------------------------------------------------------------
| 1  | NAME OF REPORTING PERSONS                                               |
|    | Dolphin Management, Inc.                                                |
|    | S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS                      |
|    | (Intentionally Omitted)                                                 |
|----|-------------------------------------------------------------------------|
| 2  | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*            (a)  |X|   |
|    |                                                              (b)  |_|   |
|----|-------------------------------------------------------------------------|
| 3  | SEC USE ONLY                                                            |
|----|-------------------------------------------------------------------------|
| 4  | SOURCE OF FUNDS                                                         |
|    | AF                                                                      |
|----|-------------------------------------------------------------------------|
| 5  | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED                |
|    | PURSUANT TO ITEMS 2(d) OR 2(e)                                    |_|   |
|----|-------------------------------------------------------------------------|
| 6  | CITIZENSHIP OR PLACE OF ORGANIZATION                                    |
|    | Delaware                                                                |
|----------------------------------------------------------------------------- |
|                      |  7 | SOLE VOTING POWER                                |
|                      |    | 0                                                |
|     NUMBER OF        |----|--------------------------------------------------|
|      SHARES          |  8 | SHARED VOTING POWER                              |
|   BENEFICIALLY       |    | 1,419,913                                        |
|     OWNED BY         |----|--------------------------------------------------|
|       EACH           |  9 | SOLE DISPOSITIVE POWER                           |
|    REPORTING         |    | 0                                                |
|   PERSON WITH        |----|--------------------------------------------------|
|                      | 10 | SHARED DISPOSITIVE POWER                         |
|                      |    | 1,419,913                                        |
|----------------------------------------------------------------------------- |
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON            |
|    | 1,419,913                                                               |
|----|-------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN    |_|   |
|    | SHARES*                                                                 |
|----|-------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)                      |
|    | 13.6%                                                                   |
|----|-------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON*                                               |
|    | CO                                                                      |
 ------------------------------------------------------------------------------


                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 4 OF 13        |
 -----------------------                                  ---------------------

 ------------------------------------------------------------------------------
| 1  | NAME OF REPORTING PERSONS                                               |
|    | Dolphin Advisors, LLC                                                   |
|    | S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS                      |
|    | (Intentionally Omitted)                                                 |
|----|-------------------------------------------------------------------------|
| 2  | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*            (a)  |X|   |
|    |                                                              (b)  |_|   |
|----|-------------------------------------------------------------------------|
| 3  | SEC USE ONLY                                                            |
|----|-------------------------------------------------------------------------|
| 4  | SOURCE OF FUNDS                                                         |
|    | AF                                                                      |
|----|-------------------------------------------------------------------------|
| 5  | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED                |
|    | PURSUANT TO ITEMS 2(d) OR 2(e)                                    |_|   |
|----|-------------------------------------------------------------------------|
| 6  | CITIZENSHIP OR PLACE OF ORGANIZATION                                    |
|    | Delaware                                                                |
|----------------------------------------------------------------------------- |
|                      |  7 | SOLE VOTING POWER                                |
|                      |    | 0                                                |
|     NUMBER OF        |----|--------------------------------------------------|
|      SHARES          |  8 | SHARED VOTING POWER                              |
|   BENEFICIALLY       |    | 1,419,913                                        |
|     OWNED BY         |----|--------------------------------------------------|
|       EACH           |  9 | SOLE DISPOSITIVE POWER                           |
|    REPORTING         |    | 0                                                |
|   PERSON WITH        |----|--------------------------------------------------|
|                      | 10 | SHARED DISPOSITIVE POWER                         |
|                      |    | 1,419,913                                        |
|----------------------------------------------------------------------------- |
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON            |
|    | 1,419,913                                                               |
|----|-------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN    |_|   |
|    | SHARES*                                                                 |
|----|-------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)                      |
|    | 13.6%                                                                   |
|----|-------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON*                                               |
|    | OO (limited liability company)                                          |
 ------------------------------------------------------------------------------



                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 5 OF 13        |
 -----------------------                                  ---------------------

