(Mark One)
|
|||
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
|
||
|
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: (
|
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
|
|
|
Large accelerated filer □
|
Accelerated filer □
|
|
Smaller reporting company
|
Emerging growth company
|
PART I
|
Page
|
|
Item 1.
|
3 | |
Item 1A.
|
16 | |
Item 1B.
|
27 | |
Item 2.
|
27 | |
Item 3.
|
28 | |
Item 4.
|
28 | |
PART II
|
||
Item 5.
|
29 | |
Item 6.
|
29 | |
Item 7.
|
30 | |
Item 7A.
|
41 | |
Item 8.
|
42
|
|
Item 9.
|
77 | |
Item 9A.
|
77 | |
Item 9B.
|
78 | |
Item 9C.
|
78 | |
PART III
|
||
Item 10.
|
78 | |
Item 11.
|
79 | |
Item 12.
|
79 | |
Item 13.
|
80 | |
Item 14.
|
80 | |
PART IV
|
||
Item 15.
|
80 | |
Item 16.
|
81
|
|
85 | ||
81
|
* |
to be incorporated by reference from the Proxy Statement for the registrant’s 2021 Annual Meeting of Shareholders.
|
• |
changes in the rate of economic growth in the United States and other major international economies;
|
• |
changes in investment by the nuclear and fossil electric utility industry, the chemical and petrochemical industries, or the U.S. military;
|
• |
changes in the financial condition of our customers;
|
• |
changes in the regulatory environment;
|
• |
changes in political climate;
|
• |
changes in project design or schedules;
|
• |
contract cancellations;
|
• |
changes in our estimates of costs to complete projects;
|
• |
changes in trade, monetary and fiscal policies worldwide;
|
• |
currency fluctuations;
|
• |
war and/or terrorist attacks on facilities either owned by our customers or our company, or where equipment or services are or may be provided;
|
• |
catastrophic failure or other incident at facilities either owned by our customers or our company, or where equipment or services are or may be provided;
|
• |
initiation, prosecution, or outcomes of future litigation;
|
• |
protection and validity of our trademarks and other intellectual property rights;
|
• |
increasing competition by foreign and domestic companies;
|
• |
compliance with our debt covenants;
|
• |
recoverability of claims against our customers and others;
|
• |
changes in estimates used in our critical accounting policies; and
|
• |
impact of the Novel Coronavirus (COVID-19), or other future pandemics, on the global economy and on our customers, suppliers, employees and business.
|
• |
optimization of existing generation assets
|
• |
design support and deployment of advanced reactor designs
|
• |
integration with renewable power sources
|
• |
Design engineering for plant mechanical, electrical, I&C, civil and structural, fire protection and cyber systems
|
• |
Engineering programs addressing ASME codes, balance of plant programs other regulatory programs and economic driven programs such as plant thermal performance
|
• |
Simulation engineering for nuclear, thermal and process plant training and virtual commissioning
|
• |
Retain and strengthen our “Base” revenue through optimization of current capabilities and established client relationships.
|
• |
Integrate our product and service areas to provide more comprehensive or enhanced solutions when internal or external value can be identified.
|
• |
Explore, evaluate, and develop new collaborative service areas, products, and solutions closely aligned with internal core strengths, client goals, and overall industry clean power initiatives.
|
Years ended December 31,
|
||||||||
2021
|
2020
|
|||||||
Nuclear power
|
91
|
%
|
89
|
%
|
||||
Fossil fuel power
|
6
|
%
|
7
|
%
|
||||
Process
|
3
|
%
|
4
|
%
|
||||
Total
|
100
|
%
|
100
|
%
|
• |
potential exposure to unknown liabilities of the acquired companies;
|
• |
higher than anticipated acquisition costs and expenses;
|
• |
depletion of cash and other Company assets and resources in connection with the acquisition or integration;
|
• |
difficulty and expense of integrating the operations and personnel of the companies, especially if the acquired operations are geographically distant or culturally different;
|
• |
potential disruption of our ongoing business and diversion of management time and attention;
|
• |
failure to maximize our financial and strategic position by the successful incorporation of acquired technology;
|
• |
difficulties in adopting and maintaining uniform standards, controls, procedures, and policies;
|
• |
loss of key employees and customers as a result of changes in management; and
|
• |
possible dilution to our shareholder.
|
• |
export laws and regulations that could erode our profit margins or restrict the export of some or all of our products;
|
• |
compliance with the U.S. Foreign Corrupt Practices Act and similar non-U.S. regulations;
|
• |
the burden and cost of compliance with foreign laws, treaties and technical standards generally, as well as responding to changes in those requirements;
|
• |
contract award and funding delays;
|
• |
potential restrictions on transfers of funds;
|
• |
potential difficulties in accounts receivable collection;
|
• |
currency fluctuations, including costs and potentially limited availability of viable hedging options;
|
• |
import and export duties and value added or other taxes;
|
• |
transportation and communication delays and interruptions;
|
• |
differences in insurance availability and coverage in some jurisdictions;
|
• |
difficulties involving strategic alliances and managing foreign sales agents or representatives;
|
• |
uncertainties arising from foreign local business practices and cultural considerations; and
|
• |
potential military conflicts and political risks, including particularly the current conflict between Russia and Ukraine
|
• |
potential disruption of our international business due to the worldwide COVID-19 virus outbreak.
|
Years ended December 31,
|
||||||||
2021
|
2020
|
|||||||
Customer A
|
28
|
%
|
0
|
%
|
||||
Customer B
|
19
|
%
|
15
|
%
|
||||
Customer C
|
13
|
%
|
12
|
%
|
||||
Customer D
|
10
|
%
|
11
|
%
|
Years ended December 31,
|
||||||||
2021
|
2020
|
|||||||
Customer E
|
14
|
%
|
6
|
%
|
||||
Customer F
|
12
|
%
|
11
|
%
|
• |
providing that our Board of Directors fixes the number of members of the board and fills all vacancies on the Board of Directors;
|
• |
providing for the division of our Board of Directors into three classes with staggered terms;
|
• |
limiting who may call special meetings of shareholders;
|
• |
prohibiting shareholder action by written consent, thereby requiring shareholder action to be taken at a meeting of the shareholders;
|
• |
establishing advance notice requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted on by shareholders at shareholder meetings;
|
• |
establishing supermajority vote requirements for certain amendments to our certificate of incorporation and bylaws;
|
• |
limiting the right of shareholders to remove directors; and
|
• |
authorizing the issuance of “blank check” preferred stock, which could be issued by our Board of Directors to increase the number of outstanding shares and thwart a takeover attempt.
|
ITEM 3. |
LEGAL PROCEEDINGS.
|
ITEM 4. |
MINE SAFETY DISCLOSURES.
|
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
2021
|
||||||||
Quarter
|
High
|
Low
|
||||||
First
|
$
|
2.68
|
$
|
1.30
|
||||
Second
|
$
|
1.92
|
$
|
1.24
|
||||
Third
|
$
|
1.70
|
$
|
1.14
|
||||
Fourth
|
$
|
1.73
|
$
|
1.27
|
2020
|
||||||||
Quarter
|
High
|
Low
|
||||||
First
|
$
|
1.84
|
$
|
0.88
|
||||
Second
|
$
|
1.18
|
$
|
0.91
|
||||
Third
|
$
|
1.08
|
$
|
0.90
|
||||
Fourth
|
$
|
1.46
|
$
|
0.98
|
ITEM 7. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
($ in thousands)
|
Years ended December 31,
|
|||||||||||||||
2021
|
%
|
2020
|
%
|
|||||||||||||
Revenue
|
$
|
55,183
|
100.0
|
%
|
$
|
57,620
|
100.0
|
%
|
||||||||
Cost of revenue
|
43,325
|
78.5
|
%
|
42,835
|
74.3
|
%
|
||||||||||
Gross profit
|
11,858
|
21.5
|
%
|
14,785
|
25.7
|
%
|
||||||||||
Operating expenses
|
||||||||||||||||
Selling, general and administrative
|
14,908
|
27.0
|
%
|
15,765
|
27.4
|
%
|
||||||||||
Research and development
|
626
|
1.1
|
%
|
686
|
1.2
|
%
|
||||||||||
Restructuring charges
|
798
|
1.4
|
%
|
1,297
|
2.3
|
%
|
||||||||||
Loss on impairment
|
3
|
-
|
4,302
|
7.5
|
%
|
|||||||||||
Depreciation
|
284
|
0.5
|
%
|
330
|
0.6
|
%
|
||||||||||
Amortization of definite-lived intangible assets
|
1,213
|
2.2
|
%
|
1,943
|
3.4
|
%
|
||||||||||
Total operating expenses
|
17,832
|
32.3
|
%
|
24,323
|
42.2
|
%
|
||||||||||
Operating loss
|
(5,974
|
)
|
(10.8
|
%)
|
(9,538
|
)
|
(16.6
|
%)
|
||||||||
Interest expense
|
(159
|
)
|
(0.3
|
%)
|
(623
|
)
|
(1.1
|
%)
|
||||||||
Gain (loss) on derivative instruments, net
|
19
|
0.0
|
%
|
(17
|
)
|
0.0
|
%
|
|||||||||
Other income (expense), net
|
16,884
|
30.6
|
%
|
(4
|
)
|
0.0
|
%
|
|||||||||
Income (loss) before taxes
|
10,770
|
19.5
|
%
|
(10,182
|
)
|
(17.7
|
%)
|
|||||||||
Provision for income taxes
|
163
|
0.3
|
%
|
355
|
0.6
|
%
|
||||||||||
Net income (loss)
|
$
|
10,607
|
19.2
|
%
|
$
|
(10,537
|
)
|
(18.3
|
%)
|
(in thousands)
|
Year ended December 31,
|
|||||||||||||||
2021
|
2020
|
Change
|
||||||||||||||
Revenue:
|
$ |
|
%
|
|||||||||||||
Performance Improvement Solutions
|
$
|
28,140
|
$
|
32,790
|
(4,650
|
)
|
(14.2
|
)%
|
||||||||
Workforce Solutions
|
27,043
|
24,830
|
2,213
|
8.9
|
%
|
|||||||||||
Total revenue
|
$
|
55,183
|
$
|
57,620
|
(2,437
|
)
|
(4.2
|
)%
|
($ in thousands)
|
Years ended December 31,
|
|||||||||||||||
2021
|
%
|
2020
|
%
|
|||||||||||||
Gross profit:
|
||||||||||||||||
Performance Improvement Solutions
|
$
|
8,124
|
28.9
|
%
|
$
|
11,395
|
34.8
|
%
|
||||||||
Workforce Solutions
|
3,734
|
13.8
|
%
|
3,390
|
13.7
|
%
|
||||||||||
Consolidated gross profit
|
$
|
11,858
|
21.5
|
%
|
$
|
14,785
|
25.7
|
%
|
($ in thousands)
|
Years ended December 31,
|
|||||||||||||||
2021
|
%
|
2020
|
%
|
|||||||||||||
Selling, general and administrative expenses:
|
||||||||||||||||
Corporate charges
|
$
|
10,305
|
69.1
|
%
|
$
|
10,881
|
69.0
|
%
|
||||||||
Business development
|
3,024
|
20.3
|
%
|
3,364
|
21.3
|
%
|
||||||||||
Facility operation & maintenance (O&M)
|
872
|
5.8
|
%
|
928
|
5.9
|
%
|
||||||||||
Provision for loss on legal settlement
|
-
|
0.0
|
%
|
477
|
3.0
|
%
|
||||||||||
Bad debt expense
|
691
|
|
4.6
|
%
|
103
|
0.7
|
%
|
|||||||||
Other
|
16
|
0.1
|
%
|
12
|
0.1
|
%
|
||||||||||
Total
|
$
|
14,908
|
100.0
|
%
|
$
|
15,765
|
100.0
|
%
|
• |
A $6.2 million decrease in net inflows from changes in net working capital was primarily driven by increased collections due to large milestone payments of large
projects in the prior year.
|
• |
A $2.1 million decrease in operating expenses (excluding non-cash operating expenses) mainly driven by a reduction of external legal and audit fees in 2021.
|
• |
A $2.9 million decrease in gross profit, primarily driven by lower revenue due to COVID-19.
|
Three Months Ended
|
Twelve Months Ended
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
Net income (loss)
|
$
|
(1,857
|
)
|
$
|
(1,469
|
)
|
$
|
10,607
|
$
|
(10,537
|
)
|
|||||
Interest expense, net
|
24
|
67
|
159
|
623
|
||||||||||||
Provision for income taxes
|
36
|
189
|
163
|
355
|
||||||||||||
Depreciation and amortization
|
439
|
582
|
1,865
|
2,612
|
||||||||||||
EBITDA
|
(1,358
|
)
|
(631
|
)
|
12,794
|
(6,947
|
)
|
|||||||||
Litigation
|
(22
|
)
|
568
|
(22
|
)
|
477
|
||||||||||
Loss on impairment
|
-
|
-
|
3
|
4,302
|
||||||||||||
Employee retention credit
|
-
|
-
|
(7,162
|
)
|
-
|
|||||||||||
PPP Loan and accumulated interest forgiveness
|
-
|
-
|
(10,127
|
)
|
-
|
|||||||||||
Restructuring charges
|
-
|
1,102
|
798
|
1,297
|
||||||||||||
Stock-based compensation expense
|
259
|
21
|
1,043
|
378
|
||||||||||||
Change in fair value of derivative instruments
|
(19
|
)
|
52
|
(19
|
)
|
17
|
||||||||||
Acquisition-related expense
|
-
|
1
|
-
|
192
|
||||||||||||
VAT write-off
|
-
|
-
|
450
|
-
|
||||||||||||
Adjusted EBITDA
|
$
|
(1,140
|
)
|
$
|
1,113
|
$
|
(2,242
|
)
|
$
|
(284
|
)
|
Three Months ended
December 31,
|
Twelve Months ended
December 31,
|
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
(unaudited)
|
(unaudited)
|
audited
|
audited
|
|||||||||||||
Net income (loss)
|
$
|
(1,857
|
)
|
$
|
(1,469
|
)
|
$
|
10,607
|
$
|
(10,537
|
)
|
|||||
Litigation
|
(22
|
)
|
568
|
(22
|
)
|
477
|
||||||||||
Loss on impairment
|
-
|
-
|
3
|
4,302
|
||||||||||||
Employee retention credit
|
-
|
-
|
(7,162
|
)
|
-
|
|||||||||||
PPP Loan and accumulated interest forgiveness
|
-
|
-
|
(10,127
|
)
|
-
|
|||||||||||
Restructuring charges
|
-
|
1,102
|
798
|
1,297
|
||||||||||||
Stock-based compensation expense
|
259
|
21
|
1,043
|
378
|
||||||||||||
Change in fair value of derivative instruments
|
(19
|
)
|
52
|
(19
|
)
|
17
|
||||||||||
Acquisition-related expense
|
-
|
1
|
-
|
192
|
||||||||||||
VAT write-off
|
-
|
-
|
450
|
-
|
||||||||||||
Amortization of intangible assets related to acquisitions
|
284
|
415
|
1,213
|
1,943
|
||||||||||||
Valuation allowance
|
246
|
1,589
|
246
|
1,589
|
||||||||||||
Income tax expense impact of adjustments
|
46
|
345
|
46
|
345
|
||||||||||||
Adjusted net income (loss)
|
$
|
(1,063
|
)
|
$
|
2,624
|
$
|
(2,924
|
)
|
$
|
3
|
||||||
Diluted earnings (loss) per common share
|
$
|
(0.09
|
)
|
$
|
(0.07
|
)
|
$
|
0.51
|
$
|
(0.52
|
)
|
|||||
Adjusted earnings (loss) per common share – Diluted
|
$
|
(0.05
|
)
|
$
|
0.13
|
$
|
(0.14
|
)
|
$
|
0
|
||||||
Weighted average shares outstanding – Diluted
|
20,901,005
|
20,646,910
|
20,761,191
|
20,439,157
|
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
• |
Obtained an understanding of management’s process for developing fair value estimates including testing the completeness, accuracy, and relevance of underlying
data and evaluating significant management assumptions by comparing historical revenue and operating results to budgeted amounts; and reviewing backlog and projected revenues giving consideration to the impact the COVID-19 pandemic has
had on the Company’s operations.
|
• |
Performed sensitivity analyses of significant assumptions, particularly as they relate to revenue growth rates, operating margins and discount
rates, and evaluated their impact on future cash flows that form the basis of fair value for the reporting units.
|
• |
Utilized firm personnel with specialized knowledge and skills in valuation to assist in assessing the appropriateness of the fair value
methodology, evaluating the reasonableness of certain assumptions used including the discount rates and testing the mathematical accuracy of the discounted cash flow model.
|
• |
We obtained an understanding of management’s process for applying the cost-to-cost method to SBD contracts, including management’s process for developing, revising, and applying
estimates-at-completion and the on-going monitoring.
|
• |
For a sample of contracts, we evaluated inputs and assumptions requiring significant management judgments included within the Company’s estimation of costs to complete by
performed the following:
|
• |
Inspected the underlying contract, related amendments, and change orders (if any) to test the existence of customer arrangements and obtain
an understanding of the contractual requirements and related performance obligations.
|
• |
Tested actual costs incurred to-date and assessed the relative progress toward satisfying the performance obligation(s) of the contract.
|
• |
Evaluated the estimation of costs to complete including anticipated direct labor, subcontract labor, and other direct cost by:
|
• |
Inquiring of financial and operational personnel of the Company and evaluating factors within the cost to complete estimates that may demonstrate indication of potential
management bias.
|
• |
Inspecting correspondences, if any, between the Company and the customer regarding actual to-date and expected performance.
|
• |
Evaluating the sufficiency of the Company’s assessment of contract performance risks included within the estimated costs to complete.
|
• |
Performing a “look back” analysis by comparing the Company’s historical estimates of costs to complete to actual costs incurred in subsequent
documentation to assess the Company’s ability to develop reliable cost estimates.
|
• |
In response to the material weakness noted above, we obtained account reconciliations of unbilled receivables and billings in excess of revenue earned as of December 31, 2021,
evaluated the accuracy and completeness of the schedules, agreed such reconciliations to the trial balance to determine whether reconciling items were appropriate and isolated and investigated all unbilled receivables with no recent
activity.
