Long-Term Debt

9 Months Ended

Sep. 30, 2011

10.	Long-Term Debt

At September 30, 2011 and December 31, 2010, the Company had no long-term debt.

Lines of Credit

At December 31, 2010, the Company had two separate revolving credit agreements for revolving lines of credit with Bank of America (“BOA”) which were to expire on May 31, 2012. The Company and its subsidiary, GSE Power Systems, Inc., were jointly and severally liable as co-borrowers. The credit facilities enabled the Company to borrow funds to support working capital needs and standby letters of credit. The first line of credit which was in the principal amount of up to $3.5 million was amended on March 29, 2010 to increase the principal amount to $5.0 million, but was terminated on March 14, 2011 (see below). The second line of credit was in the principal amount of up to $2.5 million. This line of credit enabled the Company to borrow funds up to 80% of domestic accounts receivable, 30% of domestic unbilled receivables and 100% of the principal balance of a $600,000 certificate of deposit issued by BOA and was amended on March 14, 2011 (see below). The interest rate on this line of credit was based on the daily LIBOR rate plus 225 basis points, with interest only payments due monthly. The credit agreements contained certain restrictive covenants regarding future acquisitions, incurrence of debt and the payment of dividends. In addition, both credit agreements contained financial covenants with respect to the Company’s minimum tangible net worth, debt service coverage ratio, and funded debt to EBITDA ratio. At December 31, 2010, the Company was in default of the funded debt to EBITDA ratio.

Due to the Company’s financial covenant default as of December 31, 2010, BOA made the following amendments to the Company’s revolving credit agreements effective March 14, 2011:

A written waiver was granted for the funded debt to EBITDA ratio default.

The $5.0 million principal line of credit was terminated.

The financial covenants for the $2.5 million principal line of credit were deleted. Going forward, there are no financial covenants.

The Company was required to cash collateralize all outstanding standby letters of credit.

All future letters of credit issued by BOA must be cash collateralized.

Borrowings under the line of credit must be cash collateralized. Currently the Company has in place a $600,000 certificate of deposit as collateral for the line of credit.

As of September 30, 2011, the Company was contingently liable for eight standby letters of credit and two surety bonds totaling $5.4 million which represent performance and bid bonds on ten contracts. The Company has deposited the full value of eight of the standby letters of credit in certificates of deposit ($4.3 million) which have been restricted in that the Company does not have access to these funds until the related letters of credit have expired. The cash has been recorded on the Company’s balance sheet at September 30, 2011 as restricted cash.