 ------------------------------------------------------------------------------
| 1  | NAME OF REPORTING PERSONS                                               |
|    | Dolphin Direct Equity Partners, LP                                      |
|    | S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS                      |
|    | (Intentionally Omitted)                                                 |
|----|-------------------------------------------------------------------------|
| 2  | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*            (a)  |X|   |
|    |                                                              (b)  |_|   |
|----|-------------------------------------------------------------------------|
| 3  | SEC USE ONLY                                                            |
|----|-------------------------------------------------------------------------|
| 4  | SOURCE OF FUNDS                                                         |
|    | WC                                                                      |
|----|-------------------------------------------------------------------------|
| 5  | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED                |
|    | PURSUANT TO ITEMS 2(d) OR 2(e)                                    |_|   |
|----|-------------------------------------------------------------------------|
| 6  | CITIZENSHIP OR PLACE OF ORGANIZATION                                    |
|    | U.S.                                                                    |
|----------------------------------------------------------------------------- |
|                      |  7 | SOLE VOTING POWER                                |
|                      |    | 0                                                |
|     NUMBER OF        |----|--------------------------------------------------|
|      SHARES          |  8 | SHARED VOTING POWER                              |
|   BENEFICIALLY       |    | 1,419,913                                        |
|     OWNED BY         |----|--------------------------------------------------|
|       EACH           |  9 | SOLE DISPOSITIVE POWER                           |
|    REPORTING         |    | 0                                                |
|   PERSON WITH        |----|--------------------------------------------------|
|                      | 10 | SHARED DISPOSITIVE POWER                         |
|                      |    | 1,419,913                                        |
|----------------------------------------------------------------------------- |
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON            |
|    | 1,419,913                                                               |
|----|-------------------------------------------------------------------------|
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN    |_|   |
|    | SHARES*                                                                 |
|----|-------------------------------------------------------------------------|
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)                      |
|    | 13.6%                                                                   |
|----|-------------------------------------------------------------------------|
| 14 | TYPE OF REPORTING PERSON*                                               |
|    | PN                                                                      |
 ------------------------------------------------------------------------------


                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 6 OF 13        |
 -----------------------                                  ---------------------

ITEM 1.   SECURITY AND ISSUER

          The class of equity  security to which this  statement  relates is the
common stock, no par value (the "COMMON STOCK") of GSE Systems, Inc., a Delaware
corporation (the "COMPANY").  The address of the principal  executive offices of
the Company is 9189 Red Branch Road, Columbia, Maryland 21045.

ITEM 2.   IDENTITY AND BACKGROUND

          This statement is being jointly filed by each of the following persons
pursuant to Rule 13d-1(k)  promulgated by the Securities and Exchange Commission
(the  "COMMISSION")  pursuant to Section 13 of the  Securities  Exchange  Act of
1934, as amended (the "EXCHANGE  ACT"):  Peter E. Salas ("MR.  SALAS"),  Dolphin
Management  Inc.,  a  New  York  corporation  ("DOLPHIN  MANAGEMENT"),   Dolphin
Advisors,  LLC, a New York limited liability company ("DOLPHIN  ADVISORS"),  and
Dolphin Direct Equity  Partners,  LP, a Delaware limited  partnership  ("DOLPHIN
DIRECT"). Mr. Salas, Dolphin Management, Dolphin Advisors and Dolphin Direct are
collectively  referred  to as the  "REPORTING  PERSONS."  Mr.  Salas is a United
States citizen.

          The  principal  business  address of Mr.  Salas,  Dolphin  Management,
Dolphin Advisors and Dolphin Direct is c/o Dolphin Asset  Management  Corp., 129
East 17th Street, New York, New York 10003.

          Dolphin Direct is a private  investment fund.  Dolphin Advisors is the
sole managing  general  partner of Dolphin  Direct.  The  principal  business of
Dolphin Advisors is to serve as investment manager to Dolphin Direct and another
private  investment  fund.  Dolphin  Management is the sole  managing  member of
Dolphin Advisors.  The principal  business of Dolphin  Management is to serve as
investment  manager to Dolphin  Advisors  and Dolphin  Direct and certain  other
entities. Mr. Salas is the sole shareholder and President of Dolphin Management.
The  principal  business  of Mr.  Salas  is to act as the sole  shareholder  and
President of Dolphin Management and as the principal of investment funds.