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Contract receivables, net
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Equipment, software and leasehold improvements, net
|
|
|
||||||
Software development costs, net
|
|
|
||||||
Goodwill
|
|
|
||||||
Intangible assets, net
|
|
|
||||||
Operating lease right-of-use assets, net
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Line of credit
|
$
|
|
$
|
|
||||
PPP Loan, current portion
|
|
|
||||||
Accounts payable
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Accrued compensation
|
|
|
||||||
Billings in excess of revenue earned
|
|
|
||||||
Accrued warranty
|
|
|
||||||
Income taxes payable
|
|
|
||||||
Other current liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
PPP Loan, noncurrent portion
|
|
|
||||||
Operating lease liabilities noncurrent
|
|
|
||||||
Other noncurrent liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies (Note 16)
|
|
|
||||||
Shareholders' equity:
|
||||||||
Preferred stock $
|
|
|
||||||
Common stock $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Accumulated other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
Treasury stock at cost,
|
(
|
)
|
(
|
)
|
||||
Total shareholders' equity
|
|
|
||||||
Total liabilities and shareholders' equity
|
$
|
|
$
|
|
Years ended December 31,
|
||||||||
2021
|
2020
|
|||||||
Revenue
|
$
|
|
$
|
|
||||
Cost of revenue
|
|
|
||||||
Gross profit
|
|
|
||||||
Operating expenses
|
||||||||
Selling, general and administrative
|
|
|
||||||
Research and development
|
|
|
||||||
Restructuring charges
|
|
|
||||||
Loss on impairment
|
|
|
||||||
Depreciation
|
|
|
||||||
Amortization of definite-lived intangible assets
|
|
|
||||||
Total operating expenses
|
|
|
||||||
Operating loss
|
(
|
)
|
(
|
)
|
||||
Interest expense
|
(
|
)
|
(
|
)
|
||||
Gain (loss) on derivative instruments, net
|
|
(
|
)
|
|||||
Other income (expense), net
|
|
(
|
)
|
|||||
Income (loss) before taxes
|
|
(
|
)
|
|||||
Provision for income taxes
|
|
|
||||||
Net income (loss)
|
$
|
|
$
|
(
|
)
|
|||
Net income (loss) per common share - basic
|
$
|
|
$
|
(
|
)
|
|||
Diluted income (loss) per common share
|
$
|
|
$
|
(
|
)
|
|||
Weighted average shares outstanding used to compute net loss per share - basic
|
|
|
||||||
Weighted average shares outstanding - Diluted
|
|
|
||||||
Years ended December 31,
|
||||||||
2021
|
2020
|
|||||||
Net income (loss)
|
$
|
|
$
|
(
|
)
|
|||
Cumulative translation adjustment
|
|
|
||||||
Comprehensive Income (loss)
|
$
|
|
$
|
(
|
)
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Accumulated
Other Comprehensive
|
Treasury Stock
|
||||||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Loss
|
Shares
|
Amount
|
Total
|
|||||||||||||||||||||||||
Balance, January 1, 2020
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
(
|
)
|
|
|
-
|
|
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Net loss
|
-
|
|
|
(
|
)
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Balance, December 31, 2020
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
Common stock issued for RSUs vested | ( |
) | - | |||||||||||||||||||||||||||||
Shares withheld to pay taxes | - | ( |
) | - | ( |
) | ||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||
Net income | - | - | ||||||||||||||||||||||||||||||
Balance, December 31, 2021 | $ |
$ |
$ |
( |
) | $ |
( |
) | ( |
) | $ |
( |
) | $ |
Years ended December 31,
|
||||||||
2021
|
2020
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$
|
|
$
|
(
|
)
|
|||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
||||||||
Loss on impairment
|
|
|
||||||
Depreciation
|
|
|
||||||
Amortization of intangible assets
|
|
|
||||||
Amortization of capitalized software development costs
|
|
|
||||||
Amortization of deferred financing costs
|
||||||||
Gain on PPP loan forgiveness
|
(
|
)
|
|
|||||
Stock-based compensation expense
|
|
|
||||||
Bad debt (recovery) expense
|
|
|
||||||
((Gain) loss on derivative instruments, net
|
(
|
)
|
|
|||||
Deferred income taxes
|
|
|
||||||
Gain on sale of assets
|
|
(
|
)
|
|||||
Changes in assets and liabilities:
|
||||||||
Contract receivables, net
|
(
|
)
|
|
|||||
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) provided by operating activities
|
(
|
)
|
|
|||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(
|
)
|
(
|
)
|
||||
Proceeds from sale of equipment
|
|
|
||||||
Capitalized software development costs
|
(
|
)
|
(
|
)
|
||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Proceeds from line of credit
|
|
|
||||||
Repayment of line of credit
|
(
|
)
|
(
|
)
|
||||
Payment of insurance premium
|
(
|
)
|
(
|
)
|
||||
Repayment of long-term debt
|
|
(
|
)
|
|||||
Proceeds from Paycheck Protection Program Loan
|
|
|
||||||
Termination fee on Interest rate swap agreement
|
(
|
)
|
||||||
Shares withheld to pay taxes
|
(
|
)
|
(
|
)
|
||||
Deferred financing costs
|
|
(
|
)
|
|||||
Net cash used in financing activities
|
(
|
)
|
(
|
)
|
||||
Effect of exchange rate changes on cash
|
|
|
||||||
Net decrease in cash and cash equivalents
|
(
|
)
|
(
|
)
|
||||
Cash, cash equivalents at beginning of year
|
|
|
||||||
Cash, cash equivalents at end of year
|
$
|
|
$
|
|
(in thousands, except for per share data)
|
Years ended December 31,
|
|||||||
2021
|
2020
|
|||||||
Numerator:
|
||||||||
Net income (loss) attributed to common shareholders
|
$
|
|
$
|
(
|
)
|
|||
Denominator:
|
||||||||
Weighted-average shares outstanding for basic earnings per share
|
|
|
||||||
Effect of dilutive securities:
|
||||||||
Dilutive RSU shares outstanding
|
|
|
||||||
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share
|
|
|
||||||
Shares related to dilutive securities excluded because inclusion would be anti-dilutive
|
|
|
|
Twelve Months Ended December 31,
|
|||||||
2021
|
2020
|
|||||||
Performance Improvement Solutions segment
|
||||||||
System Design and Build
|
$
|
|
$
|
|
||||
Point in time
|
|
|
||||||
Over time
|
|
|
||||||
Software
|
|
|
||||||
Point in time
|
|
|
||||||
Over time
|
|
|
||||||
Training and Consulting Services
|
|
|
||||||
Point in time
|
|
|
||||||
Over time
|
|
|
||||||
Workforce Solutions segment
|
||||||||
Training and Consulting Services
|
|
|
||||||
Point in time
|
|
|
||||||
Over time
|
|
|
||||||
Total revenue
|
$
|
|
$
|
|
|
December 31, 2021
|
December 31, 2020
|
||||||
Billings in excess of revenue earned (BIE)
|
$
|
|
$
|
|
||||
Revenue recognized in the period from amounts included in BIE at the beginning of the period
|
$
|
|
|
Sykesville
|
Fort Worth
|
Total
|
||||||||||
Square Ft in use December 1, 2019
|
|
|
|
|||||||||
Square Ft in use December 31, 2019
|
|
|
|
|||||||||
Abandoned Square Ft
|
|
|
|
|||||||||
(in thousands)
|
||||||||||||
Pre-Abandonment ROU Balance
|
$
|
|
$
|
|
$
|
|
||||||
Post-Abandonment Balance
|
|
|
|
|||||||||
Abandonment ROU
|
$ |
|
$ |
|
$ |
|
Total 2021
Restructuring Costs
|
Total 2020
Restructuring Costs
|
|||||||
Restructuring Costs
|
||||||||
Lease termination costs
|
$
|
(
|
)
|
$
|
|
|||
International restructuring
|
|
|
||||||
Employee termination benefits
|
|
|
||||||
Total
|
$
|
|
$
|
|
(in thousands)
|
As of December 31, 2021
|
|||||||||||
Gross Carrying Amount
|
Accumulated Amortization
|
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, 2020
|
|||||||||||||||
Gross Carrying Amount
|
Accumulated Amortization
|
Impact of 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:
|
||||
2022
|
$
|
|
||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
||||
Thereafter
|
|
|||
$
|
|
|
Goodwill
|
Impairment
|
Net
|
|||||||||
Performance Improvement Solutions
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Workforce Solutions
|
|
|
|
|||||||||
Net book value at December 31, 2021
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
December 31,
|
|||||||
2021
|
2020
|
|||||||
Billed receivables
|
$
|
|
$
|
|
||||
Unbilled receivables
|
|
|
||||||
Allowance for doubtful accounts
|
(
|
)
|
(
|
)
|
||||
Total contract receivables, net
|
$
|
|
$
|
|
(in thousands)
|
As of and for the
|
|||||||
Years ended December 31,
|
||||||||
2021
|
2020
|
|||||||
Beginning balance
|
$
|
|
$
|
|
||||
Current year (recovery) provision
|
|
|
||||||
Current year write-offs
|
(
|
)
|
(
|
)
|
||||
Ending balance
|
$
|
|
$
|
|
(in thousands)
|
December 31,
|
|||||||
2021
|
2020
|
|||||||
Income tax receivable
|
$
|
|
$
|
|
||||
Prepaid expenses
|
|
|
||||||
Other current assets
|
|
|
||||||
Total
|
$
|
|
$
|
|
(in thousands)
|
December 31,
|
|||||||
2021
|
2020
|
|||||||
Computer and equipment
|
$
|
|
$
|
|
||||
Software
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Furniture and fixtures
|
|
|
||||||
|
|
|||||||
Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
Equipment, software and leasehold improvements, net
|
$
|
|
$
|
|
(in thousands)
|
As of and for the
|
|||||||
years ended December 31,
|
||||||||
2021
|
2020
|
|||||||
Beginning balance
|
$
|
|
$
|
|
||||
Current year provision
|
(
|
)
|
(
|
)
|
||||
Current year claims
|
(
|
)
|
(
|
)
|
||||
Currency adjustment
|
|
|
||||||
Ending balance
|
$
|
|
$
|
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
Current
|
$
|
|
$
|
|
||||
Non-current
|
|
|
||||||
Total Warranty
|
$
|
|
$
|
|
Quoted Prices
in Active Markets
for Identical Assets
|
Significant
Other Observable
Inputs
|
Significant
Unobservable
Inputs
|
||||||||||||||
(in thousands)
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
||||||||||||
Money market funds
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Total assets
|
$
|
|
$
|
|
$
|
|
$
|
|
Quoted Prices
in Active Markets
for Identical Assets
|
Significant
Other Observable
Inputs
|
Significant
Unobservable
Inputs
|
||||||||||||||
(in thousands)
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
||||||||||||
Money market funds
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Total assets
|
$
|
|
$
|
|
$
|
|
$
|
|
Years ended December 31,
|
||||||||
(in thousands)
|
2021
|
2020
|
||||||
Foreign exchange contracts- change in fair value
|
$
|
|
$
|
|
||||
Interest rate swap - change in fair value
|
|
(
|
)
|
|||||
Remeasurement of related contract receivables and billings in excess of revenue earned
|
|
|
||||||
$
|
|
$
|
(
|
)
|
(in thousands)
|
Years ended December 31,
|
|||||||
2021
|
2020
|
|||||||
Domestic
|
$
|
|
$
|
(
|
)
|
|||
Foreign
|
(
|
)
|
|
|||||
Total
|
$
|
|
$
|
(
|
)
|
(in thousands)
|
Years ended December 31,
|
|||||||
2021
|
2020
|
|||||||
Current:
|
||||||||
Federal
|
$
|
(
|
)
|
$
|
|
|||
State
|
|
|
||||||
Foreign
|
|
|
||||||
Subtotal
|
|
|
||||||
Deferred:
|
||||||||
Federal
|
|
|
||||||
State
|
|
|
||||||
Foreign
|
|
|
||||||
Subtotal
|
|
|
||||||
Total
|
$
|
|
$
|
|
Effective Tax Rate percentage (%)
|
||||||||
Years ended December 31,
|
||||||||
2021
|
2020
|
|||||||
Statutory federal income tax rate
|
|
%
|
|
%
|
||||
State income taxes, net of federal tax benefit
|
|
%
|
|
%
|
||||
Effect of foreign operations
|
(
|
)%
|
(
|
)%
|
||||
Effect of foreign restructuring
|
|
%
|
(
|
)%
|
||||
Change in valuation allowance
|
|
%
|
(
|
)%
|
||||
PPP Loan Forgiveness
|
(
|
)%
|
|
%
|
||||
Meals and Entertainment
|
|
%
|
(
|
)%
|
||||
Stock-based compensation
|
|
%
|
(
|
)%
|
||||
GILTI Inclusion
|
|
%
|
(
|
)%
|
||||
Uncertain Tax Positions
|
(
|
)%
|
(
|
)%
|
||||
Prior year reconciling items
|
|
%
|
|
%
|
||||
Effective tax rate
|
|
%
|
(
|
)%
|
(in thousands)
|
As of December 31,
|
|||||||
2021
|
2020
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carryforwards
|
$
|
|
$
|
|
||||
Accruals
|
|
|
||||||
Reserves
|
|
|
||||||
Alternative minimum tax credit carryforwards
|
|
|
||||||
Stock-based compensation expense
|
|
|
||||||
Intangible assets
|
|
|
||||||
Goodwill
|
|
|
||||||
Operating lease liability
|
|
|
||||||
Fixed Assets
|
||||||||
Other
|
|
|
||||||
Total deferred tax asset
|
|
|
||||||
Valuation allowance
|
(
|
)
|
(
|
)
|
||||
Total deferred tax asset less valuation allowance
|
|
|
||||||
Deferred tax liabilities:
|
||||||||
Software development costs
|
(
|
)
|
(
|
)
|
||||
Fixed assets
|
|
(
|
)
|
|||||
Indefinite-lived intangibles
|
(
|
)
|
(
|
)
|
||||
Operating lease - right of use asset
|
(
|
)
|
(
|
)
|
||||
Other
|
(
|
)
|
(
|
)
|
||||
Total deferred tax liability
|
(
|
)
|
(
|
)
|
||||
Net deferred tax liability
|
$
|
(
|
)
|
$
|
|
China
|
Ukraine
|
South Korea
|
UK
|
U.S.
|
||||||||||||||||||||||||||||||||||||||||
(in thousands)
|
Tax
|
Interest and Penalties
|
Tax
|
Interest and Penalties
|
Tax
|
Interest and Penalties
|
Tax
|
Interest and Penalties
|
Tax
|
Interest and Penalties
|
Total
|
|||||||||||||||||||||||||||||||||
Balance, January 1, 2020
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||||||||
Increases
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Decreases
|
|
|
(
|
)
|
(
|
)
|
|
|
|
|
|
|
(
|
)
|
||||||||||||||||||||||||||||||
Balance, December 31, 2020
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||||||||
Increases
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Decreases
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||||
Balance, December 31, 2021
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Number of Shares
|
Weighted Average
Fair Value
|
|||||||
Nonvested RSUs at January 1, 2020
|
|
$
|
|
|||||
RSUs granted
|
|
|
||||||
RSUs forfeited
|
(
|
)
|
|
|||||
RSUs vested
|
(
|
)
|
|
|||||
Nonvested RSUs at December 31, 2020
|
|
$
|
|
|||||
Nonvested RSUs at January 1, 2021
|
|
$
|
|
|||||
RSUs granted
|
|
|
||||||
RSUs forfeited
|
(
|
)
|
|
|||||
RSUs vested
|
(
|
)
|
|
|||||
Nonvested RSUs at December 31, 2021
|
|
$
|
|
Operating Leases
|
Classification
|
December 31, 2021
|
December 31, 2020
|
|||||||
Leased Assets
|
|
|||||||||
Operating lease - right of use assets
|
|
$
|
|
$ |
|
|||||
|
|
|||||||||
Lease Liabilities
|
|
|||||||||
Operating lease liabilities - Current
|
|
|
|
|||||||
Operating lease liabilities
|
|
|||||||||
|
|
$ |
$ |
Lease Cost
|
Classification
|
Twelve months ended
December 31, 2021
|
||||
Operating lease cost (1)
|
Selling, general and administrative expenses
|
$
|
|
|||
Short-term leases costs (2)
|
Selling, general and administrative expenses
|
|
||||
Sublease income (3)
|
Selling, general and administrative expenses
|
(
|
)
|
|||
Net lease cost
|
|
$
|
|
(in thousands)
|
Gross Future
|
|||
Minimum Lease
|
||||
Payments
|
||||
2022
|
$
|
|
||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
Thereafter
|
|
|||
Total
|
$
|
|
||
Less: Interest
|
|
|||
Present value of lease payments
|
$
|
|
Lease Term and Discount Rate
|
Twelve months ended
December 31, 2021
|
|||
Weighted-average remaining lease term (years)
|
||||
Operating leases
|
|
|||
Weighted-average discount rate
|
||||
Operating leases
|
|
%
|
Twelve months ended December 31,
|
||||||||
Cash paid for amounts included in measurement of liabilities
|
2021
|
2020
|
||||||
Cash paid for amounts included in measurement of liabilities
|
$
|
|
$
|
|
||||
|
||||||||
Right-of-use assets obtained in exchange for new operating lease liabilities
|
$
|
|
$
|
|
(in thousands)
|
Years ended December 31,
|
|||||||
2021
|
2020
|
|||||||
Revenue:
|
||||||||
Performance Improvement Solutions
|
$
|
|
$
|
|
||||
Workforce Solutions
|
|
|
||||||
Total revenue
|
$
|
|
$
|
|
||||
Operating loss
|
||||||||
Performance Improvement Solutions
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Workforce Solutions
|
(
|
)
|
(
|
)
|
||||
Litigation
|
|
(
|
)
|
|||||
Loss on impairment
|
(
|
)
|
(
|
)
|
||||
Operating loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Interest expense
|
(
|
)
|
(
|
)
|
||||
Gain (loss) on derivative instruments, net
|
|
(
|
)
|
|||||
Other income (expense), net
|
|
(
|
)
|
|||||
Income (loss) before taxes
|
$
|
|
$
|
(
|
)
|
(in thousands)
|
December 31,
|
|||||||
2021
|
2020
|
|||||||
Performance Improvement Solutions
|
$
|
|
$
|
|
||||
Workforce Solutions
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
(in thousands)
|
Year ended December 31, 2021
|
|||||||||||||||||||
United States
|
Europe
|
Asia
|
Eliminations
|
Consolidated
|
||||||||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
-
|
$
|
|
||||||||||
Transfers between geographic locations
|
|
|
|
(
|
)
|
|
||||||||||||||
Total revenue
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
Operating income (loss)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
||||||
Total assets, at December 31
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
Year ended December 31, 2020
|
|||||||||||||||||||
United States
|
Europe
|
Asia
|
Eliminations
|
Consolidated
|
||||||||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
-
|
$
|
|
||||||||||
Transfers between geographic locations
|
|
|
|
(
|
)
|
|
||||||||||||||
Total revenue
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
Operating income (loss)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
||||||||
Total assets, at December 31
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
Year ended December 31,
|
|||||||
2021
|
2020
|
|||||||
Cash paid for interest and income taxes:
|
||||||||
Interest
|
$
|
|
$
|
|
||||
Income taxes
|
$
|
|
$
|
|
||||
Noncash activity of financing insurance premium
|
$
|
|
$
|
|
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|
ITEM 9A. |
CONTROLS AND PROCEDURES.
|
ITEM 9B. |
OTHER INFORMATION.
|
ITEM 9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION.
|
ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
ITEM 11. |
EXECUTIVE COMPENSATION.
|
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.
|
Plan Category
|
Number of
Securities to
be Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
(a)
|
Weighted
Average
Exercise Price
of
Outstanding
Options,
Warrants and
Rights (b)
|
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))
(c)
|
|||||||||||
Equity compensation plans approved by security holders
|
Options
|
-
|
$
|
-
|
||||||||||
|
RSUs |
1,595,665
|
1.77
|
|||||||||||
1,595,665
|
$
|
1.77
|
1,266,479
|
|||||||||||
Equity compensation plans not approved by security holders
|
-
|
$
|
-
|
-
|
||||||||||
Total
|
1,595,665
|
$
|
1.77
|
1,266,479
|
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
|
ITEM 14. |
PRINCIPAL ACCOUNTING FEES AND SERVICES.
|
ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|
GSE Systems, Inc. and Subsidiaries
|
Report of Independent Registered Public Accounting Firms (PCAOB ID
) |
Consolidated Balance Sheets as of December 31, 2021 and 2020
|
Consolidated Statements of Operations for the years ended December 31, 2021 and 2020
|
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2021 and 2020
|
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2021 and 2020
|
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020
|
Notes to Consolidated Financial Statements
|
ITEM 16. |
FORM 10-K SUMMARY.
|
Exhibit
|
Description of Exhibits
|
2.
|
Plan of acquisition, reorganization, arrangement, liquidation, or succession
|
Membership Interests Purchase Agreement, dated as of November 14, 2014, by and between Dale Jennings, Paul Abbott, Shawn McKeever and Mickey Ellis and GSE Performance Solutions, Inc.
Incorporated herein by reference to Exhibit 2.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on November 17, 2014.
|
|
Amendment to Membership Interests Purchase Agreement, dated as of May 13, 2015. Incorporated herein by reference to Exhibit 10.2 of GSE Systems, Inc. Form 10-Q filed with the
Securities and Exchange Commission on May 14, 2015.
|
|
Stock Purchase Agreement, dated as of September 20, 2017, by and among GSE Systems, Inc., through its wholly owned subsidiary GSE Performance Solutions, Inc., Richard and Cynthia Linton
(and certain trusts owned thereby) and Absolute Consulting, Inc. Incorporated herein by reference to Exhibit 2.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on September 20, 2017.
|
|
Membership Interest Purchase Agreement, dated as of May 11, 2018, between True North Consulting LLC, Donald R. Horn, Jenny C. Horn, GSE Performance Solutions, Inc., and Donald R. Horn
in his capacity as Seller Representative. Incorporated herein by reference to Exhibit 2.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on May 14, 2018.
|
|
Membership Interest Purchase Agreement, dated as of February 15, 2019, between DP Engineering Co. Ltd., Steven L. Pellerin, Christopher A. Davenport, GSE Performance Solutions, Inc.,
and Steven L. Pellerin in his capacity as Seller Representative. Incorporated herein by reference to Exhibit 2.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on February 19, 2019.
|
|
3.
|
Certificate of Incorporation and Bylaws
|
Restatement of Certificate of Incorporation dated November 14, 2016. Incorporated herein by reference to Exhibit 3.1 of GSE Systems, Inc. Form 10-Q filed with the Securities and
Exchange Commission on November 14, 2016.
|
|
Amendment to the Certificate of Incorporation of GSE Systems, Inc. Incorporated herein by reference to Exhibit 3.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange
Commission on June 15, 2018.
|
|
Third Amended and Restated Bylaws of GSE Systems, Inc. Incorporated herein by reference to Exhibit 3.2 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission
on September 16, 2016.
|
|
First Amendment to the Third Amended and Restated Bylaws of GSE Systems, Inc. Incorporated herein by reference to Exhibit 3.2 of GSE Systems, Inc. Form 8-K filed with the Securities and
Exchange Commission on June 15, 2018.
|
|
10.
|
Material Contracts
|
Office Lease Agreement between 1332 Londontown, LLC and GSE Systems, Inc. (dated as of February 27, 2008). Incorporated herein by reference to Exhibit 10.1 of GSE Systems, Inc. Form
8-K filed with the Securities and Exchange Commission on March 11, 2008.
|
|
Amendment of Lease to Office Lease Agreement, dated May 28, 2008. Incorporated herein by reference to Exhibit 10.20 of GSE Systems, Inc. Form 10-K filed with the Securities and Exchange
Commission on March 19, 2015.
|
|
Second Amendment of Lease to Office Lease Agreement, dated July 22, 2010. Incorporated herein by reference to Exhibit 10.21 of GSE Systems, Inc. Form 10-K filed with the Securities and
Exchange Commission on March 19, 2015.
|
Third Amendment of Lease to Office Lease Agreement, dated May 15, 2012. Incorporated herein by reference to Exhibit 10.22 of GSE Systems, Inc. Form 10-K filed with the Securities and
Exchange Commission on March 19, 2015.
|
|
Fourth Amendment of Lease to Office Lease Agreement, dated April 15, 2014. Incorporated herein by reference to Exhibit 10.1 of GSE Systems, Inc. Form 10-Q filed with the Securities and
Exchange Commission on May 15, 2014.
|
|
GSE Systems, Inc. 1995 Long-Term Incentive Plan, amended and restated, dated as of March 6, 2014. Incorporated herein by reference to Exhibit A of GSE Systems, Inc. Form DEF 14A filed
with the Securities and Exchange Commission on April 29, 2014.*
|
|
Form of Option Agreement Under the GSE Systems, Inc. 1995 Long-Term Incentive Plan. Incorporated herein by reference to GSE Systems, Inc. Form 10-K filed with the Securities and
Exchange Commission on March 31, 1997. *
|
|
Form of Restricted Share Unit Agreement pursuant to the GSE Systems, Inc. 1995 Long-Term Incentive Plan, as amended and restated, dated as of April 22, 2016. Incorporated herein by
reference to Exhibit 10.2 of GSE Systems, Inc. Form 10-Q filed with the Securities and Exchange Commission on November 14, 2016.*
|
|
Form of Amendment to Restricted Share Unit Agreement, dated July 1, 2016. Incorporated herein by reference to Exhibit 99.8 of GSE Systems, Inc. Form 8-K filed with
the Securities and Exchange Commission on July 1, 2016. *
|
|
Employment Agreement, dated July 1, 2016, between GSE Systems, Inc. and Emmett A. Pepe. Incorporated herein by reference to Exhibit 99.2 of GSE Systems, Inc. Form
8-K filed with the Securities and Exchange Commission on July 5, 2016. *
|
|
Amendment to Employment Agreement between Emmett Pepe and GSE Systems, Inc. dated as of June 12, 2017. Incorporated herein by reference to Exhibit 99.4 of GSE Systems, Inc. Form 8-K
filed with the Securities and Exchange Commission on June 16, 2017.*
|
|
Amendment No. 2 to Employment Agreement between GSE Systems, Inc. and Emmett Pepe, dated as of January 11, 2019. Incorporated herein by reference to Exhibit 99.3 of GSE Systems, Inc.
Form 8-K filed with the Securities and Exchange Commission on January 11, 2019.*
|
|
Employment Agreement between Bahram Meyssami and GSE Systems, Inc. dated as of December 1, 2015. Incorporated herein by reference to Exhibit 10.1 of GSE Systems, Inc. Form 10-Q filed
with the Securities and Exchange Commission on May 15, 2017.*
|
|
Amendment to Employment Agreement between Bahram Meyssami and GSE Systems, Inc. dated as of June 12, 2017. Incorporated herein by reference to Exhibit 99.3 of GSE Systems, Inc. Form 8-K
filed with the Securities and Exchange Commission on June 16, 2017.*
|
|
Employment Agreement between Kyle J. Loudermilk and GSE Systems, Inc., dated as of July 1, 2015. Incorporated herein by reference to Exhibit 10.1 of GSE Systems, Inc. Form 8-K filed
with the Securities and Exchange Commission on July 31, 2015. *
|
|
Amendment to Employment Agreement between Kyle J. Loudermilk and GSE Systems, Inc., dated as of June 12, 2017. Incorporated herein by reference to Exhibit 99.1 of GSE Systems, Inc. Form
8-K filed with the Securities and Exchange Commission on July 1, 2016.*
|
|
Amendment No. 2 to Employment Agreement between Kyle Loudermilk and GSE Systems, Inc. dated as of June 12, 2017. Incorporated herein by reference to Exhibit 99.1 of GSE Systems, Inc.
Form 8-K filed with the Securities and Exchange Commission on June 16, 2017.*
|
|
Amendment No. 3 to Employment Agreement, dated January 11, 2019, between GSE Systems, Inc. and Kyle J. Loudermilk. Incorporated herein by reference to Exhibit 99.1 of GSE Systems, Inc.
Form 8-K filed with the Securities and Exchange Commission on January 11, 2019.*
|
Restricted Share Unit Agreement between Kyle J. Loudermilk and GSE Systems, Inc., dated as of July 1, 2015. Incorporated herein by reference to Exhibit 10.2 of GSE Systems, Inc. Form
8-K filed with the Securities and Exchange Commission on July 31, 2015.*
|
|
Amendment to Restricted Share Unit Agreement between Kyle J. Loudermilk and GSE Systems, Inc., dated as of July 1, 2016. Incorporated herein by reference to Exhibit 99.2 of GSE
Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on July 1, 2016.*
|
|
Restricted Share Unit Agreement (Cash Award) between Kyle J. Loudermilk and GSE Systems, Inc., dated as of July 1, 2016. Incorporated herein by reference to Exhibit 99.3 of GSE
Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on July 1, 2016.*
|
|
Restricted Share Unit Agreement (Common Stock Award) between Kyle J. Loudermilk and GSE Systems, Inc., dated as of July 1, 2016. Incorporated herein by reference to Exhibit 99.4 of GSE
Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on July 1, 2016.*
|
|
Restricted Share Unit Agreement between Emmett A. Pepe and GSE Systems, Inc., dated as of July 1, 2016. Incorporated herein by reference to Exhibit 99.3 of GSE Systems, Inc. Form 8-K
filed with the Securities and Exchange Commission on July 5, 2016.*
|
|
Restricted Share Unit Agreement between Bahram Meyssami and GSE Systems, Inc. dated as of December 1, 2015. Incorporated herein by reference to Exhibit 10.2 of GSE Systems, Inc. Form
10-Q filed with the Securities and Exchange Commission on May 15, 2017.*
|
|
Amendment to Restricted Share Unit Agreement between Bahram Meyssami and GSE Systems, Inc. dated as of July 1, 2016. Incorporated herein by reference to Exhibit 10.3 of GSE Systems,
Inc. Form 10-Q filed with the Securities and Exchange Commission on May 15, 2017.*
|
|
Credit and Security Agreement, by and between Citizens Bank, National Association, GSE Systems, Inc. and GSE Performance Solutions, Inc., dated December 29, 2016. Incorporated herein by
reference to Exhibit 99.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on January 4, 2017.
|
|
Amended and Restated Credit and Security Agreement, dated as of May 11, 2018, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance
Solutions, Inc., as Borrower. Incorporated herein by reference to Exhibit 99.1 of GSE Systems, Inc. Form 8-K filed with the Securities and Exchange Commission on May 14, 2018.
|
|
Amendment and Reaffirmation Agreement, dated February 22, 2017, and effective as of December 29, 2016. Incorporated herein by reference to Exhibit 10.36 of GSE Systems, Inc. Form 10-K
filed with the Securities and Exchange Commission on March 28, 2017.
|
|
Second Amendment and Reaffirmation Agreement dated as of May 25, 2018. Incorporated herein by reference to Exhibit 10.35 of Form 10-K filed with the Securities and Exchange Commission
on June 11, 2020.
|
|
Third Amendment and Reaffirmation Agreement dated as of February 15, 2019, by and among GSE Systems, Inc. and GSE Performance Solutions, Inc., as Borrowers, GSE True North Consulting,
LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering Ltd. Co., as Guarantors, and Citizens Bank, National Association, as Bank. Incorporated herein by reference to Exhibit 99.1 of GSE Systems, Inc. Form 8-K filed with the
Securities and Exchange Commission on February 19, 2019.
|
|
Form of Indemnification Agreement. Incorporated herein by reference to Exhibit 10.38 of Form 10-K filed with the Securities and Exchange Commission on June 11, 2020.
|
|
Fourth Amendment and Reaffirmation Agreement dated as of March 20, 2019, by and among GSE Systems, Inc., and GSE Performance Solutions, Inc., as Borrowers, GSE True North Consulting, LLC, Hyperspring, LLC,
Absolute Consulting, Inc., and DP Engineering LLC, as Guarantors, and Citizens Bank, National Association, as Bank. Incorporated herein by reference to Exhibit 10.39 of Form 10-K filed with the
Securities and Exchange Commission on June 11, 2020.
|
Fifth Amendment and Reaffirmation Agreement, dated as of June 28, 2019, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions, Inc. as Borrower, GSE
True North Consulting, LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering, LLC as Guarantor. Incorporated herein by reference to Exhibit 99.1 of our Current Report on Form 8-K filed with the Securities and Exchange
Commission on July 1, 2019.
|
|
Settlement and Release Agreement, dated as of December 30, 2019, by GSE Performance Solutions, Inc., GSE Systems, Inc. and their subsidiaries and affiliate, on the one hand, and Christopher A. Davenport and
Steven L. Pellerin, on the other hand, incorporated herein by reference to Exhibit 99.1 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 6, 2020.
|
|
Sixth Amendment and Reaffirmation Agreement, dated as of December 31, 2019, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions, Inc. as Borrower,
GSE True North Consulting, LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering, LLC as Guarantor. Incorporated herein by reference to Exhibit 99.1 of our Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 8, 2020.
|
|
Seventh Amendment and Reaffirmation Agreement, dated as of March 31, 2020, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions, Inc. as Borrower,
GSE True North Consulting, LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering, LLC as Guarantor. Incorporated herein by reference to Exhibit 99.1 of our Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 17, 2020.
|
|
Collateral assignment of Rights Under Escrow Agreement dated March 31, 2020, is made by GSE Performance Solutions Inc., in favor of Citizens Bank, National Association. Incorporated
herein by reference to Exhibit 10.45 of Form 10-K filed with the Securities and Exchange Commission on June 11, 2020.
|
|
Eighth Amendment and Reaffirmation Agreement, dated as of June 29, 2020, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions,
Inc. as Borrower, GSE True North Consulting, LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering, LLC as Guarantor. Incorporated herein by reference to Exhibit 10.1 of Form 10-Q filed with the Securities and Exchange
Commission on November 16, 2020.
|
|
Ninth Amendment and Reaffirmation Agreement, dated as of March 29, 2021, by and among Citizens Bank, National Association, as Bank, and GSE Systems, Inc. and GSE Performance Solutions,
Inc. as Borrower, GSE True North Consulting, LLC, Hyperspring, LLC, Absolute Consulting, Inc. and DP Engineering, LLC as Guarantor. Incorporated herein by reference to Exhibit 99.1 of our Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 2, 2021.
|
|
Paycheck Protection Note, by and between GSE Systems, Inc. and Citizens Bank, N.A., dated April
23, 2020,. Incorporated herein by reference to Exhibit 99.1 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 30, 2020.
|
|
Tenth Amendment and Reaffirmation Agreement, dated as of November 12, 2021. filed herewith.
|
|
Securities Purchase Agreement, dated as of February 23, 2022, by and between GSE Systems, Inc. and Lind Global Fund II LP.
|
|
Senior Convertible Promissory Note due February 23, 2024 made by GSE Systems, Inc. in favor of Lind Global Fund II LP, dated February 23, 2022.
|
|
Common Stock Purchase Warrant issued by GSE Systems, Inc. to Lind Global Fund II LP.
|
|
10.45 |
First Amendment, dated as of March 9, 2022, to Securities Purchase Agreement, dated February 23, 2022 by and between GSE Systems,
Inc. and Lind Global Fund II LP, filed herewith.
|
14
|
Code of Ethics
|
Code of Ethics for the Principal Executive Officer and Senior Financial Officers. Previously filed in connection with the GSE Systems, Inc. Form 10-K filed with the Securities and
Exchange Commission on March 31, 2006 and incorporated herein by reference.
|
|
21
|
Subsidiaries.
|
List of Subsidiaries of Registrant at December 31, 2020, filed herewith.
|
|
23
|
Consent of Independent Registered Public Accounting Firm
|
Consent of Dixon Hughes Goodman LLP, filed herewith.
|
Consent of BDO USA, LLP. filed herewith.
|
|
24
|
Power of Attorney
|
Power of Attorney for Directors' and Officers' Signatures on SEC Form 10-K, filed herewith.
|
|
31
|
Certifications
|
Certification of Chief Executive Officer of the Company pursuant to Securities and Exchange Act Rule 13d-14(a)/15(d-14(a), as adopted pursuant to Section 302 and 404 of the
Sarbanes-Oxley Act of 2002, filed herewith.
|
|
Certification of Chief Financial Officer of the Company pursuant to Securities and Exchange Act Rule 13d-14(a)/15(d-14(a), as adopted pursuant to Section 302 and 404 of the
Sarbanes-Oxley Act of 2002, filed herewith.
|
|
32
|
Section 1350 Certifications
|
Certification of Chief Executive Officer and Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, file herewith.
|
|
* Management contracts or compensatory plans required to be filed as exhibits pursuant to Item 15(b) of this report.
|
|
GSE Systems, Inc.
|
|||
|
By:
|
/ s / Kyle J. Loudermilk | ||
|
Chief Executive Officer
|
Date: March 31, 2022
|
/s / KYLE J. LOUDERMILK
|
||
Kyle J. Loudermilk, Chief Executive Officer
|
|||
(Principal Executive Officer)
|
Date: March 31, 2022
|
/ s / EMMETT A. PEPE
|
||
Emmett A. Pepe, Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
Date: March 31, 2022
|
(Kathryn O'Connor Gardner,
Chairman of the Board
|
)
|
By:
|
/ s / EMMETT A. PEPE
|
|
(William Corey, Chairman of the Audit Committee
|
)
|
Emmett A. Pepe
|
|||
(Thomas J. Dougherty, Director
|
)
|
Attorney-in-Fact
|
|||
(Suresh Sundaram, Director
|
)
|
||||
(Kyle Loudermilk, Director
|
)
|
Leverage Ratio
|
Margin
|
Category 1
Greater than or equal to 3.25 to 1.00
|
4.75%
|
Category 2
Greater than or equal to 3.00 to 1.00, but less than 3.25 to 1.00
|
4.50%
|
Category 3
Greater than or equal to 2.75 to 1.00, but less than 3.00 to 1.00
|
4.25%
|
Category 4
Greater than or equal to 2.00 to 1.00, but less than 2.75 to 1.00
|
4.00%
|
Category5
Greater than or equal to 1.00 to 1.00, but less than 2.00 to 1.00
|
3.75%
|
Category 6
Less than 1.00 to 1.00
|
3.50%
|
BANK:
|
||||
Witness/Attest:
|
CITIZENS BANK, NATIONAL ASSOCIATION.
|
|||
By:
|
/s/ Erin C Kane
|
(SEAL)
|
||
|
Name: Erin C Kane
|
|||
|
Title: Workout Officer
|
|||
Witness/Attest:
|
GSE PERFORMANCE SOLUTIONS, INC.
|
|||
/s/ Leah Brewster
|
By:
|
/s/ Emmett Pepe
|
(SEAL)
|
|
|
Emmett Pepe | |||
|
Treasurer | |||
GUARANTORS:
|
||||
Witness/Attest:
|
ABSOLUTE CONSULTING, INC.
|
|||
/s/ Leah Brewster
|
By:
|
/s/ Emmett Pepe
|
(SEAL)
|
|
|
Emmett Pepe | |||
|
Treasurer | |||
Witness/Attest:
|
HYPERSPRING, LLC
|
|||
/s/ Leah Brewster
|
By:
|
/s/ Emmett Pepe
|
(SEAL)
|
|
|
Emmett Pepe | |||
|
Treasurer
|
Witness/Attest:
|
GSE TRUE NORTH CONSULTING, LLC
|
|||
/s/ Leah Brewster
|
By:
|
/s/ Emmett Pepe
|
(SEAL)
|
|
|
Emmett Pepe | |||
|
Treasurer | |||
Witness/Attest:
|
DP ENGINEERING, LLC
|
|||
/s/ Leah Brewster
|
By:
|
/s/ Emmett Pepe
|
(SEAL)
|
|
|
Emmett Pepe | |||
|
Treasurer
|
COMPANY:
|
|||
GSE SYSTEMS, INC.
|
|||
/s/ Emmett Pepe
|
|||
Name:
|
Emmett Pepe
|
||
Title:
|
Chief Financial Officer
|
||
INVESTOR:
|
|||
LIND GLOBAL FUND II LP
|
|||
By:
|
/s/ Jeff Easton
|
||
Name:
|
Jeff Easton
|
||
Title:
|
Managing Member of Lind Global Partners II LLC, General Partner
|
Name
|
Place of Incorporation or Organization
|
|
GSE Systems Engineering (Beijing) Company, Ltd
|
Peoples Republic of China
|
|
GSE Process Solutions, Inc.
|
State of Delaware
|
|
GSE Services Company L.L.C.
|
State of Delaware
|
|
GSE Performance Solutions, Inc.
|
State of Delaware
|
|
Hyperspring, LLC
|
State of Delaware
|
|
Absolute Consulting, Inc.