          During the past five years,  none of the Reporting Persons and, to the
knowledge of the Reporting Persons,  none of the executive officers or directors
of the  Reporting  Persons,  if  applicable,  has been  convicted  in a criminal
proceeding (excluding traffic violations or similar misdemeanors), or has been a
party to a civil  proceeding of a judicial or  administrative  body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree  or final  order  enjoining  future  violations  of,  or  prohibiting  or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.

ITEM 3.   SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

          On May 26, 2005, pursuant to a Senior Subordinated Secured Convertible
Note and Warrant Purchase Agreement, dated as of May 26, 2005 (the "Agreement"),
the  Company  issued  and sold to  Dolphin  Direct,  for an  aggregate  price of
$2,000,000, a senior subordinated secured convertible note of the Company in the
aggregate  principal  amount of  $2,000,000  (the  "Note")  and a  warrant  (the



                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 7 OF 13        |
 -----------------------                                  ---------------------


"Warrant") to purchase  380,952  shares (the "Warrant  Shares") of Common Stock.
This transaction is herein referred to as the "Financing."

          As of the financing,  the Common Stock is listed on the American Stock
Exchange (the "Amex").  Under Section 713 of the Amex Company  Guide,  companies
with securities listed on the Amex must obtain  stockholder  approval before the
sale,  issuance,  or potential  issuance of their common  stock,  or  securities
convertible into their common stock, in connection with a transaction other than
a public offering,  equal to 20% or more of their outstanding  common stock, for
less than the greater of book or market value of their common stock.

          The Note is  convertible,  in part or in whole,  into shares of Common
Stock based on a conversion price of $1.925.  However, the conversion price, and
thus the number of shares  into which the Note may be  converted,  is subject to
adjustment,  including upon certain  dilutive  issuances or deemed  issuances of
Common Stock. Under these adjustment provisions,  the Company may be required to
issue, upon conversion of the Note (when aggregated with the number of shares of
Common  Stock  issued  upon  exercise  of  the  Warrant),  20%  or  more  of the
outstanding  shares of Common Stock on May 26, 2005 for less than the greater of
book or market value of their common stock. Accordingly, under the Amex's rules,
the Company is seeking to obtain stockholder approval for any such issuance.

          Under  the  terms  of the  Agreement  and  Note,  notwithstanding  the
adjustment provisions of the Note, the number of shares of Common Stock actually
issued on conversion of the Note,  when  aggregated with the number of shares of
the Common Stock actually issued or issuable upon exercise of the Warrant,  will
not exceed 19.99% of the outstanding  shares of the Common Stock on May 26, 2005
(the "Conversion Share Limit").  However,  the Note provides that the Conversion
Share  Limit  will  terminate  upon  the  effectiveness  of the  consent  to the
transaction  by  stockholders  holding a majority of the  outstanding  shares of
Common Stock, in compliance with the  stockholder  approval  requirements of the
Amex.

          On May 19,  2005,  the  Company  obtained  the  written  consent  (the
"Majority Consent") of GP Strategies Corporation ("GP Strategies"), as holder of
a majority of the outstanding shares of the Common Stock. Under the rules of the
Exchange Act, the effectiveness of the Majority Consent,  and the termination of
the Conversion Share Limit,  will become effective on the day following the 20th
day after the Company's  information  statement  relating to the Financing  (the
"INFORMATION  STATEMENT") is mailed to the Company's  stockholders.  The Company
mailed a preliminary  Information Statement with the Commission on May 27, 2005.
In light of the limited  conditions  prior to the  termination of the Conversion
Share Limit,  this Schedule 13D reports the ownership of the Common Stock by the
Reporting Persons on the basis that such termination has occurred.

          THE AGREEMENT. On May 26, 2005, pursuant to the Agreement, the Company
issued  the Note and the  Warrant to Dolphin  Direct for an  aggregate  purchase
price of $2,000,000, less certain fees the Company agreed to pay to or on behalf


                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 8 OF 13        |
 -----------------------                                  ---------------------

of Dolphin Direct.  Of such purchase price,  $500,000 was placed in escrow until
the termination of the Conversion Share Limit. If the Conversion Share Limit has
not been  terminated by the 75th day after the closing date,  such $500,000 will
be paid to Dolphin Direct.

          Under the Agreement,  the Company has agreed,  among other things, not
to, and to cause its  subsidiaries  not to, while the Note is  outstanding,  (i)
acquire, sell or otherwise transfer any material assets or rights of the Company
or a subsidiary, or enter into any contract or agreement relating to the sale of
assets,  which is not consummated  pursuant to an arms length transaction,  (ii)
enter into any contract,  agreement or transaction  with any officer,  director,
stockholder  or  affiliate of the Company or a  subsidiary  other than  ordinary
course  transactions that are consistent with past practice and pursuant to arms
length terms,  (iii) pay or declare any dividend or make any distribution  upon,
redeem,  retire or repurchase or otherwise acquire,  any shares of capital stock
or other securities of the Company or a subsidiary, other than certain dividends
currently owed to ManTech International, or (iv) materially change the Company's
or any subsidiary's line of business as currently conducted.

          The Company  has agreed to file,  within 30 days of the closing of the
Financing, a registration statement covering the resale by Dolphin Direct of all
shares of Common Stock issuable pursuant to the Note or the Warrant. The Company
has also  agreed to use its best  efforts  to have such  registration  statement
declared effective by the Commission as soon as possible  thereafter,  but in no
event  later than 90 days after the  closing of the  Financing,  and to keep the
registration  statement effective thereafter until all such securities have been
sold or can be sold without most restrictions.  If the Company does not meet the
deadlines  for filing  and  effectiveness  of the  registration  statement,  the
Company will be required to pay Dolphin Direct 2% of the  outstanding  principal
of the Note for each  30-day  period the  Company is late.  The Company has also
agreed to provide piggyback  registration  rights if at any time there is not an
effective  registration  statement  covering the resale by Dolphin Direct of all
shares of Common Stock issuable pursuant to the Note or the Warrant.

          THE  NOTE.  The Note is in the  principal  amount  of  $2,000,000  and
matures on March 31, 2009. The Note  initially  bears interest at the rate of 8%
per annum.  Interest  is  payable  in  arrears on the last day of each  calendar
quarter and all principal  and accrued  interest is payable upon  maturity.  The
interest  rate will  decrease,  for each quarter  during which the  registration
statement  registering  the  shares  of  common  stock  into  which  the Note is
convertible  is in  effect,  by 2% per  annum  for each 25%  increment  over the
conversion price achieved by the Company's Common Stock price.

          The Note is convertible,  in part or in whole, into a number of shares
of Common Stock equal to the principal and interest of the Note being  converted
divided by an initial conversion price of $1.925. However, if the Company issues
or sells any shares of Common Stock or securities  exercisable  or  exchangeable
for or convertible into common stock (excluding certain shares, including shares
issued to Dolphin Direct,  under certain  employee  benefit plans or pursuant to
outstanding  options or convertible  securities) for a  consideration  per share
less than the then effective conversion price, then the conversion price will be
reduced to an amount equal to the  consideration per share in such new issuance.


                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 9 OF 13        |
 -----------------------                                  ---------------------

The conversion price will also be  appropriately  adjusted upon any stock split,
stock  dividend,   recapitalization,   combination,   or  similar   transaction.
Notwithstanding such adjustment provision,  the number of shares of Common Stock
actually  issued on  conversion  of the Note will be limited  by the  Conversion
Share Limit until the effectiveness of the Majority Consent on the day following
the  twentieth  day after the  Information  Statement is mailed to the Company's
stockholders.  If the Company fails to issue a  certificate  for the shares into
which the Note has been  converted  within  three days of such  conversion,  the
Company  will be  required to pay,  for each day the Company is late,  an amount
equal to 1% of the  product  of  number of  shares  to which  Dolphin  Direct is
entitled  and the  closing  price of the  Common  Stock on the last day that the
Company could have delivered such certificate.

          Events of default under the Note include, among other things, and with
certain cure periods,  the  suspension of trading or failure to be listed on one
of certain  markets,  failure to comply with  certain  agreements  with  Dolphin
Direct (such as a failure to comply with the conversion  provisions of the Note,
a failure to have sufficient shares authorized for conversion,  and a failure to
pay  principal  or interest or other  amount when due),  failure to pay material
indebtedness,  and  bankruptcy.  Upon and during the  continuance of an event of
default of the Note,  the interest  rate will increase to 24%. The holder of the
Note may  require  the  Company to redeem all or any portion of the Note upon an
event of default for a price equal to the greater of the amount of the principal
and  interest  of the note to be redeemed or the product of the number of shares
of Common Stock into which such principal and interest is convertible multiplied
by the closing trading price of the Common Stock  immediately prior to the event
of default.