GSE True North Consulting, LLC
DP Engineering, LLC
|
State of Delaware
State of Delaware
State of Delaware
|
|
GSE Systems Slovakia s.r.o
|
Slovakia
|
Date: March 31, 2022
|
/s/ Kyle J. Loudermilk
|
|
Kyle J. Loudermilk
|
||
Chief Executive Officer
|
||
Date: March 31, 2022
|
/s/ Emmett A. Pepe
|
|
Emmett A. Pepe
|
||
Chief Financial Officer
|
||
Date: March 31, 2022
|
s/ Kathryn
O’Connor Gardner
|
|
Kathryn O’Connor Gardner
|
||
Chairman of the Board
|
||
Date: March 31, 2022
|
/s/ William
Corey
|
|
William Corey
|
||
Chairman of the Audit Committee
|
||
Date: March 31, 2022
|
/s/ Thomas J.
Dougherty
|
|
Thomas J. Dougherty
|
||
Director
|
||
Date: March 31, 2022
|
/s/ Suresh Sundaram
|
|
Suresh Sundaram
|
||
Director
|
1. |
I have reviewed this annual report on Form 10-K 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 annual 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 fourth 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: March 31, 2022
|
/s/ Kyle J. Loudermilk
|
|
Kyle J. Loudermilk
|
||
Chief Executive Officer
(Principal Executive Officer)
|
6. |
I have reviewed this annual report on Form 10-K of GSE Systems, Inc.;
|
7. |
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;
|
8. |
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;
|
9. |
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:
|
e) |
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;
|
f) |
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;
|
g) |
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
|
h) |
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 (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
10. |
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:
|
c) |
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
|
d) |
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: March 31, 2022
|
/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: March 31, 2022
|
/s/ Kyle J. Loudermilk
|
/s/ Emmett A. Pepe
|
||
Kyle J. Loudermilk
|
Emmett A. Pepe
|
|||
Chief Executive Officer
|
Chief Financial Officer
|
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Shareholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 2,000,000 | 2,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 60,000,000 | 60,000,000 |
Common stock, shares issued (in shares) | 22,533,005 | 22,192,569 |
Common stock, shares outstanding (in shares) | 20,934,094 | 20,593,658 |
Treasury stock at cost (in shares) | 1,598,911 | 1,598,911 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) [Abstract] | ||
Net income (loss) | $ 10,607 | $ (10,537) |
Cumulative translation adjustment | 1,110 | 632 |
Comprehensive Income (loss) | $ 11,717 | $ (9,905) |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Accumulated Deficit [Member] |
Accumulated Other Comprehensive Loss [Member] |
Treasury Stock [Member] |
Total |
---|---|---|---|---|---|---|
Balance at Dec. 31, 2019 | $ 218 | $ 79,400 | $ (54,654) | $ (1,846) | $ (2,999) | $ 20,119 |
Balance (in shares) at Dec. 31, 2019 | 21,839 | (1,599) | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock-based compensation expense | $ 0 | 378 | 0 | 0 | $ 0 | 378 |
Common stock issued for RSUs vested | $ 4 | (4) | 0 | 0 | 0 | 0 |
Common stock issued for RSUs vested (in shares) | 354 | |||||
Shares withheld to pay taxes | $ 0 | (87) | 0 | 0 | 0 | (87) |
Foreign currency translation adjustment | 0 | 0 | 0 | 632 | 0 | 632 |
Net income (loss) | 0 | 0 | (10,537) | 0 | 0 | (10,537) |
Balance at Dec. 31, 2020 | $ 222 | 79,687 | (65,191) | (1,214) | $ (2,999) | 10,505 |
Balance (in shares) at Dec. 31, 2020 | 22,193 | (1,599) | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock-based compensation expense | $ 0 | 1,043 | 0 | 0 | $ 0 | 1,043 |
Common stock issued for RSUs vested | $ 3 | (3) | 0 | 0 | 0 | 0 |
Common stock issued for RSUs vested (in shares) | 340 | |||||
Shares withheld to pay taxes | $ 0 | (222) | 0 | 0 | 0 | (222) |
Foreign currency translation adjustment | 0 | 0 | 0 | 1,110 | 0 | 1,110 |
Net income (loss) | 0 | 0 | 10,607 | 0 | 0 | 10,607 |
Balance at Dec. 31, 2021 | $ 225 | $ 80,505 | $ (54,584) | $ (104) | $ (2,999) | $ 23,043 |
Balance (in shares) at Dec. 31, 2021 | 22,533 | (1,599) |
Summary of Significant Accounting Policies |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies |
1. Summary of Significant Accounting Policies
Principles of consolidation
GSE Systems, Inc. is a leading provider of professional and technical engineering, staffing services, and simulation software to clients in the power
and process industries. References in this report to “GSE,” the “Company,” “we” and “our” are to GSE Systems, Inc. and its subsidiaries, collectively. All intercompany balances and transactions have been eliminated in consolidation.
Accounting estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America
(U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate the estimates used, including, but not limited to those related to revenue recognition on long-term contracts, allowance for doubtful accounts, product
warranties, valuation of goodwill and intangible assets acquired, impairment of long-lived assets to be disposed of, valuation of stock-based compensation awards and the recoverability of deferred tax assets. Actual results could differ from these
estimates.
Business combinations
Business combinations are accounted for in accordance with the Financial Accounting Standards Board (“FASB”) ASC 805, Business Combinations, using the acquisition method. Under the acquisition method, the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree are recognized at fair value on the
acquisition date, which is the date on which control is transferred to us. Any excess purchase price is recorded as goodwill. Transaction costs associated with business combinations are expensed as incurred.
Revenues and the results of operations of the acquired business are included in the accompanying consolidated statements of
operations commencing on the date of acquisition.
Acquisitions may include contingent consideration payments based on future financial measures of an acquired company. Under ASC 805, contingent
consideration is required to be recognized at fair value as of the acquisition date. We estimate the fair value of these liabilities based on financial projections of the acquired companies and estimated probabilities of achievement. At each
reporting date, the contingent consideration obligation is revalued to estimated fair value, and changes in fair value subsequent to the acquisition are reflected in income or expense in the consolidated statements of operations, and could cause a
material impact to our operating results. Changes in the fair value of contingent consideration obligations may result from changes in discount periods and rates, changes in the timing and amount of revenue and/or earnings estimates, and changes in
probability assumptions with respect to the likelihood of achieving the various earn-out criteria.
Revenue recognition
We derive our revenue through three broad
revenue streams: 1) System Design and Build (“SDB”), 2) software, and 3) training and consulting services. We recognize revenue from SDB and software contracts mainly through the Performance Improvement Solutions segment and the training and
consulting service contracts through both the Performance Improvement Solutions segment and Workforce Solutions segment.
The SDB contracts are typically fixed-price and consist of initial design,
engineering, assembly and installation of training simulators which include hardware, software, labor, and PCS on the software. We generally have two
main performance obligations for an SDB contract: (1) the training simulator build and (2) the PCS period. The training simulator build performance obligation generally includes hardware, software, and labor. The transaction price under the SDB
contracts is allocated to each performance obligation based on its standalone selling price. We recognize the training simulator build revenue over the construction and installation period using the cost-to-cost input method. In applying the
cost-to-cost input method, we use the actual costs incurred to date relative to the total estimated costs to measure the work progress toward the completion of the performance obligation and recognize revenue over time as control transfers to a
customer. Estimated contract costs are reviewed and revised periodically during the contract period, and the cumulative effect of any change in estimates is recognized in the period in which the change is identified. Estimated losses are
recognized in the period such losses become known.
Uncertainties inherent in the performance of contracts include labor availability and
productivity, material costs, change order scope and pricing, software modification and customer acceptance issues. The reliability of these cost estimates is critical to our revenue recognition as a significant change in the estimates can cause
our revenue and related margins to change significantly from previous estimates.
Management judgments and estimates involved in the initial creation and subsequent updates to our estimates-at-completion and related profit recognized are
critical for our revenue recognition associated with SDB contracts. Inputs and assumptions requiring significant management judgment included anticipated direct labor, subcontract labor, and other direct costs required to deliver on unfinished
performance obligations.
The SDB contracts generally provide a one-year base warranty on the systems. The base warranty will not be accounted for as a separate performance obligation under the contract because it
does not provide the customer with a service in addition to the assurance that the completed project complies with agreed-upon specifications. Warranties extended beyond our typical one-year period will be evaluated on a case-by-case basis to determine if it provides more than just assurance that the product operates as intended, which requires carve-out
as a separate performance obligation.
Revenue from the sale of perpetual standalone
and term software licenses, which do not require significant modification or customization, is recognized upon its delivery to the customer. Revenue from the sale of cloud-based, subscription-based software licenses is recognized ratably over
the term of such licenses following delivery to the customer. Delivery is considered to have occurred when the customer receives a copy of the software and is able to use and benefit from the software.
A software license sale contract with multiple deliverables typically includes the following elements: license, installation and training services, and
PCS. The total transaction price of a software license sale contract is typically fixed and is allocated to the identified performance obligations based on their relative standalone selling prices. Revenue is recognized as the performance
obligations are satisfied. Specifically, license revenue is recognized when the software license is delivered to the customer; installation and training revenue are recognized when the installation and training are completed without regard to a
detailed evaluation of the point in time criteria due to the short-term nature of the installation and training services (one to two days on average); and PCS revenue is recognized ratably over the service period, as PCS is deemed as a stand-ready
obligation.
The contracts within the training and consulting services revenue stream are either T&M based or fixed-price based. Under a typical T&M contract,
we are compensated based on the number of hours of approved time provided by temporary workers and the bill rates which are fixed by type of work, as well as approved expenses incurred. The customers are billed on a regular basis, such as weekly,
biweekly or monthly. In accordance with ASC 606-10-55-18, Revenue from contracts with customers, we elected to apply the “right to invoice” practical expedient, under which we recognize revenue in the
amount to which we have the right to invoice. The invoice amount represents the number of hours of approved time worked by each temporary worker multiplied by the bill rate for the type of work, as well as approved expenses incurred. Under a
typical fixed-price contract, we recognize the revenue on a Percentage of Completion basis as it relates to construction contracts with revenue recognized based on project delivery over time. Revenue from the sale of short-term contracts with a
delivery period of one month or less is recognized in the month completed.
For contracts with multiple performance obligations, we allocate the contract price to each performance obligation based on its relative standalone selling
price. We generally determine standalone selling prices based on the prices charged to customers.
The transaction price for software contracts is generally fixed, and we recognize revenue upon delivery of the software, with fees due in advance or
shortly after delivery of the software.
We recognize training and consulting services revenue as services are performed and bill our customers for services that we have provided on a regular
basis (i.e. weekly, biweekly or monthly).
Contract asset relates to performance under the contract for obligations that are satisfied but not yet billed, which we classify as contract receivables,
net.
Contract liability, which we classify as billing-in-excess of revenue earned, relates to payments received in advance of performance under the contract.
Contract liabilities are recognized as revenue as performance obligations are satisfied.
Cash and cash equivalents
Cash and cash equivalents represent cash and highly liquid investments including money market accounts with maturities of three months or less at the
date of purchase.
Contract receivables, net and contract asset and liabilities
Contract receivables include recoverable costs and accrued profit not billed which represents revenue recognized in excess of
amounts billed. Contract asset (contract receivables, net) include amounts earned in performance of services that have not been invoiced. Contract liabilities include billings in excess of revenue earned on uncompleted contracts in the accompanying
consolidated balance sheets represent advanced billings to clients on contracts in advance of work performed. Generally, such amounts will be earned and recognized over the next twelve months.
Billed receivables are recorded at invoiced amounts. The allowance for doubtful accounts is based on historical trends of past due accounts, write-offs,
specific identification and review of customer accounts.
Impairment of long-lived assets
Long-lived assets, such as equipment, purchased software, capitalized software development costs, and intangible assets subject to amortization, are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized at the amount by which the carrying amount
of the asset exceeds its fair value. Assets to be disposed of would be separately presented in the consolidated balance sheets and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated.
Development expenditures
Development expenditures incurred to meet customer specifications under contracts are charged to cost of revenue. Company sponsored development
expenditures are either charged to operations as incurred and are included in research and development expenses or are capitalized as software development costs. The amounts incurred for Company sponsored development activities relating to the
development of new products and services or the improvement of existing products and services, were approximately $0.9 million and $1.0 million for the years ended December 31, 2021
and 2020, respectively. Of these amounts, the Company capitalized approximately $0.3 million and $0.3 million for the years ended December 31, 2021 and 2020,
respectively.
Equipment, software and leasehold improvements, net
Equipment and purchased software are recorded at cost and depreciated using the straight-line method with estimated useful lives ranging from three years to ten years. Leasehold
improvements are amortized over the term of the lease or the estimated useful life, whichever is shorter, using the straight-line method. Upon sale or retirement, the cost and related depreciation are eliminated from the respective accounts and any
resulting gain or loss is included in operations. Maintenance and repairs are charged to expense as incurred.
Software development costs
Certain computer software development costs, including direct labor cost,
are capitalized in the accompanying consolidated balance sheets. Capitalization of computer software development costs begins upon the establishment of technological feasibility. Capitalization ceases and amortization of capitalized costs begins
when the software product is commercially available for general release to customers. Amortization of capitalized computer software development costs is included in cost of revenue and is determined using the straight-line method over the
remaining estimated economic life of the product, typically three years. On an annual basis, or more frequently as conditions indicate, we assess the recovery of the unamortized software development costs by estimating the net undiscounted cash flows expected to be generated by the sale of the
product. If the undiscounted cash flows are not sufficient to recover the unamortized software cost we will write-down the carrying amount of such asset to its estimated fair value based on the future discounted cash flows. The excess of any
unamortized computer software costs over the related fair value is written down and charged to operations. Included in capitalized software development costs are certain expenses associated with the development software as a service. Significant changes in the sales projections could result in an impairment with respect to the capitalized software that is reported on our consolidated balance sheets.
Goodwill and intangible assets
Our intangible assets include amounts recognized in connection with business
acquisitions, including customer relationships, trade names, non-compete agreements and alliance agreements. Due to the impact of the COVID-19 pandemic, definite-lived intangible assets were reviewed for impairment in the first quarter of
2020. The undiscounted cash flows evidenced impairment for the DP Engineering asset group as such, we used a discounted cash flow model to determine the fair value of the DP Engineering asset group and recorded an impairment charge of $4.3 million as of the period ended March 31, 2020.
Our intangible assets impairment analysis includes the use of undiscounted and discounted cash flow models that requires management to make assumptions
regarding estimates of revenue growth rates and operating margins used to calculate projected future cash flows.
Intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset.
Amortization is recognized on a straight-line basis over the estimated useful life of the intangible asset, except for contract backlog and contractual customer relations, which are recognized in proportion to the related project revenue streams.
Intangible assets with definite lives are reviewed for impairment if indicators of impairment arise. We do not have any intangible assets with indefinite useful lives.
Goodwill represents the excess of costs over fair value of assets of businesses
acquired. We review goodwill for impairment annually as of December 31 and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. We test goodwill at the reporting unit level. A reporting unit
is an operating segment, or one level below an operating segment, as defined by U.S. GAAP. We have determined that we have two
reporting units, which are the same as our two operating segments: (i) Performance Improvement Solutions (“Performance”) and (ii)
Workforce Solutions.
ASU 2011-08 permits an entity to first assess qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform impairment testing. Under ASU 2011-08, an entity is not required to perform
step one of the goodwill impairment test for a reporting unit if it is more likely than not that its fair value is greater than its carrying amount. Additionally, ASU 2017-04 permits eliminating two step approach when there is indication of
impairment.
During the first quarter of fiscal 2020, We determined that the impact of the COVID-19 pandemic on our operations was an indicator of a triggering event
that could result in potential impairment of goodwill. As such we performed a Step 1 goodwill analysis whereby we compared the fair value of each reporting unit to its respective carrying value. Based upon this analysis, we determined the fair
value of each of our reporting units exceeded the carrying value and thus there was no impairment as of the period ended March 31, 2020. We completed our annual quantitative step 1 analysis as of December 31, 2021 and 2020 and concluded that the
fair values of each of our reporting units exceeded their respective carrying values.
Our goodwill impairment analysis includes the use of a discounted cash flow model that requires management to make assumptions regarding estimates of
revenue growth rates and operating margins used to calculate projected future cash flows, and risk-adjusted discount rates. We make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for
each of our reporting units.
Foreign currency translation
The United States Dollar (USD) is our functional currency and that of our subsidiaries operating in the United States. The
functional currency of each of our foreign subsidiaries is the currency of the economic environment in which the subsidiary primarily does business. Our foreign subsidiaries’ financial statements are translated into USD using the exchange rates
applicable to the dates of the financial statements. Assets and liabilities are translated into USD using the period-end spot foreign exchange rates. Income and expenses are translated at the average exchange rate for the year. Equity accounts are
translated at historical exchange rates. The effects of these translation adjustments are cumulative translation adjustments, which are reported as a component of accumulated other comprehensive income (loss) included in the consolidated statements
of changes in shareholders’ equity.
For any business transaction that is in a currency different from the entity’s functional currency, we record a gain or loss based on the difference
between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled) to the foreign currency realized gain (loss) account in the consolidated statements of operations.
Income taxes
Income taxes are provided under the asset and liability method. Under this method, deferred income taxes are determined based on the differences between
the consolidated financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amounts expected to be realized. A provision is made for our current liability for federal, state and foreign income taxes and the change in our deferred income tax assets and liabilities.
We establish accruals for uncertain tax positions taken or expected to be taken in a tax return when it is not more likely than not (i.e., a likelihood
of more than fifty percent) that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater
than 50% likely of being realized upon ultimate settlement. Favorable or unfavorable adjustment of the accrual for any particular issue would be recognized as an increase or decrease to income tax expense in the period of a change in facts and
circumstances. Interest and penalties related to income taxes are accounted for as income tax expense.
Stock-based compensation
Stock-based compensation expense is based on the grant-date fair value estimated in accordance with the provisions of ASC 718, Compensation-Stock Compensation. Compensation expense related to stock-based awards is recognized on a pro rata straight-line basis based on the fair value of share
awards that are scheduled to vest during the requisite service period.