          The holder of the Note will be entitled to participate in any pro rata
issuance or sale of securities to the Company's  stockholders to the extent that
the holder would have been able to participate if the Note had been converted to
Common Stock in its entirety.

          The Company is prevented,  under the terms of the Note,  from engaging
in any fundamental  transaction (such as a merger,  consolidation or sale of the
Company)  unless the successor  assumes in writing all of the obligations of the
Company  under the Note and the  successor  is a publicly  traded  company  with
common stock traded on the Amex, Nasdaq or the New York Stock Exchange.

          The Note ranks senior to all other  indebtedness  of the Company other
than certain debt  connected  with the  Company's  senior  credit  agreement (or
certain  refinancings   thereof)  and  the  Company's  obligation  to  repay  GP
Strategies  for payments made by GP  Strategies  pursuant to its guaranty of the
Company's senior credit  agreement debt, to which the Note is expressly  junior,
and  certain  capitalized  leases and  contingent  obligations.  The  Company is
prohibited from any additional indebtedness senior to the Note while the Note is
outstanding. The ranking is effectuated by a subordination agreement between the
Company's senior lender, Dolphin Direct, and the Company.

          THE WARRANT.  The Warrant is exercisable  for 380,952  Warrant Shares,
and the initial exercise price is $2.22 per Warrant Share. The exercise price of
the Warrant must be paid in cash, except that if a registration statement is not


                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 10 OF 13       |
 -----------------------                                  ---------------------

available  for the resale of  Warrant  Shares,  the holder may make a  "cashless
exercise" of the Warrant.  The Warrant expires on the seventh anniversary of its
issuance.

          If the  Company  issues  or  sells  any  shares  of  Common  Stock  or
securities  exercisable or  exchangeable  for or  convertible  into common stock
(excluding  certain shares,  including  shares issued to Dolphin  Direct,  under
certain employee benefit plans or pursuant to outstanding options or convertible
securities) for a consideration per share less than the then effective  exercise
price,  then the  exercise  price  will be  reduced  to an  amount  equal to the
consideration per share in such new issuance,  without  adjustment to the number
of Warrant Shares issuable on exercise. The exercise price and number of Warrant
Shares will also be appropriately  adjusted upon any dividend or distribution of
assets (including any distribution of cash,  securities or other property by way
of   dividend,   spin-off,   reclassification,   or  similar   recapitalization,
combination, or similar transaction. If the Company fails to issue a certificate
for the shares for which the Warrant  has been  exercised  within  three days of
such conversion, the Company will required to pay, for each day that the Company
is late,  an amount  equal to 1% of the product of number of shares to which the
Investor is entitled  and the closing  price of the Common Stock on the last day
that the Company could have delivered such certificate.

          The holder of the Warrant will be entitled to  participate  in any pro
rata issuance or sale of securities to the company's  stockholders to the extent
that the holder  would have been able to  participate  if the  Warrant  had been
exercised in its entirety.

          The  Company  is  prevented,  under  the  terms of the  Warrant,  from
engaging in any fundamental  transaction  (such as a merger,  consolidation,  or
sale  of the  Company)  unless  the  successor  assumes  in  writing  all of the
obligations  of the Company  under the Warrant and the  successor  is a publicly
traded  company  with common  stock  traded on the Amex,  Nasdaq or the New York
Stock Exchange.

          The Company has granted  Dolphin  Direct a priority lien on all of its
and  its  subsidiaries'  assets,  subject  only to  certain  existing  or  other
permitted liens, as to which such priority is second.

ITEM 4.   PURPOSE OF THE TRANSACTION

          The Reporting  Persons  purchased the Note and the Warrant  because of
its belief that the Company  represents  an attractive  investment  based on the
business prospects and strategy of the Company.