Significant customers and concentration of credit risk
For the year ended December 31, 2021,
we have a concentration of revenue from one individual customer, which accounted for 13.8% of our consolidated revenue. For the year ended December 31, 2020,
we have a concentration of revenue from one individual customer, which accounted for 14.1% of our consolidated revenue. No other individual customer accounted for more than 10% of our consolidated revenue in 2021 or 2020.
As of December 31, 2021 and 2020, we
have no customer that accounted over 10% of the Company’s consolidated contract receivables.
Fair values of financial instruments
The carrying amounts of current assets and current liabilities reported in the consolidated balance sheets approximate fair value due to their short term
duration.
Derivative instruments
Occasionally, we utilize forward foreign currency exchange contracts to manage market risks associated with the fluctuations in foreign currency exchange
rates. It is our policy to use such derivative financial instruments to protect against market risk arising in the normal course of business in order to reduce the impact of these exposures. We minimize credit exposure by limiting counterparties to
nationally recognized financial institutions. We do not have such derivative instruments as of December 31, 2021.
COVID-19
Our employees began working remotely during the first quarter of 2020 due to the COVID-19 pandemic and will continue to do so when practical and as
mandated by local, state and federal directives and regulations. Employees almost entirely work from home within our Performance Improvement Solutions segment, except when required to be at the client site for essential project work. Our
Performance contracts, which are considered an essential service, are permitted to and mostly continue without pause; however, we have experienced certain delays in new business. For our staff augmentation business, we have seen certain contracts
for our Workforce Solutions customers paused or delayed as clients shrink their own on-premise workforces to the minimum operating levels in response to the pandemic; as a result, our Workforce Solutions segment has experienced a decline in its
billable employee base since the start of the pandemic. Although we cannot fully estimate the length or gravity of the impact of the COVID-19 pandemic to our business at this time, we have experienced delays in commencing new projects and thus
our ability to recognize revenue has been delayed for some contracts. We have also experienced order reductions or other negative changes to orders due to the pandemic. We routinely monitor our operating expenses as a result of contract delays
and have made adjustments to keep our gross profit at a sustainable level.
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Recent Accounting Pronouncements |
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Dec. 31, 2021 | |
Recent Accounting Pronouncements [Abstract] | |
Recent Accounting Pronouncements |
2. Recent Accounting Pronouncements
Accounting
pronouncements recently adopted
In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities, Investments – Equity Method and Joint Ventures, and Derivatives and Hedging, which provides clarity
for companies that hold equity securities at cost to first update the fair value of an investment, immediately prior to applying the Equity Method of Accounting; or clarity for companies that enter into forward contracts to purchase additional
shares of an equity security that would then require the investee to account for the investment via the Equity Method. This ASU is applicable for public companies starting with fiscal years beginning after December 15, 2020 and interim periods
within those fiscal years. We adopted ASU 2020-01 on January 1, 2021. This standard did not have a significant impact to our consolidated financial statements since we do not currently hold any investments at cost.
In September 2020, the FASB issued ASU 2020-10, Codification Improvements, which is part of an ongoing attempt to improve the consistency of the
codification. Previously the option to disclose information in the notes to the financial statements was in one of two sections: Disclosure Section (Section 50) or Other Presentation Matters (Section 45). ASU 2020-10 conforms the disclosure
requirements into Section 50 and provides additional information on specific guidance that was previously unclear or not included in the codification. This ASU is applicable for public companies starting with fiscal years beginning after
December 15, 2020, with early adoption available for interim and annual financial statements not already filed and using the retrospective approach. However, the FASB does not believe that this should change any of the current reporting or
disclosure requirements. We adopted ASU 2020-10 on January 1, 2021. The adoption of this standard did not have a material impact to our consolidated financial statements.
Accounting pronouncements not yet adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which introduces new guidance for credit losses on instruments within its
scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including, but not limited to, trade and other receivables, held-to-maturity debt securities, loans and net
investments in leases. The new guidance also modifies the impairment model for availablefor- debt securities and requires the entities to determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit
loss. The standard also indicates that entities may not use the length of time a security has been in an unrealized loss position as a factor in concluding whether a credit loss exists. Early adoption is permitted for all entities for fiscal years
beginning after December 15, 2018, including interim periods within those fiscal years. On October 16, 2019, the FASB voted to defer the deadlines for private companies and certain small public companies, including smaller reporting companies, to
implement the new accounting standards on credit losses. The new effective date is January 1, 2023. As a smaller reporting company, we have elected to defer adoption in line with new deadlines and are currently evaluating the effects, if any, that
the adoption of this guidance will have on our consolidated financial position, results of operations and cash flows.
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant
impact on our consolidated financial statements and related disclosures.
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Earnings per Share |
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Earnings per Share |
3. Earnings per share
Basic earnings per share is based on the weighted average number of outstanding common shares for the period. Diluted earnings per share adjusts the
weighted average shares outstanding for the potential dilution that could occur if outstanding vested stock options were exercised. Basic and diluted earnings per share are based on the weighted average number of outstanding shares for the period.
The number of common shares and common share equivalents used in the determination of basic and diluted (loss) earnings per share were as follows:
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Coronavirus Aid, Relief and Economic Security Act |
12 Months Ended |
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Dec. 31, 2021 | |
Coronavirus Aid, Relief and Economic Security Act [Abstract] | |
Coronavirus Aid, Relief and Economic Security Act |
4. Coronavirus Aid, Relief and Economic Security Act
Paycheck
Protection Program Loan (PPP Loan)
On March
27, 2020, the United States enacted the CARES Act. to extend liquidity to small businesses and assist in retaining employees during the COVID-19 pandemic. We applied for and, on April 23, 2020, received a payroll protection program loan in the
amount of $10.0 million (the “PPP Loan”) under the CARES Act, as administered by the SBA. The application for receipt of the PPP Loan
required us to certify, in good faith, that the attendant economic uncertainty made the loan necessary to support our ongoing operations. The PPP Loan bore interest at a rate of 1% per annum and would mature on April 23, 2022, with the first payment deferred until September 2021. We used the proceeds of the PPP Loan for payroll and related costs,
rent and utilities. Pursuant to the regulations promulgated by the SBA, in order to request forgiveness of the PPP Loan, we were required to submit an application to the Lender substantiating that we were entitled to the PPP Loan and used the
proceeds of the PPP Loan as permitted under the CARES Act. The Lender reviewed our application for forgiveness and associated documentation, and on February 26, 2021 forwarded our application to the SBA with the Lender’s determination that the
loan is fully forgivable. On August 5, 2021, we received notice that full principal amount and all accrued interest thereon of the PPP Loan was formally forgiven by the SBA. We recognized other income of $10.1 million related to this forgiveness during 2021.
Employee
Retention Credits (ERC)
Employee
retention tax credits, made available under the CARES Act, allow eligible employers to claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees, initially from March
27, 2020 until June 30, 2021, and extended through September 30, 2021. For the fourth quarter of 2021, we have received a refund of $0.2
million from the IRS for previously filed Form 941s. For the year ended December 31, 2021 we have applied for a total of $5.0 million
from the IRS with the timely filing of Form 941 and 941-X and recognized a benefit of $2.2 million from unremitted payroll taxes as
allowable. We recorded other income of $7.2 million related to the employee retention tax credits earned for the year ended December
31, 2021. As of December 31, 2021, we received employee retention tax credit refunds totaling $0.9 million with remaining outstanding
refunds receivable of $4.1 million which was included in the other current assets balance at December 31, 2021. Subsequent to the year
end, we received the employee retention tax credit refunds of $1.1 million.
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Revenue |
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Revenue |
5. Revenue
We account for revenue in accordance with ASC 606, Revenue
from Contracts with Customers. We primarily generate revenue through three distinct revenue streams: (1) SDB, (2) software and
(3) training and consulting services across our Performance and Workforce Solutions segments. We recognize revenue from SDB and software contracts mainly through our Performance segment. We recognize training and consulting service contracts
through Performance Improvement Solutions segment and Workforce Solutions segment.
The following table represents a disaggregation of revenue by type of goods or services for the years ended December 31, 2021 and 2020, along with the reportable
segment for each category:
(in thousands)
The following table reflects the balance of contract liabilities and the revenue recognized in the reporting period that was included in the contract
liabilities from contracts with customers:
(in thousands)
For the year ended December 31, 2021,
we recognized revenue of $26 thousand related to performance obligations satisfied in previous periods.
As of December 31, 2021,
the aggregate amount of transaction price allocated to the remaining performance obligations of SDB, software and fixed-price training and consulting services contracts is $21.2 million. We will recognize the revenue as the performance obligations are satisfied, which is expected to occur over the next twelve months.
Part of the training and consulting services contracts are T&M based. Under a typical T&M contract, we are compensated based on the number of
hours of approved time provided by temporary workers and the bill rates, which are fixed by type of work, as well as approved expenses incurred. As part of our adoption of ASU 2014-09, we have elected to use the optional exemption under ASC
606-10-50-14(b) Revenue from contracts with customers, pursuant to which we have excluded disclosures of transaction prices allocated to
remaining performance obligations under such contracts and when we expect to recognize the revenue.
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Restructuring Expenses |
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Restructuring Expenses |
6. Restructuring expenses
International Restructuring
On December 27, 2017, the Board of Directors approved an international restructuring plan to streamline and optimize our global operations. Beginning in
December 2017, we have been in the process of consolidating its engineering services and R&D activities to Maryland and ceasing an unprofitable non-core business in the United Kingdom (UK). As a result, we have closed our offices in Nyköping,
Sweden; Chennai, India; and Stockton-on-Tees, UK. These actions are designed to improve our productivity by eliminating duplicate employee functions, increasing our focus on our core business, improving efficiency and maintaining the full range of
engineering capabilities while reducing costs and organizational complexity.
We eliminated approximately 40 positions
due to these changes, primarily in Europe and India, and has undertaken other related cost-savings measures. As a result of these efforts, we have recorded total restructuring charges of approximately $3.9 million, primarily related to workforce reductions, contracts termination costs and asset write-offs due to the exit activities. We recorded a restructuring charge of $1.0 million and $0.8 million for the
years ended December 31, 2020 and December 31, 2021, respectively. In addition to the restructuring costs incurred to date, we have charged $1.2
million of cumulative translation adjustments against net income (loss) and an approximately $0.8 million of tax benefit was realized
upon liquidation of these foreign entities.
DP Engineering Restructuring
During the third quarter of 2019, we implemented a restructuring plan as a result of the work suspension of DP Engineering’s largest customer and
subsequent notification on August 6, 2019 that the EOC contract was being terminated. Accordingly, we took the necessary measures to reduce DP Engineering’s workforce by approximately 12 full-time employees and terminated one of its office leases
early resulting in a one-time cost of $0.3 million being paid in the third quarter of 2019. As a result of this plan, we incurred $0.2 million of restructuring costs to align the workforce to the expected level of business for the years ended December 31, 2020.
Lease abandonment
As of December 31, 2019, management decided to cease-use and abandoned a portion of several operating lease right of use lease assets in a long idled
space in our Sykesville office and in DP Engineering’s Fort Worth office. This was decided as part of the on-going international restructuring plans to right size the organization. Management determined the square footage which would remain in use
and took steps to ensure the abandoned space was separated from the remaining in use space, end access of all employees to the abandoned sections, and remove any remaining office furniture assets. We applied the abandonment guidance in ASC
360-10-35. We believe “abandonment” means ceasing to use the underlying asset and lacking either the intent or the ability to sublease the underlying asset. Accordingly, lease abandonment restructuring charges incurred relating to the right of use
assets for the year ended December 31, 2020 totaled $1.5 million. No additional charges were incurred for the year ended December 31, 2021.
The following table shows the abandoned square footage and right of use asset details:
The following table shows the total restructuring costs:
Expected Restructuring Costs
We expect no additional restructuring costs under the international restructuring plan. As a part of the DP restructuring, the right sizing effort had
led to the lease abandonment and related impairment as mentioned above. In a continuing effort to align our workforce and by extension the available workspace, we expect future restructuring as we continue to migrate out of the Sykesville office.
At this time management is unable to estimate the ultimate restructuring costs or timeline over which these costs will be recognized.
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Goodwill and Intangible Assets |
7. Goodwill and Intangible Assets
During the three months ended March 31, 2020, we recognized an impairment charge of $4.3 million of certain intangible assets as a result of the valuation analysis performed. The need for the valuation analysis was triggered by the
macroeconomic impact of the COVID-19 pandemic on our operations. This analysis did not indicate impairment of goodwill.
Our Step 1 goodwill impairment analysis includes the use of a discounted cash flow model that
requires management to make assumptions regarding estimates of growth rates used to forecast revenue, operating margin and terminal value as well as determining the appropriate risk-adjusted discount rates and other factors that impact fair value
determinations.
We monitor operating results and events and circumstances that may indicate potential impairment of
intangible assets. We perform an annual intangible assets impairment analysis at the year end, which includes the use of undiscounted cash flow and discounted cash flow models that requires management to make assumptions regarding estimates of
growth rates used to forecast revenue, operating margin and terminal value as well as determining the appropriate risk adjusted discount rates and other factors that impact fair value determinations. The current assessment has no indication of
impairment.
Management determined no additional triggering impact occurred during the year ended December 31,
2021.
The following table shows the gross carrying amount and accumulated amortization of definite-lived intangible assets:
Amortization expense related to definite-lived intangible assets totaled 1.2 million and $1.9 million for the years ended December 31, 2021 and 2020, respectively. The following table shows the
estimated amortization expense of the definite-lived intangible assets for the next five years:
Goodwill
There were no changes in goodwill during 2019 to 2020 and 2020 to 2021:
(in thousands)
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Contract Receivables |
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Contract Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract Receivables |
8. Contract Receivables
Contract receivables represent our unconditional rights to consideration due from a broad base of both domestic and international customers. Net contract
receivables are considered to be collectible within twelve months.
Recoverable costs and accrued profit not billed represent costs incurred and associated profit accrued on contracts that will become billable upon future
milestones or completion of contracts. The components of contract receivables are as follows:
Management reviews collectability of receivables periodically and records an allowance for doubtful accounts to reduce our
receivables to their net realizable value when it is probable that we will not be able to collect all amounts due according to the contractual terms of the receivable. The allowance for doubtful accounts is based on historical trends of past due
accounts, write-offs, and specific identification and review of customer accounts. During the years ended December 31, 2021 and 2020, we recorded bad debt expense of $678
thousand and $103 thousand, respectively. Included in the current year provision is an impairment of unbilled receivables of $824 thousand related to a customer contract with our GSE Beijing entity offset by $133 thousand recovery of bad debt from previously written off balances.
During January 2022, we invoiced $2.1
million of the unbilled amounts related to the balance at December 31, 2021.
The activity in the allowance for doubtful accounts is as follows:
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Prepaid Expenses and Other Current Assets |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Current Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Current Assets |
9. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
Other current assets primarily include Employee Retention Credits not yet received as of December 31, 2021. Subsequent to the year end,
we received the employee retention tax credit refunds of $1.1 million, which was included in the other current assets balance at
December 31, 2021. Prepaid expenses primarily include prepayment for insurance and other subscription-based services.
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Equipment, Software and Leasehold Improvements |
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Equipment, Software and Leasehold Improvements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equipment, Software and Leasehold Improvements |
10. Equipment, Software and Leasehold Improvements
Equipment, software and leasehold improvements, net consist of the following:
Depreciation expense was $0.3 million and
$0.3 million for the years ended December 31, 2021 and 2020, respectively. Capitalization of internal-use software cost of $0.5 million related to the ongoing systems upgrade and implementation effort were recorded in software for the twelve months ended December 31, 2021.
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Product Warranty |
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Accrued Warranty [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranty |
11. Product Warranty
Accrued warranty
For contracts that contain a warranty provision, we provide an accrual for estimated future warranty costs based on historical experience and projected
claims. Our contracts may contain warranty provisions ranging from one year to five years. The current portion of the accrued warranty is presented separately on the consolidated balance sheets within current liabilities whereas the noncurrent portion is included in
other liabilities.
The activity in the accrued warranty accounts is as follows:
The current and non-current warranty balance is as follows:
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Fair Value of Financial Instruments |
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Fair Value of Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments |
12. Fair Value of Financial Instruments
ASC 820, Fair Value Measurement (ASC 820)
defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The levels of the fair value hierarchy established by ASC 820 are:
Level 1: inputs are quoted prices, unadjusted, in active markets for identical assets or liabilities that the reporting entity has the ability to access
at the measurement date.
Level 2: inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. A
Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3: inputs are unobservable and reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing
the asset or liability.
As of December 31, 2021 and 2020, we considered the recorded value of certain of our financial assets and liabilities, which consist primarily of cash and
cash equivalents, contract receivable and accounts payable, to approximate fair value based upon their short-term nature.
During the years ended December 31, 2021
and 2020, we did not
have any transfers into or out of Level 3. The following table presents assets measured at fair value at December 31, 2021:
The following table presents assets measured at fair value at December 31, 2020:
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Debt |
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Dec. 31, 2021 | |
Debt [Abstract] | |
Debt |
13. Debt
On December 29, 2016, we entered a 3-year $5.0 million revolving line of credit facility (“RLOC”) with the
Citizens Bank, N.A. (the “Bank”) to fund general working capital needs and acquisitions. On May 11, 2018, we entered into the Amended and Restated Credit and Security Agreement (the “Credit Agreement” or the “Credit Facility”) to (a) expand the
RLOC to include a letter of credit sub-facility and not be subject to a borrowing base and (b) to add a $25.0 million term loan
facility, available to finance permitted acquisitions over the following 18 months. The credit facility was subject to certain
financial covenants and reporting requirements and was scheduled to mature on May 11, 2023 and accrue interest at the USD LIBOR, plus
a margin that varies depending on our overall leverage ratio. The RLOC had required monthly payments of only interest, with principal due at maturity, while our term loan draws required monthly payments of principal and interest based on an
amortization schedule. Our obligations under the Credit Agreement are guaranteed by our wholly owned subsidiaries, Hyperspring, Absolute, True North, DP Engineering and by any future material domestic subsidiaries (collectively, the
“Guarantors”). We subsequently amended and ratified the Credit Agreement a number of times. More recently, during 2020, the COVID-19 pandemic impacted our operations and our projected ability to comply with certain financial covenants. As such,
we amended the credit facility at various dates in 2020 to revise our fixed charge ratio and leverage ratio requirements as well as our Adjusted EBITDA requirement. In exchange for relaxed covenants or waivers of covenants for certain periods, we
were required by the Bank to curtail our term debt, and as a part of the Eighth Amendment and Reaffirmation Agreement, entered into in June of 2020, we repaid the entire outstanding balance on the term loan facility.
Due to a projected violation of the leverage ratio at the end of the first quarter, we signed the
Ninth Amendment and Reaffirmation Agreement with an effective date of March 29, 2021. Pursuant to the Ninth Amendment and Reaffirmation Agreement, the Bank waived the fixed charge coverage ratio and leverage ratio for the quarters ending March 31
and June 30, 2021, and we agreed, for each quarter thereafter, that the fixed charge coverage ratio shall not be less than 1.10 to
1.00. In addition, we agreed to not exceed a maximum leverage ratio starting on September 30, 2021 as follows: (i) 3.25 to 1.00 for
the period ending September 30, 2021; (ii) 3.00 to 1.00 for the period ending on December 31, 2021, (iii) 2.75 to 1.00 for the period ending March 31, 2022; (iv) 2.50
to 1.00 for the period ending June 30, 2022 and (v) 2.00 to 1.00 for the periods ending September 30, 2022 and each December 31st,
March 31st, June 30th and September 30th thereafter. We were also required to maintain a minimum of $2.5 million in aggregate USA
liquidity. As part of the amendment, we agreed, at closing, (i) to make a $500,000 pay down of RLOC; (ii) RLOC commitment to be reduced
to $4.25 million; and (iii) $0.5
million of RLOC will only be available for issuance of Letters of Credit. We also agreed to pay $0.5 million to reduce RLOC to $3.75 million by June 30, 2021 and to $3.5
million by September 30, 2021. Commencing December 31, 2021 and on the last day of each quarter, we will pay $75,000 to reduce the
RLOC. We incurred $25,000 fees related to this amendment during the year ended December 31, 2021.
Following the Ninth Amendment and Reaffirmation Agreement, due to Q3 2021 violations of the
leverage ratio covenant, we signed the Tenth Amendment and Reaffirmation Agreement with an effective date of November 12, 2021, with our bank to waive the fixed charge coverage ratio and leverage ratio for the quarters ending September 30 and
December 31, 2021, and we agreed, (i) interest on the outstanding principal amount of the RLOC shall accrue at the interest rate in effect for the RLOC from time to time, but the interest due and payable on the RLOC on each Interest Payment Date
shall be determined by subtracting seventy-five (75) basis points from the Applicable Margin and (ii) the seventy-five (75) basis points of accrued interest on the RLOC not paid on any Interest Payment Date pursuant to clause (i) above shall be due and payable on the
Termination Date or the date of payment in full of the RLOC. RLOC Amount” means (i) $3,500,000 (ii) on each date a payment in the
amount of $250,000 is made pursuant to Subsection 2.1.5(d), the RLOC Amount immediately prior to such payment reduced by $250,000 and (iii) on March 31, 2022 and on each June 30, September 30, December 31 and March 31 thereafter, the RLOC Amount immediately prior to each
such date reduced by $37,500. In addition, we agreed, by December 31, 2021, we will pay the Bank $250,000 to be applied to the principal amount outstanding under the RLOC. Commencing on March 31, 2022 and on each June 30, September 30, December 31
and March 31 thereafter, we will pay the Bank $75,000 to be applied to the principal amount outstanding under the RLOC. In addition,
within the fifth (5th) Business Day after we have received, subsequent to November 1, 2021, Employee Retention Credits in an aggregate amount not less than $500,000, we will pay the Bank $250,000 to be applied to the principal amount
outstanding under the RLOC. We are also required to maintain a minimum of $2.25 million in aggregate USA liquidity. We incurred $15 thousand of amendment fee related to this amendment.
On February 23, 2022, we entered into a Securities Purchase Agreement with Lind Global Fund II LP
(“Lind Global”), pursuant to which we issued to Lind Global a two-year, secured, interest-free convertible promissory note to pay off
the Revolving Line of Credit balance with Citizens Bank (See Note 24).
Revolving Line of Credit (“RLOC”)
As of December 31, 2021, we had outstanding borrowings of $1.8 million under the RLOC and four letters of credit totaling
$1.1 million outstanding to certain of our customers. The total borrowing capacity under the RLOC was $3.25 million as of December 31, 2021. After consideration of letters of credit and the $0.5 million reserved for issuance of new letters of credit, there was no
amount available for borrowing under the RLOC.
Using proceeds from the Convertible Note (further described in Note 24), we repaid in full, all
outstanding indebtedness owed to Citizens, and the Amended and Restated Credit and Security Agreement between us, our subsidiaries, and Citizens has been terminated. We will continue to maintain a cash management account and certain letters of
credit with Citizens and, accordingly, have entered into a certain Cash Management Agreement with Citizens, as well as certain Cash Pledge Agreements in amounts corresponding to the current outstanding letters of credits with customers (as
described above).
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Derivative Instruments |
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Derivative Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments |
14. Derivative Instruments
In the normal course of business, our operations are exposed to fluctuations in foreign currency values and interest rate changes. We may seek to control
a portion of these risks through a risk management program that includes the use of derivative instruments.
Foreign Currency Risk Management
Our foreign currency denominated contract receivables, billings in excess of revenue earned and subcontractor accruals that are related to the
outstanding foreign exchange contracts are remeasured at the end of each period into our functional currency, using the current exchange rate at the end of the period. The gain or loss resulting from such remeasurement is also included in loss on
derivative instruments, net in the consolidated statements of operations.
We utilize foreign currency exchange contracts to manage market risks associated with fluctuations in foreign currency exchange rates and to minimize
credit exposure by limiting counterparties to nationally recognized financial institutions.
As of December 31, 2021, we had no foreign exchange contracts outstanding.
Interest Rate Risk Management
For the periods presented, we did not elect to designate any of our derivative contracts as hedges. Changes in the fair value of the derivative contracts
are included in loss on derivative instruments, net in the consolidated statements of operations.
For the years ended December 31, 2021
and 2020, we recognized a net (loss) gain on its derivative instruments as outlined below:
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Income Taxes |
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Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
15. Income Taxes
The consolidated income before income taxes, by domestic and foreign sources, is as follows:
The provision (benefit) for income taxes is as follows:
The effective income tax rate for the years ended December 31, 2021 and 2020 differed from the statutory federal income tax rate as presented below:
The difference between the effective rate and statutory rate in 2021 primarily resulted from a change in valuation allowance, permanent differences, including PPP Loan forgiveness and foreign restructuring, accruals related to uncertain tax positions, the tax impact
of stock compensation forfeitures, foreign taxes, and state tax expense.
Deferred income taxes arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated
financial statements. A summary of the tax effect of the significant components of the deferred income tax assets and liabilities is as follows:
We file tax returns in the United States federal jurisdiction and in several state and foreign jurisdictions. Because of the net operating loss carryforwards, we are subject to U.S. federal and
state income tax examinations for tax years , and forward, and is subject to foreign tax examinations by tax authorities for the
years and forward. Open tax years related to state and foreign jurisdictions remain subject to examination but are not considered
material to our financial position, results of operations or cash flows.
In
assessing the ability to realize our deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. Our ability to realize its deferred tax assets depends primarily
upon the preponderance of positive evidence that could be demonstrated by three-year cumulative positive earnings, reversal of existing deferred temporary differences, and generation of sufficient future taxable income to allow for the utilization
of deductible temporary differences.
As
of each reporting date, our management considers new evidence, both positive and negative, that could impact management's view with regard to future realization of deferred tax assets to estimate if sufficient future taxable income will be
generated to use the existing deferred tax assets. This analysis is performed on a jurisdiction by jurisdiction basis.
We performed an analysis of the
valuation allowance position for its worldwide deferred tax assets and determined that a valuation allowance continues to be necessary on its U.S. and foreign deferred tax assets at December 31, 2021.
As of December 31, 2021, our largest deferred tax asset was $6.2
million of net operating losses. It primarily relates to a U.S. net operating loss carryforward of $6.2 million; $4.5 million of the net operating loss carryforward expires in various amounts between
and ; $1.7 million of the net operating loss carryforward is an indefinite-lived deferred tax asset. We do not believe that it is more likely than not that we will be able to realize its deferred
tax assets for its U.S. and foreign deferred tax assets at December 31, 2021 and therefore we have maintained a $9.4 million valuation
allowance for our net deferred tax assets. The Company has a deferred tax liability in the amount of $93 thousand at December 31, 2021
related to the portion of Goodwill which cannot be offset by deferred tax assets.As of December 31, 2021 and 2020, our consolidated cash and cash equivalents totaled $3.6
million and $6.7 million, respectively, including cash and cash equivalents held at non-U.S. entities totaling $1.2 million and $3.1 million,
respectively. The non-U.S. entities include operating subsidiaries located in China. We do not assert permanent reinvestment in China. Accordingly, we analyzed the cumulative earnings and profits and determined the US deferred liability related to
this position is immaterial.
Uncertain Tax Positions
During 2021 and 2020, we recorded tax liabilities for certain foreign tax contingencies. We recorded these uncertain tax positions in other current liabilities on the
consolidated balance sheets.
The following table outlines our uncertain tax liabilities, including accrued interest and penalties for each jurisdiction:
|
Capital Stock |
12 Months Ended |
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Dec. 31, 2021 | |
Capital Stock [Abstract] | |
Capital Stock |
16. Capital Stock
The total authorized shares of capital stock we are authorized to issue equals 62,000,000 total shares of stock of which 60,000,000 are
designated as common stock and 2,000,000 are designated as preferred stock. Our Board of Directors has the authority to establish one or
more classes of preferred stock and to determine, within any class of preferred stock, the preferences, rights and other terms of such class.
As of December 31, 2021, the Company has
reserved 7,500,000 shares of common stock for issuance; zero are reserved for shares upon exercise of outstanding stock options and 1,595,665 are reserved for
shares upon vesting of restricted stock units. There are 1,266,479 shares available for future grants under the Plan (as further defined
below).
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Stock-Based Compensation |
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Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation |
17. Stock-Based Compensation
Long-term incentive plan
During 1995, we established the 1995 Long-Term Incentive Stock Option Plan (the “Plan”), which permits the granting of stock options (including incentive stock options
and nonqualified stock options) stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards or any combination of these to employees, directors or consultants. The Plan was amended and restated effective
April 22, 2016 and expires on April 21, 2026; the total number of shares that could be issued under the Plan is 7,500,000. As of
December 31, 2021, 4,637,856 shares have been issued under the Plan, zero stock options and 1,595,665 restricted stock units (RSUs)
were outstanding under the Plan, while 1,266,479 shares remain for future grants under the Plan.
We recognize compensation expense on a pro rata straight-line basis over the requisite service period for stock-based compensation awards with
both graded and cliff vesting terms. We recognize the cumulative effect of a change in the number of awards expected to vest in compensation expense in the period of change. We have not capitalized any portion of its stock-based compensation. Our
forfeiture rate is based on actuals.
During the years ended December 31, 2021 and 2020, we recognized $1.0
million and $0.4 million, respectively, of stock-based compensation expense under the fair value method. Accordingly, we recognized
associated deferred income tax expense (benefits) of $111 thousand and $220 thousand before valuation allowance, respectively, during the years ended December 31, 2021 and 2020. During the years ended December 31, 2021 and 2020, there were no stock-based compensation expense related to the change in fair value of cash-settled RSUs, which we account for as a liability.
On February 23, 2022, we entered into a Securities Purchase Agreement with Lind Global Fund II LP (“Lind Global”), pursuant to which we issued to Lind Global a two-year, secured, interest-free convertible promissory note in the amount of $5.75 million (the “Convertible Note”) and a common stock purchase warrant to acquire 1,283,732
shares of our common stock (the “Warrant”) (See Note 24).
Restricted Stock Units
During the years ended December 31, 2021 and 2020, we issued RSUs to employees which vest upon the achievement of specific market-based or time-based measures. The
fair value for RSU's is calculated based on the stock price on the grant date and expensed ratably over the requisite service period as market-based results achieved, which ranges between one year and five years. The following table summarizes the
information about vested and unvested restricted stock units for the years ended December 31, 2021 and 2020.
As of December 31, 2021, we had $0.7 million of unrecognized compensation expense related to the RSUs expected to be recognized on a pro-rata straight line basis over a weighted
average remaining service period of approximately 1.2 years.
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Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases |
18. Leases
We have lease agreements with lease and non-lease components, which are accounted for as a single lease. We apply a portfolio approach to effectively
account for the operating lease ROU assets and liabilities.
Lease contracts are evaluated at inception to determine whether they contain a lease and whether we obtain the right to control an identified asset. The
following table summarizes the classification of operating ROU assets and lease liabilities on the consolidated balance sheets (in thousands):
During September 2020, we notified the landlord of our consolidated subsidiary Absolute’s home office of our decision not to renew the lease.
We executed a sublease agreement with a tenant to sublease 850
square feet from the Sykesville office space on September 13, 2021. This agreement is in addition to the previous sublease for 3,650 square feet entered into on May 1, 2019.
The addition of the second sublease is for a portion of the space previously abandoned in December 2019. The sublease does not relieve us of our primary lease obligation. The lessor agreements are all considered operating leases, maintaining the
historical classification of the underlying lease. We do not recognize any underlying assets for the subleases as a lessor of operating leases. The net amount received from the sublease is recorded within selling, general and administrative
expenses.
The table below summarizes the lease income and expenses recorded in the consolidated statements of operations incurred year to date ended December 31, 2021, (in thousands):
(1) Includes variable lease costs which are immaterial.
(2) Include leases maturing less than twelve months from the report date.
(3) Sublease
portfolio consists of 2 tenants, which sublease parts of our principal executive office located at 1332 Londontown Blvd, Suite 200,
Sykesville, MD.
We are obligated under certain noncancelable operating leases for office facilities and equipment. Future minimum lease payments under noncancelable
operating leases as of December 31, 2021 are as follows:
We have calculated the weighted-average remaining lease term, presented in years below, and the weighted-average discount rate for our operating leases.
As noted in our lease accounting policy, we use the incremental borrowing rate as the lease discount rate:
The table below sets out the classification of lease payments in the consolidated statements of cash flows. There was no right-of-use assets obtained in
exchange for operating lease liabilities represent new operating leases obtained through our business combination during the year to date ended December 31, 2021:
(in thousands)
|
Employee Benefits |
12 Months Ended |
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Dec. 31, 2021 | |
Employee Benefits [Abstract] | |
Employee Benefits |
19. Employee Benefits
We have a qualified defined contribution plan that covers all U.S. employees under Section 401(k) of the Internal Revenue Code. Under this plan, our
stipulated basic contribution matches a portion of the participants’ contributions based upon a defined schedule for employee’s in our Performance Improvement Solutions segment. Our contributions to the plan were approximately $290 thousand and $260 thousand for the
years ended December 31, 2021 and 2020,
respectively.
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Segment Information |
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Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information |
20. Segment Information
We have two
reportable business segments.
The Performance Improvement Solutions segment provides simulation, training and engineering products and services delivered across
the breadth of industries we serve. Solutions include simulation for both training and engineering applications. Examples of engineering services include, but are not limited to, plant design verification and validation, thermal performance
evaluation and optimization programs, and engineering programs for plants for ASME code and ASME Section XI. We provide these services across all market segments through our Performance, True North, and DP Engineering subsidiaries. Example training
applications include turnkey and custom training services. Contract terms are typically less than two years.
The Workforce Solutions segment provides specialized workforce solutions primarily to the nuclear industry, working at clients’ facilities. This business
is managed through our Hyperspring and Absolute subsidiaries. The business model, management focus, margins and other factors clearly separate this business line from the rest of our products and services portfolio.
The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment revenue
to consolidated revenue and operating results to consolidated income before income tax expense (benefit). Inter-segment revenue is eliminated in consolidation and is not significant.
Additional information relating to segments is as follows:
For the years ended December 31, 2021 and 2020, 91%
and 89%, respectively, of our consolidated revenue was from customers in the nuclear power industry. We design, develop and deliver
business and technology solutions to the energy industry worldwide. Revenue, operating income (loss) and total assets for our United States, European, and Asian subsidiaries as of and for the years ended December 31, 2021 and 2020 are as follows:
Revenues by geographic location above are attributed to the contracting entity. Therefore, revenues from a foreign customer that contracted directly
with our U.S. entity are included in revenues from the United States. All revenues in Asia were attributable to our Chinese subsidiary.
Alternatively, revenue from customers domiciled in foreign countries were approximately 12% and 17%, of our consolidated 2021 and 2020 revenue, respectively. Revenue
from foreign countries where our customers reside were all individually less than 10% of our consolidated revenue during 2021 and 2020.
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Supplemental Disclosure of Cash Flow Information |
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Disclosure of Cash Flow Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Disclosure of Cash Flow Information |
21. Supplemental Disclosure of Cash Flow Information
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Non-consolidated Variable Interest Entity |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Non-consolidated Variable Interest Entity [Abstract] | |
Non-consolidated Variable Interest Entity |
22. Non-consolidated Variable Interest Entity
Through our wholly owned subsidiary, DP Engineering, we effectively hold a 48% membership interest in DP-NXA Consultants LLC (“DP-NXA”).
DP-NXA was established to provide industrial services that include civil, structural, architectural, electrical, fire protection,
plumbing, mechanical consulting engineering services to customers. DP-NXA sub-contracts their work to its two owners, NXA Consultants
LLC (“NXA”), which owns 52% of the entity, and DP
Engineering. DP Engineering and NXA contributed $48 thousand and $52 thousand, respectively, for 48% and 52% interest in DP-NXA. DP Engineering recorded the contributed cash as an equity investment.
We evaluated the nature of DP Engineering’s investment in DP-NXA and determined that DP-NXA is a variable interest entity (“VIE”).
Since we do not have the power to direct activities that most significantly impact DP-NXA, we cannot be DP-NXA’s primary beneficiary. Furthermore, we concluded that we do not hold a controlling financial interest in DP-NXA since NXA, the VIE’s
majority owner, makes all operational and business decisions. We account for DP Engineering’s investment in DP-NXA using the equity method of accounting due to the fact DP Engineering exerts significant influence with its 48% of membership interest, but does not control the financial and operating decisions.
Our maximum exposure to any losses incurred by DP-NXA is limited to DP Engineering’s investment. As of December 31, 2021, DP
Engineering has not made any additional contributions to DP-NXA and we believe DP Engineering’s maximum exposure to any losses incurred by DP-NXA was not material. As of December 31, 2021, we do not have existing guarantee with or to DP-NXA, or any
third-party work contracted with it.
For the year ended December 31, 2021, the carrying value of the investment in DP-NXA was zero. We do not have any investment income or loss from DP-NXA for the year ended December 31, 2021.
|
Commitments and Contingencies |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies |
23. Commitments and Contingencies
Joyce v. Absolute Consulting, Inc.
On March 29, 2019, a former employee of Absolute Consulting, Inc., filed a putative class action against us and Absolute, Joyce v. Absolute Consulting Inc., case number 1:19 cv 00868 RDB, in
the United States District Court for the District of Maryland. The lawsuit alleged that the plaintiff and certain other employees were not properly compensated for overtime hours worked. We were subsequently dismissed from the case, leaving
Absolute as the sole defendant.
On August 17, 2020, Absolute entered into a settlement agreement with the plaintiffs (the “Settlement Agreement”), with a maximum settlement amount of $1.5 million which required approval by the Court. On September 8, 2020, the Settlement Agreement was approved by the Court, and the case was dismissed,
although the parties remain bound by the terms of the Settlement Agreement. On September 29, 2020, we received $952 thousand from a
general escrow account, originally set up as part of our purchase of Absolute during fiscal year 2017. We presented the loss related to the above-described settlement and the benefit from the above described proceeds from the release of escrow from
the Absolute transaction in, selling, general and administrative expenses, in the amount of $477 thousand for the year ended December
31,2021. Following the Court’s approval, Absolute made an initial payment toward the settlement amount in the amount of $625 thousand,
which amount included legal fees. After the expiration of an opt-in notice period, the final cost of settling this case, including plaintiff’s attorney fees was approximately $1.4 million. Approximately $713 thousand of the settlement amount was paid out
prior to December 31, 2020. Approximately $694 thousand was paid out in 2021. No liability remains as of December 31, 2021.