          The Reporting  Persons have no present plans or proposals  that relate
to or that would  result in any of the actions  specified in clauses (a) through
(j) of Item 4 of Schedule 13D of the Exchange  Act.  Nonetheless,  the Reporting
Persons may at any time formulate plans or proposals for the Company, including,
among other things, entering into privately negotiated sales of shares of Common
Stock or acquisitions of additional shares of Common Stock,  making  open-market
sales or  purchases,  proposing  a  business  combination  transaction  with the


                                  SCHEDULE 13D
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| CUSIP NO. 13916P100   |                                | PAGE 11 OF 13       |
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Company or making a tender offer for some or all of the Common Stock. It is also
possible  that  the  Reporting  Persons  will  decide  not to  pursue  any  such
transaction.

ITEM 5.   INTEREST IN SECURITIES OF THE ISSUER

     (a) As of the date of this Schedule 13D, as discussed  above, the Reporting
Persons  may be  deemed  to be a group as  defined  in Rule  13d-5(b)  under the
Exchange  Act  and,  as such a  group,  may be  deemed  to  beneficially  own an
aggregate of 1,419,913 shares of Common Stock,  which  constitute  approximately
13.6% of the  outstanding  shares  Common  Stock,  based on 8,999,706  shares of
Common Stock  outstanding  as of May 2, 2005  pursuant to the Issuer's Form 10-Q
for the  fiscal  quarter  ended  March 31,  2005,  on which are based all of the
percentages  of  outstanding  shares of  Common  Stock  set  forth  herein.  The
foregoing  and all other  amounts of  beneficial  ownership set forth herein are
calculated pursuant to Rule 13d-3 under the Exchange Act ("RULE 13D-3").

          As of the date hereof,  Mr. Salas,  by virtue of his  relationship  to
Dolphin  Management and Dolphin Advisors,  may be deemed to beneficially own all
1,419,913   shares  of  Common  Stock  referred  to  above,   which   constitute
approximately  13.6% of the  outstanding  shares of Common Stock. As of the date
hereof,  Dolphin  Management,  by virtue of its  relationship  with  respect  to
Dolphin  Advisors  and Dolphin  Direct,  may be deemed to  beneficially  own all
1,419,913   shares  of  Common  Stock  referred  to  above,   which   constitute
approximately  13.6% of the  outstanding  shares of Common Stock. As of the date
hereof,  Dolphin Advisors,  by virtue of its relationship to Dolphin Direct, may
be deemed to beneficially  own all 1,419,913  shares of Common Stock referred to
above, which constitute  approximately 13.6% of the outstanding shares of Common
Stock.  As of the date hereof,  Dolphin  Direct,  by virtue of its  ownership of
record  of the Note and the  Warrant,  may be  deemed  to  beneficially  own the
1,419,913  shares of Common Stock issuable upon conversion or exercise  thereof,
which shares constitute  approximately 13.6% of the outstanding shares of Common
Stock.  Each of Mr.  Salas,  Dolphin  Management,  Dolphin  Advisors and Dolphin
Direct  owns no shares of Common  Stock and,  without  implying  the  beneficial
ownership of Common Stock by any other Reporting  Person other than as expressly
set forth  herein,  disclaims  beneficial  ownership of any shares  beneficially
owned by any other Reporting Person.

     (b) By virtue of the foregoing relationships, Mr. Salas is deemed to solely
have,  and each of Dolphin  Management,  Dolphin  Advisors and Dolphin Direct is
deemed to share,  the power to vote or direct  the vote of,  and to  dispose  or
direct  the  disposition  of,  the  shares of  Common  Stock  issuable  upon the
conversion of the Note or exercise of the Warrant.

     (c) The Note,  which is convertible  into 1,038,961 shares of Common Stock,
and the  Warrant,  which is  exercisable  to purchase  380,952  shares of Common
Stock, were purchased within the last 60 days as described above.

     (d) Each of the  Reporting  Persons  affirms  that no person other than the
Reporting Persons has the right to receive or the power to direct the receipt of


                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 12 OF 13       |
 -----------------------                                  ---------------------

dividends  from,  or the  proceeds  from the sale of, the shares of Common Stock
deemed to be beneficially  owned by such Reporting  Person or the Warrant or the
Note.

     (e) Not applicable.

ITEM 6.   CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
          RESPECT TO SECURITIES OF THE ISSUER

          As  described  in Item 4, the Note and the Warrant  were  purchased in
connection  with the  Financing,  which was  consummated as of May 26, 2005. The
Reporting  Persons  retain  complete,  independent  economic  control over their
respective  investments in the Note and the Warrant as contemplated  herein, and
none  of them  has  made  any  specific  agreement,  commitment  or  arrangement
regarding  disposition  of the Note,  the  Warrant  or  shares  of Common  Stock
issuable upon conversion or exercise thereof.

          Pursuant to Rule  13d-1(k)  promulgated  under the  Exchange  Act, the
Reporting  Persons  have  entered  into an  agreement  with respect to the joint
filing of this  Schedule  13D and any  amendment  or  amendments  hereto,  which
agreement is included as an exhibit hereto.





ITEM 7.     MATERIAL TO BE FILED AS EXHIBITS

Exhibit 1.  Senior Subordinated  Secured Convertible  Note and  Warrant Purchase
            Agreement, dated as of May 26, 2005.

Exhibit 2.  Senior Subordinated Secured Convertible Note.

Exhibit 3.  Common Stock Purchase Warrant.

Exhibit 4.  Schedule 13D Joint Filing Agreement.


                                  SCHEDULE 13D
 -----------------------                                  ---------------------
| CUSIP NO. 13916P100   |                                | PAGE 13 OF 13       |
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                              SIGNATURES


            After reasonable inquiry and to the best of our knowledge
and belief, we certify that the information set forth in this
statement is true, complete and correct. Pursuant to Rule 13d-1(k)(1),
each of the undersigned agrees that this statement is filed on behalf
of each of us.

June 2, 2005

                                        /s/ Peter E. Salas
                                        ----------------------------------------
                                            PETER E. SALAS

                                     DOLPHIN MANAGEMENT INC.

                                     By: /s/ Peter E. Salas
                                        ----------------------------------------
                                     Name:   Peter E. Salas
                                     Its:    President

                                     DOLPHIN ADVISORS, LLC

                                     By:  Dolphin Management Inc.
                                     Its: Managing Member

                                     By:/s/ Peter E. Salas
                                        ----------------------------------------
                                     Name:  Peter E. Salas
                                     Its:   President

                                     DOLPHIN DIRECT EQUITY PARTNERS, LP

                                     By:  Dolphin Advisors, LLC
                                     Its: Managing Partner

                                     By:  Dolphin Management Inc.
                                     Its: Managing Member

                                     By: /s/ Peter E. Salas
                                        ----------------------------------------
                                     Name:   Peter E. Salas
                                     Its:    President


EX-99.1 2 e953960ex99_1.htm EXHIBIT 4, JOINT FILING AGREEMENT EX 99.1
                                                                       EXHIBIT 4

                       SCHEDULE 13D JOINT FILING AGREEMENT

          In  accordance  with  the  requirements  of Rule  13d-1(k)  under  the
Securities Exchange Act of 1934, as amended,  and subject to the limitations set
forth  therein,  the parties set forth below agree to jointly  file the Schedule
13D to which this joint filing  agreement is  attached,  and have duly  executed
this joint filing agreement as of the date set forth below.

          IN WITNESS  WHEREOF,  the undersigned have caused this Agreement to be
signed as of June 2, 2005.

                                        /s/ Peter E. Salas
                                        ----------------------------------------
                                            PETER E. SALAS

                                     DOLPHIN MANAGEMENT INC.

                                     By: /s/ Peter E. Salas
                                         ---------------------------------------
                                     Name:   Peter E. Salas
                                     Its:    President

                                     DOLPHIN ADVISORS, LLC

                                     By:  Dolphin Management Inc.
                                     Its: Managing Member

                                     By: /s/ Peter E. Salas
                                         ---------------------------------------
                                     Name:   Peter E. Salas
                                     Its:    President

                                     DOLPHIN DIRECT EQUITY PARTNERS, LP

                                     By:  Dolphin Advisors, LLC
                                     Its: Managing Partner

                                     By:  Dolphin Management, Inc.
                                     Its: Managing Member

                                     By: /s/ Peter E. Salas
                                         ---------------------------------------
                                     Name:   Peter E. Salas
                                     Its:    President


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