Per ASC 450 Accounting for Contingencies, we
review potential items and areas where a loss contingency could arise. In the opinion of management, we are not a party to any legal proceeding, the outcome of which, in management’s opinion, individually or in the aggregate, would have a material
effect on our consolidated results of operations, financial position or cash flows, other than as noted above. We expense legal defense costs as incurred.
We, from time to time, are involved in litigation in the ordinary course of business. While it is too early to determine the outcome of such matters,
management does not expect the resolution of these matters to have a material impact on our financial position or results of operations.
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Subsequent Events |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events |
24. Subsequent Events
On February 23, 2022, we entered into a Securities Purchase
Agreement with Lind Global Fund II LP (“Lind Global”), pursuant to which we issued to Lind Global a two-year, secured, interest-free
convertible promissory note in the amount of $5.75 million (the “Convertible Note”) and a common stock purchase warrant to acquire 1,283,732 shares of our common stock (the “Warrant”).
The Convertible Note is convertible into our common stock at any time after the earlier of six (6) months from issuance of the Convertible Note or the date the registration statement is effective. The conversion price of the Convertible Note is equal to $1.94, subject to customary adjustments. The Convertible Note will reach maturity in February of , although we are permitted to prepay the Convertible Note, provided that Lind Global shall have the option to convert up to of the outstanding principal of the Convertible Note at a price per share equal to the lessor of the Repayment Share price or the conversion price (as described below). The Convertible Note is guaranteed by each of our subsidiaries and is secured by a first priority lien on all of our assets. The Convertible Note is not subject to any financial covenants and events of default under the Convertible Note are limited to events related to payment, certain events pertaining to the underlying shares of common stock and other customary events including, but not limited to, bankruptcy or insolvency. Upon the occurrence of an event of default, the Convertible Note will become immediately due and payable, subject to any cure periods described in the Convertible Note, and the customer may demand that all or a portion of the outstanding principal amount be converted into shares of common stock at the lower of the then current conversion price and 80% of the average of the three (3) lowest daily volume-weighted average price (“VWAPs”) during the twenty (20) days prior to delivery of the conversion notice. If there is a change of control of the Company, Lind Global has the right to require us to prepay the outstanding principal amount of the Convertible Note. A portion of the proceeds of the Convertible Note were used to repay, in full, all outstanding indebtedness owed to Citizens, and the Amended and Restated Credit and Security Agreement between us, our subsidiaries, and Citizens was terminated. We will continue to maintain a cash management account and certain letters of credit with Citizens and, accordingly, have entered into a certain Cash Management Agreement with Citizens, as well as certain Cash Pledge Agreements in amounts corresponding to the current outstanding letters of credits with customers (as described in Note 13). The Warrant entitles Lind Global to purchase up to 1,283,732 shares of our common stock until
February 23, 2027, at an exercise price of $1.94 per share, subject to customary adjustments described therein.
|
Summary of Significant Accounting Policies (Policies) |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Summary of Significant Accounting Policies [Abstract] | |
Principles of consolidation |
Principles of consolidation
GSE Systems, Inc. is a leading provider of professional and technical engineering, staffing services, and simulation software to clients in the power
and process industries. References in this report to “GSE,” the “Company,” “we” and “our” are to GSE Systems, Inc. and its subsidiaries, collectively. All intercompany balances and transactions have been eliminated in consolidation.
|
Accounting estimates |
Accounting estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America
(U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate the estimates used, including, but not limited to those related to revenue recognition on long-term contracts, allowance for doubtful accounts, product
warranties, valuation of goodwill and intangible assets acquired, impairment of long-lived assets to be disposed of, valuation of stock-based compensation awards and the recoverability of deferred tax assets. Actual results could differ from these
estimates.
|
Business combinations |
Business combinations
Business combinations are accounted for in accordance with the Financial Accounting Standards Board (“FASB”) ASC 805, Business Combinations, using the acquisition method. Under the acquisition method, the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree are recognized at fair value on the
acquisition date, which is the date on which control is transferred to us. Any excess purchase price is recorded as goodwill. Transaction costs associated with business combinations are expensed as incurred.
Revenues and the results of operations of the acquired business are included in the accompanying consolidated statements of
operations commencing on the date of acquisition.
Acquisitions may include contingent consideration payments based on future financial measures of an acquired company. Under ASC 805, contingent
consideration is required to be recognized at fair value as of the acquisition date. We estimate the fair value of these liabilities based on financial projections of the acquired companies and estimated probabilities of achievement. At each
reporting date, the contingent consideration obligation is revalued to estimated fair value, and changes in fair value subsequent to the acquisition are reflected in income or expense in the consolidated statements of operations, and could cause a
material impact to our operating results. Changes in the fair value of contingent consideration obligations may result from changes in discount periods and rates, changes in the timing and amount of revenue and/or earnings estimates, and changes in
probability assumptions with respect to the likelihood of achieving the various earn-out criteria.
|
Revenue recognition |
Revenue recognition
We derive our revenue through three broad
revenue streams: 1) System Design and Build (“SDB”), 2) software, and 3) training and consulting services. We recognize revenue from SDB and software contracts mainly through the Performance Improvement Solutions segment and the training and
consulting service contracts through both the Performance Improvement Solutions segment and Workforce Solutions segment.
The SDB contracts are typically fixed-price and consist of initial design,
engineering, assembly and installation of training simulators which include hardware, software, labor, and PCS on the software. We generally have two
main performance obligations for an SDB contract: (1) the training simulator build and (2) the PCS period. The training simulator build performance obligation generally includes hardware, software, and labor. The transaction price under the SDB
contracts is allocated to each performance obligation based on its standalone selling price. We recognize the training simulator build revenue over the construction and installation period using the cost-to-cost input method. In applying the
cost-to-cost input method, we use the actual costs incurred to date relative to the total estimated costs to measure the work progress toward the completion of the performance obligation and recognize revenue over time as control transfers to a
customer. Estimated contract costs are reviewed and revised periodically during the contract period, and the cumulative effect of any change in estimates is recognized in the period in which the change is identified. Estimated losses are
recognized in the period such losses become known.
Uncertainties inherent in the performance of contracts include labor availability and
productivity, material costs, change order scope and pricing, software modification and customer acceptance issues. The reliability of these cost estimates is critical to our revenue recognition as a significant change in the estimates can cause
our revenue and related margins to change significantly from previous estimates.
Management judgments and estimates involved in the initial creation and subsequent updates to our estimates-at-completion and related profit recognized are
critical for our revenue recognition associated with SDB contracts. Inputs and assumptions requiring significant management judgment included anticipated direct labor, subcontract labor, and other direct costs required to deliver on unfinished
performance obligations.
The SDB contracts generally provide a one-year base warranty on the systems. The base warranty will not be accounted for as a separate performance obligation under the contract because it
does not provide the customer with a service in addition to the assurance that the completed project complies with agreed-upon specifications. Warranties extended beyond our typical one-year period will be evaluated on a case-by-case basis to determine if it provides more than just assurance that the product operates as intended, which requires carve-out
as a separate performance obligation.
Revenue from the sale of perpetual standalone
and term software licenses, which do not require significant modification or customization, is recognized upon its delivery to the customer. Revenue from the sale of cloud-based, subscription-based software licenses is recognized ratably over
the term of such licenses following delivery to the customer. Delivery is considered to have occurred when the customer receives a copy of the software and is able to use and benefit from the software.
A software license sale contract with multiple deliverables typically includes the following elements: license, installation and training services, and
PCS. The total transaction price of a software license sale contract is typically fixed and is allocated to the identified performance obligations based on their relative standalone selling prices. Revenue is recognized as the performance
obligations are satisfied. Specifically, license revenue is recognized when the software license is delivered to the customer; installation and training revenue are recognized when the installation and training are completed without regard to a
detailed evaluation of the point in time criteria due to the short-term nature of the installation and training services (one to two days on average); and PCS revenue is recognized ratably over the service period, as PCS is deemed as a stand-ready
obligation.
The contracts within the training and consulting services revenue stream are either T&M based or fixed-price based. Under a typical T&M contract,
we are compensated based on the number of hours of approved time provided by temporary workers and the bill rates which are fixed by type of work, as well as approved expenses incurred. The customers are billed on a regular basis, such as weekly,
biweekly or monthly. In accordance with ASC 606-10-55-18, Revenue from contracts with customers, we elected to apply the “right to invoice” practical expedient, under which we recognize revenue in the
amount to which we have the right to invoice. The invoice amount represents the number of hours of approved time worked by each temporary worker multiplied by the bill rate for the type of work, as well as approved expenses incurred. Under a
typical fixed-price contract, we recognize the revenue on a Percentage of Completion basis as it relates to construction contracts with revenue recognized based on project delivery over time. Revenue from the sale of short-term contracts with a
delivery period of one month or less is recognized in the month completed.
For contracts with multiple performance obligations, we allocate the contract price to each performance obligation based on its relative standalone selling
price. We generally determine standalone selling prices based on the prices charged to customers.
The transaction price for software contracts is generally fixed, and we recognize revenue upon delivery of the software, with fees due in advance or
shortly after delivery of the software.
We recognize training and consulting services revenue as services are performed and bill our customers for services that we have provided on a regular
basis (i.e. weekly, biweekly or monthly).
Contract asset relates to performance under the contract for obligations that are satisfied but not yet billed, which we classify as contract receivables,
net.
Contract liability, which we classify as billing-in-excess of revenue earned, relates to payments received in advance of performance under the contract.
Contract liabilities are recognized as revenue as performance obligations are satisfied.
|
Cash and cash equivalents |
Cash and cash equivalents
Cash and cash equivalents represent cash and highly liquid investments including money market accounts with maturities of three months or less at the
date of purchase.
|
Contract receivables, net and contract asset and liabilities |
Contract receivables, net and contract asset and liabilities
Contract receivables include recoverable costs and accrued profit not billed which represents revenue recognized in excess of
amounts billed. Contract asset (contract receivables, net) include amounts earned in performance of services that have not been invoiced. Contract liabilities include billings in excess of revenue earned on uncompleted contracts in the accompanying
consolidated balance sheets represent advanced billings to clients on contracts in advance of work performed. Generally, such amounts will be earned and recognized over the next twelve months.
Billed receivables are recorded at invoiced amounts. The allowance for doubtful accounts is based on historical trends of past due accounts, write-offs,
specific identification and review of customer accounts.
|
Impairment of long-lived assets |
Impairment of long-lived assets
Long-lived assets, such as equipment, purchased software, capitalized software development costs, and intangible assets subject to amortization, are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized at the amount by which the carrying amount
of the asset exceeds its fair value. Assets to be disposed of would be separately presented in the consolidated balance sheets and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated.
|
Development expenditures |
Development expenditures
Development expenditures incurred to meet customer specifications under contracts are charged to cost of revenue. Company sponsored development
expenditures are either charged to operations as incurred and are included in research and development expenses or are capitalized as software development costs. The amounts incurred for Company sponsored development activities relating to the
development of new products and services or the improvement of existing products and services, were approximately $0.9 million and $1.0 million for the years ended December 31, 2021
and 2020, respectively. Of these amounts, the Company capitalized approximately $0.3 million and $0.3 million for the years ended December 31, 2021 and 2020,
respectively.
|
Equipment, software and leasehold improvements, net |
Equipment, software and leasehold improvements, net
Equipment and purchased software are recorded at cost and depreciated using the straight-line method with estimated useful lives ranging from three years to ten years. Leasehold
improvements are amortized over the term of the lease or the estimated useful life, whichever is shorter, using the straight-line method. Upon sale or retirement, the cost and related depreciation are eliminated from the respective accounts and any
resulting gain or loss is included in operations. Maintenance and repairs are charged to expense as incurred.
|
Software development costs |
Software development costs
Certain computer software development costs, including direct labor cost,
are capitalized in the accompanying consolidated balance sheets. Capitalization of computer software development costs begins upon the establishment of technological feasibility. Capitalization ceases and amortization of capitalized costs begins
when the software product is commercially available for general release to customers. Amortization of capitalized computer software development costs is included in cost of revenue and is determined using the straight-line method over the
remaining estimated economic life of the product, typically three years. On an annual basis, or more frequently as conditions indicate, we assess the recovery of the unamortized software development costs by estimating the net undiscounted cash flows expected to be generated by the sale of the
product. If the undiscounted cash flows are not sufficient to recover the unamortized software cost we will write-down the carrying amount of such asset to its estimated fair value based on the future discounted cash flows. The excess of any
unamortized computer software costs over the related fair value is written down and charged to operations. Included in capitalized software development costs are certain expenses associated with the development software as a service. Significant changes in the sales projections could result in an impairment with respect to the capitalized software that is reported on our consolidated balance sheets.
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Goodwill and intangible assets |
Goodwill and intangible assets
Our intangible assets include amounts recognized in connection with business
acquisitions, including customer relationships, trade names, non-compete agreements and alliance agreements. Due to the impact of the COVID-19 pandemic, definite-lived intangible assets were reviewed for impairment in the first quarter of
2020. The undiscounted cash flows evidenced impairment for the DP Engineering asset group as such, we used a discounted cash flow model to determine the fair value of the DP Engineering asset group and recorded an impairment charge of $4.3 million as of the period ended March 31, 2020.
Our intangible assets impairment analysis includes the use of undiscounted and discounted cash flow models that requires management to make assumptions
regarding estimates of revenue growth rates and operating margins used to calculate projected future cash flows.
Intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset.
Amortization is recognized on a straight-line basis over the estimated useful life of the intangible asset, except for contract backlog and contractual customer relations, which are recognized in proportion to the related project revenue streams.
Intangible assets with definite lives are reviewed for impairment if indicators of impairment arise. We do not have any intangible assets with indefinite useful lives.
Goodwill represents the excess of costs over fair value of assets of businesses
acquired. We review goodwill for impairment annually as of December 31 and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. We test goodwill at the reporting unit level. A reporting unit
is an operating segment, or one level below an operating segment, as defined by U.S. GAAP. We have determined that we have two
reporting units, which are the same as our two operating segments: (i) Performance Improvement Solutions (“Performance”) and (ii)
Workforce Solutions.
ASU 2011-08 permits an entity to first assess qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform impairment testing. Under ASU 2011-08, an entity is not required to perform
step one of the goodwill impairment test for a reporting unit if it is more likely than not that its fair value is greater than its carrying amount. Additionally, ASU 2017-04 permits eliminating two step approach when there is indication of
impairment.
During the first quarter of fiscal 2020, We determined that the impact of the COVID-19 pandemic on our operations was an indicator of a triggering event
that could result in potential impairment of goodwill. As such we performed a Step 1 goodwill analysis whereby we compared the fair value of each reporting unit to its respective carrying value. Based upon this analysis, we determined the fair
value of each of our reporting units exceeded the carrying value and thus there was no impairment as of the period ended March 31, 2020. We completed our annual quantitative step 1 analysis as of December 31, 2021 and 2020 and concluded that the
fair values of each of our reporting units exceeded their respective carrying values.
Our goodwill impairment analysis includes the use of a discounted cash flow model that requires management to make assumptions regarding estimates of
revenue growth rates and operating margins used to calculate projected future cash flows, and risk-adjusted discount rates. We make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for
each of our reporting units.
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Foreign currency translation |
Foreign currency translation
The United States Dollar (USD) is our functional currency and that of our subsidiaries operating in the United States. The
functional currency of each of our foreign subsidiaries is the currency of the economic environment in which the subsidiary primarily does business. Our foreign subsidiaries’ financial statements are translated into USD using the exchange rates
applicable to the dates of the financial statements. Assets and liabilities are translated into USD using the period-end spot foreign exchange rates. Income and expenses are translated at the average exchange rate for the year. Equity accounts are
translated at historical exchange rates. The effects of these translation adjustments are cumulative translation adjustments, which are reported as a component of accumulated other comprehensive income (loss) included in the consolidated statements
of changes in shareholders’ equity.
For any business transaction that is in a currency different from the entity’s functional currency, we record a gain or loss based on the difference
between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled) to the foreign currency realized gain (loss) account in the consolidated statements of operations.
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Income taxes |
Income taxes
Income taxes are provided under the asset and liability method. Under this method, deferred income taxes are determined based on the differences between
the consolidated financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amounts expected to be realized. A provision is made for our current liability for federal, state and foreign income taxes and the change in our deferred income tax assets and liabilities.
We establish accruals for uncertain tax positions taken or expected to be taken in a tax return when it is not more likely than not (i.e., a likelihood
of more than fifty percent) that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater
than 50% likely of being realized upon ultimate settlement. Favorable or unfavorable adjustment of the accrual for any particular issue would be recognized as an increase or decrease to income tax expense in the period of a change in facts and
circumstances. Interest and penalties related to income taxes are accounted for as income tax expense.
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Stock-based compensation |
Stock-based compensation
Stock-based compensation expense is based on the grant-date fair value estimated in accordance with the provisions of ASC 718, Compensation-Stock Compensation. Compensation expense related to stock-based awards is recognized on a pro rata straight-line basis based on the fair value of share
awards that are scheduled to vest during the requisite service period.
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Significant customers and concentration of credit risk |
Significant customers and concentration of credit risk
For the year ended December 31, 2021,
we have a concentration of revenue from one individual customer, which accounted for 13.8% of our consolidated revenue. For the year ended December 31, 2020,
we have a concentration of revenue from one individual customer, which accounted for 14.1% of our consolidated revenue. No other individual customer accounted for more than 10% of our consolidated revenue in 2021 or 2020.
As of December 31, 2021 and 2020, we
have no customer that accounted over 10% of the Company’s consolidated contract receivables.
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Fair values of financial instruments |
Fair values of financial instruments
The carrying amounts of current assets and current liabilities reported in the consolidated balance sheets approximate fair value due to their short term
duration.
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Derivative instruments |
Derivative instruments
Occasionally, we utilize forward foreign currency exchange contracts to manage market risks associated with the fluctuations in foreign currency exchange
rates. It is our policy to use such derivative financial instruments to protect against market risk arising in the normal course of business in order to reduce the impact of these exposures. We minimize credit exposure by limiting counterparties to
nationally recognized financial institutions. We do not have such derivative instruments as of December 31, 2021.
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Recent Accounting Pronouncements (Policies) |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Recent Accounting Pronouncements [Abstract] | |
Accounting pronouncements recently adopted |
Accounting
pronouncements recently adopted
In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities, Investments – Equity Method and Joint Ventures, and Derivatives and Hedging, which provides clarity
for companies that hold equity securities at cost to first update the fair value of an investment, immediately prior to applying the Equity Method of Accounting; or clarity for companies that enter into forward contracts to purchase additional
shares of an equity security that would then require the investee to account for the investment via the Equity Method. This ASU is applicable for public companies starting with fiscal years beginning after December 15, 2020 and interim periods
within those fiscal years. We adopted ASU 2020-01 on January 1, 2021. This standard did not have a significant impact to our consolidated financial statements since we do not currently hold any investments at cost.
In September 2020, the FASB issued ASU 2020-10, Codification Improvements, which is part of an ongoing attempt to improve the consistency of the
codification. Previously the option to disclose information in the notes to the financial statements was in one of two sections: Disclosure Section (Section 50) or Other Presentation Matters (Section 45). ASU 2020-10 conforms the disclosure
requirements into Section 50 and provides additional information on specific guidance that was previously unclear or not included in the codification. This ASU is applicable for public companies starting with fiscal years beginning after
December 15, 2020, with early adoption available for interim and annual financial statements not already filed and using the retrospective approach. However, the FASB does not believe that this should change any of the current reporting or
disclosure requirements. We adopted ASU 2020-10 on January 1, 2021. The adoption of this standard did not have a material impact to our consolidated financial statements.
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Accounting pronouncements not yet adopted |
Accounting pronouncements not yet adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which introduces new guidance for credit losses on instruments within its
scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including, but not limited to, trade and other receivables, held-to-maturity debt securities, loans and net
investments in leases. The new guidance also modifies the impairment model for availablefor- debt securities and requires the entities to determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit
loss. The standard also indicates that entities may not use the length of time a security has been in an unrealized loss position as a factor in concluding whether a credit loss exists. Early adoption is permitted for all entities for fiscal years
beginning after December 15, 2018, including interim periods within those fiscal years. On October 16, 2019, the FASB voted to defer the deadlines for private companies and certain small public companies, including smaller reporting companies, to
implement the new accounting standards on credit losses. The new effective date is January 1, 2023. As a smaller reporting company, we have elected to defer adoption in line with new deadlines and are currently evaluating the effects, if any, that
the adoption of this guidance will have on our consolidated financial position, results of operations and cash flows.
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant
impact on our consolidated financial statements and related disclosures.
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Earnings per Share (Tables) |
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Earnings (Loss) Per Share, Basic and Diluted |
The number of common shares and common share equivalents used in the determination of basic and diluted (loss) earnings per share were as follows:
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Revenue (Tables) |
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Disaggregation of Revenue |
The following table represents a disaggregation of revenue by type of goods or services for the years ended December 31, 2021 and 2020, along with the reportable
segment for each category:
(in thousands)
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Balance of Contract Liabilities and Revenue Recognized in Reporting Period |
The following table reflects the balance of contract liabilities and the revenue recognized in the reporting period that was included in the contract
liabilities from contracts with customers:
(in thousands)
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Restructuring Expenses (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Abandoned Square Footage and Right of Use Asset |
The following table shows the abandoned square footage and right of use asset details:
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Restructuring Costs |
The following table shows the total restructuring costs:
|
Goodwill and Intangible Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Acquired Finite-Lived Intangible Assets by Major Class |
The following table shows the gross carrying amount and accumulated amortization of definite-lived intangible assets:
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Finite-Lived Intangible Assets, Future Amortization Expense |
Amortization expense related to definite-lived intangible assets totaled 1.2 million and $1.9 million for the years ended December 31, 2021 and 2020, respectively. The following table shows the
estimated amortization expense of the definite-lived intangible assets for the next five years:
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Net Carrying Amount of Goodwill |
There were no changes in goodwill during 2019 to 2020 and 2020 to 2021:
(in thousands)
|
Contract Receivables (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract Receivables |
Recoverable costs and accrued profit not billed represent costs incurred and associated profit accrued on contracts that will become billable upon future
milestones or completion of contracts. The components of contract receivables are as follows:
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Allowance For Doubtful Account Rollforward |
The activity in the allowance for doubtful accounts is as follows:
|
Prepaid Expenses and Other Current Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Current Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Current Assets |
Prepaid expenses and other current assets consist of the following:
|
Equipment, Software and Leasehold Improvements (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equipment, Software and Leasehold Improvements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equipment, Software and Leasehold Improvements |
Equipment, software and leasehold improvements, net consist of the following:
|
Product Warranty (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Warranty [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activities in the Accrued Warranty Accounts |
The activity in the accrued warranty accounts is as follows:
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Activity in Warranty Accounts |
The current and non-current warranty balance is as follows:
|
Fair Value of Financial Instruments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value | The following table presents assets measured at fair value at December 31, 2021:
The following table presents assets measured at fair value at December 31, 2020:
|
Derivative Instruments (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Gain (Loss) on Derivative Instruments |
For the years ended December 31, 2021
and 2020, we recognized a net (loss) gain on its derivative instruments as outlined below:
|
Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Before Income Taxes by Domestic and Foreign Sources |
The consolidated income before income taxes, by domestic and foreign sources, is as follows:
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Provision (Benefit) For Income Taxes |
The provision (benefit) for income taxes is as follows:
|
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Effective Income Tax Rate Reconciliation |
The effective income tax rate for the years ended December 31, 2021 and 2020 differed from the statutory federal income tax rate as presented below:
|
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Deferred Tax Assets and Liabilities |
Deferred income taxes arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated
financial statements. A summary of the tax effect of the significant components of the deferred income tax assets and liabilities is as follows:
|
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Uncertain Tax Liabilities |
The following table outlines our uncertain tax liabilities, including accrued interest and penalties for each jurisdiction:
|
Stock-Based Compensation (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units |
During the years ended December 31, 2021 and 2020, we issued RSUs to employees which vest upon the achievement of specific market-based or time-based measures. The
fair value for RSU's is calculated based on the stock price on the grant date and expensed ratably over the requisite service period as market-based results achieved, which ranges between one year and five years. The following table summarizes the
information about vested and unvested restricted stock units for the years ended December 31, 2021 and 2020.
|
Leases (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Classification of Operating ROU Assets and Lease Liabilities on the Balance Sheet |
Lease contracts are evaluated at inception to determine whether they contain a lease and whether we obtain the right to control an identified asset. The
following table summarizes the classification of operating ROU assets and lease liabilities on the consolidated balance sheets (in thousands):
|
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Lease Income and Expenses |
The table below summarizes the lease income and expenses recorded in the consolidated statements of operations incurred year to date ended December 31, 2021, (in thousands):
(1) Includes variable lease costs which are immaterial.
(2) Include leases maturing less than twelve months from the report date.
(3) Sublease
portfolio consists of 2 tenants, which sublease parts of our principal executive office located at 1332 Londontown Blvd, Suite 200,
Sykesville, MD.
|
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Future Minimum Lease Payments |
We are obligated under certain noncancelable operating leases for office facilities and equipment. Future minimum lease payments under noncancelable
operating leases as of December 31, 2021 are as follows:
|
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Operating Lease Weighted Average Remaining Lease Term And Discount Rate |
We have calculated the weighted-average remaining lease term, presented in years below, and the weighted-average discount rate for our operating leases.
As noted in our lease accounting policy, we use the incremental borrowing rate as the lease discount rate:
|
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Classification of Lease Payments in the Statement of Cash Flows |
The table below sets out the classification of lease payments in the consolidated statements of cash flows. There was no right-of-use assets obtained in
exchange for operating lease liabilities represent new operating leases obtained through our business combination during the year to date ended December 31, 2021:
(in thousands)
|
Segment Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated |
The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment revenue
to consolidated revenue and operating results to consolidated income before income tax expense (benefit). Inter-segment revenue is eliminated in consolidation and is not significant.
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Reconciliation of Assets from Segment to Consolidated |
Additional information relating to segments is as follows:
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Segment Reporting Information, by Segment |
For the years ended December 31, 2021 and 2020, 91%
and 89%, respectively, of our consolidated revenue was from customers in the nuclear power industry. We design, develop and deliver
business and technology solutions to the energy industry worldwide. Revenue, operating income (loss) and total assets for our United States, European, and Asian subsidiaries as of and for the years ended December 31, 2021 and 2020 are as follows:
|
Supplemental Disclosure of Cash Flow Information (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Disclosure of Cash Flow Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Disclosure of Cash Flow Information |
|
Summary of Significant Accounting Policies, Concentration of Credit Risk (Details) - Revenue [Member] - Customer Concentration Risk [Member] - Customer |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Revenue by major customers [Abstract] | ||
Number of major customers | 1 | 1 |
Customer One [Member] | ||
Revenue by major customers [Abstract] | ||
Percentage contributed by major customers | 13.80% | 14.10% |
Earnings per Share (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Numerator [Abstract] | ||
Net income (loss) attributed to common shareholders | $ 10,607 | $ (10,537) |
Denominator [Abstract] | ||
Weighted-average shares outstanding for basic earnings per share (in shares) | 20,761,191 | 20,439,157 |
Effect of dilutive securities [Abstract] | ||
Dilutive RSU shares outstanding (in shares) | 0 | 0 |
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share (in shares) | 20,761,191 | 20,439,157 |
Shares related to dilutive securities excluded because inclusion would be anti-dilutive (in shares) | 0 | 0 |
Coronavirus Aid, Relief and Economic Security Act (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Employee Retention Credits [Abstract] | ||||
Tax benefit recognized | $ 163 | $ 355 | ||
Paycheck Protection Program [Member] | ||||
Debt Instruments [Abstract] | ||||
Other income | 10,100 | |||
Paycheck Protection Program Loan [Abstract] | ||||
Amount received from Paycheck Protection Program | $ 10,000 | $ 10,000 | ||
Interest rate | 1.00% | 1.00% | ||
Employee Retention Credits [Member] | ||||
Debt Instruments [Abstract] | ||||
Other income | $ 7,200 | |||
Employee Retention Credits [Abstract] | ||||
Refund of employee retention credit | 5,000 | |||
Tax benefit recognized | 2,200 | |||
Refund of employee retention credit received | $ 200 | 900 | ||
Refund of employee retention credit receivable | $ 4,100 | $ 4,100 | ||
Employee Retention Credits [Member] | Subsequent Event [Member] | ||||
Employee Retention Credits [Abstract] | ||||
Refund of employee retention credit received | $ 1,100 |
Contract Receivables (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Contract Receivables [Abstract] | ||
Maximum term of contract receivables | 12 months | |
Components of contract receivables [Abstract] | ||
Billed receivables | $ 6,124 | $ 5,694 |
Unbilled receivables | 6,143 | 5,160 |
Allowance for doubtful accounts | (1,010) | (360) |
Total contract receivables, net | 11,257 | 10,494 |
Impairment of unbilled receivables | 824 | |
Recovery of bad debt | 133 | |
Subsequent Billing | 2,100 | |
Allowance for Doubtful Accounts Receivable [Roll Forward] | ||
Beginning balance | 360 | 458 |
Bad debt (recovery) provision | 678 | 103 |
Current year write-offs | (28) | (201) |
Ending balance | $ 1,010 | $ 360 |
Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Prepaid Expenses and Other Current Assets [Abstract] | ||||
Income tax receivable | $ 129 | $ 129 | $ 136 | |
Prepaid expenses | 933 | 933 | 883 | |
Other current assets | 4,200 | 4,200 | 535 | |
Total prepaid expenses and other current assets | 5,262 | 5,262 | $ 1,554 | |
Employee Retention Credits [Member] | ||||
Employee Retention Credits [Abstract] | ||||
Refund of employee retention credit received | $ 200 | $ 900 | ||
Employee Retention Credits [Member] | Subsequent Event [Member] | ||||
Employee Retention Credits [Abstract] | ||||
Refund of employee retention credit received | $ 1,100 |
Product Warranty (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Activities in product warranty account [Abstract] | ||
Balance at beginning of period | $ 922 | $ 1,323 |
Current year provision | (43) | (205) |
Current year claims | (133) | (203) |
Currency adjustment | 2 | 7 |
Balance at end of period | 748 | 922 |
Standard Product Warranty Accrual, Balance Sheet Classification [Abstract] | ||
Current | 667 | 665 |
Non-current | 81 | 257 |
Total Warranty | $ 748 | $ 922 |
Minimum [Member] | ||
Product warranty provision [Abstract] | ||
Warranty Provision Contract Period | 1 year | |
Maximum [Member] | ||
Product warranty provision [Abstract] | ||
Warranty Provision Contract Period | 5 years |
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Fair Value of Financial Instruments [Abstract] | ||
Transfers into level 3 | $ 0 | $ 0 |
Transfers out of level 3 | 0 | 0 |
Assets and Liabilities Measured at Fair Value [Abstract] | ||
Money market funds | 15 | 435 |
Total assets | 15 | 435 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | ||
Assets and Liabilities Measured at Fair Value [Abstract] | ||
Money market funds | 15 | 435 |
Total assets | 15 | 435 |
Significant Other Observable Inputs (Level 2) [Member] | ||
Assets and Liabilities Measured at Fair Value [Abstract] | ||
Money market funds | 0 | 0 |
Total assets | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | ||
Assets and Liabilities Measured at Fair Value [Abstract] | ||
Money market funds | 0 | 0 |
Total assets | $ 0 | $ 0 |
Derivative Instruments, Foreign Exchange Contracts (Details) $ in Thousands |
Dec. 31, 2021
USD ($)
|
---|---|
Derivative Instruments [Abstract] | |
Foreign exchange contract outstanding | $ 0 |
Derivative Instruments, (Loss) Gain on Derivative Instruments (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Net Gain (Loss) on Derivative Instruments [Abstract] | ||
Foreign exchange contracts- change in fair value | $ 0 | $ 17 |
Interest rate swap - change in fair value | 0 | (49) |
Remeasurement of related contract receivables and billings in excess of revenue earned | 19 | 15 |
Gain (loss) on derivative instruments, net | $ 19 | $ (17) |
Capital Stock (Details) - shares |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Capital Stock [Abstract] | ||
Capital stock, shares authorized (in shares) | 62,000,000 | |
Common stock, shares authorized (in shares) | 60,000,000 | 60,000,000 |
Preferred stock, shares authorized (in shares) | 2,000,000 | 2,000,000 |
The Plan [Member] | ||
Share-based Compensation [Abstract] | ||
Common stock reserved for issuance (in shares) | 7,500,000 | |
Shares under options outstanding (in shares) | 0 | |
Shares reserved upon vesting of restricted stock units (in shares) | 1,595,665 | |
Shares available for future grants (in shares) | 1,266,479 |
Employee Benefits (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Employee Benefits [Abstract] | ||
Company's contribution to the plan | $ 290 | $ 260 |
Segment Information, Summary (Details) |
12 Months Ended |
---|---|
Dec. 31, 2021
Segment
| |
Segment Information [Abstract] | |
Number of reportable business segments | 2 |
Contract term | 2 years |
Segment Information, Loss Before Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Segment Reporting Information, Profit (Loss) [Abstract] | |||
Revenues | $ 55,183 | $ 57,620 | |
Operating loss | (5,974) | (9,538) | |
Litigation | 0 | (477) | |
Loss on impairment | $ (4,300) | (3) | (4,302) |
Interest expense | (159) | (623) | |
Gain (loss) on derivative instruments, net | 19 | (17) | |
Other income (expense), net | 16,884 | (4) | |
Income (loss) before taxes | 10,770 | (10,182) | |
Performance Improvement Solutions [Member] | |||
Segment Reporting Information, Profit (Loss) [Abstract] | |||
Revenues | 28,140 | 32,790 | |
Operating loss | (4,422) | (2,683) | |
Workforce Solutions [Member] | |||
Segment Reporting Information, Profit (Loss) [Abstract] | |||
Revenues | 27,043 | 24,830 | |
Operating loss | $ (1,549) | $ (2,076) |
Segment Information, Reconciliation of Assets from Segment to Consolidated (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Segment Reporting Information, Assets [Abstract] | ||
Assets | $ 39,051 | $ 39,190 |
Performance Improvement Solutions [Member] | ||
Segment Reporting Information, Assets [Abstract] | ||
Assets | 23,742 | 25,845 |
Workforce Solutions [Member] | ||
Segment Reporting Information, Assets [Abstract] | ||
Assets | $ 15,309 | $ 13,345 |
Segment Information, Geographic Segments (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Segment Information [Abstract] | ||
Percentage of revenues derived from customers in the nuclear power industry | 91.00% | 89.00% |
Segments, Geographical Areas [Abstract] | ||
Total revenue | $ 55,183 | $ 57,620 |
Operating income (loss) | (5,974) | (9,538) |
Assets | $ 39,051 | $ 39,190 |
Percentage of revenues derived from international sales | 12.00% | 17.00% |
Intersegment Eliminations [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | $ 0 | $ 0 |
Geography Eliminations [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | (474) | (496) |
Operating income (loss) | 0 | 0 |
Assets | (134,184) | (128,352) |
United States [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | 54,589 | 57,093 |
Operating income (loss) | (3,351) | (13,041) |
Assets | 170,116 | 161,672 |
United States [Member] | Operating Segments [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | 54,203 | 56,628 |
United States [Member] | Intersegment Eliminations [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | 386 | 465 |
Europe [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | 0 | 0 |
Operating income (loss) | (1,746) | 3,231 |
Assets | 0 | 2,679 |
Europe [Member] | Operating Segments [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | 0 | 0 |
Europe [Member] | Intersegment Eliminations [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | 0 | 0 |
Asia [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | 1,068 | 1,023 |
Operating income (loss) | (877) | 272 |
Assets | 3,119 | 3,191 |
Asia [Member] | Operating Segments [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | 980 | 992 |
Asia [Member] | Intersegment Eliminations [Member] | ||
Segments, Geographical Areas [Abstract] | ||
Total revenue | $ 88 | $ 31 |
Supplemental Disclosure of Cash Flow Information (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Cash paid for interest and income taxes: [Abstract] | ||
Interest | $ 118 | $ 532 |
Income taxes | 129 | 194 |
Noncash activity of financing insurance premium | $ 890 | $ 813 |
Non-consolidated Variable Interest Entity (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2021
USD ($)
Owners
| |
Variable Interest Entity [Abstract] | |
Number of owners | Owners | 2 |
DP Engineering Ltd, Co [Member] | |
Variable Interest Entity [Abstract] | |
Ownership percentage | 48.00% |
Contribution amount | $ 48 |
NXA Consultants LLC [Member] | |
Variable Interest Entity [Abstract] | |
Ownership percentage | 52.00% |
Contribution amount | $ 52 |
Variable Interest Entity, Not Primary Beneficiary [Member] | DP Engineering Ltd, Co [Member] | |
Variable Interest Entity [Abstract] | |
Carrying amount | $ 0 |
Commitments and Contingencies (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Sep. 08, 2020 |
Aug. 17, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Sep. 29, 2020 |
|
Loss Contingency, Estimate [Abstract] | |||||
Escrow balance | $ 952 | ||||
Provision for loss on legal settlement | $ 477 | ||||
Initial payment on settlement | $ 625 | ||||
Settlement expense | $ 1,400 | ||||
Settlement amount paid | 694 | $ 713 | |||
Liability | $ 0 | ||||
Maximum [Member] | |||||
Loss Contingency, Estimate [Abstract] | |||||
Estimated gross settlement | $ 1,500 |
Subsequent Events (Details) - Subsequent Event [Member] $ / shares in Units, $ in Thousands |
Feb. 23, 2022
USD ($)
d
$ / shares
shares
|
---|---|
Convertible Debt [Abstract] | |
Purchase of warrant to acquire shares of common stock (in shares) | shares | 1,283,732 |
Exercise price (in dollars per share) | $ / shares | $ 1.94 |
Convertible Promissory Note [Member] | |
Convertible Debt [Abstract] | |
Debt instrument term | 2 years |
Debt instrument face amount | $ | $ 5,750 |
Period for conversion | 6 months |
Conversion price (in dollars per share) | $ / shares | $ 1.94 |
Maturity date | Feb. 29, 2024 |
Conversion ratio | 0.33 |
Percentage of volume-weighted average price | 80.00% |
Average of trading days | d | 3 |
Number of trading days | d | 20 |
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