(Mark One)
|
|||
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended
|
||
or
|
|||
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ____ to ____
|
Commission File Number
|
|
(Exact name of registrant as specified in its charter)
|
|
|
|
(State of incorporation)
|
(I.R.S. Employer Identification Number)
|
|
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number, including area code: (
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
Smaller reporting company
|
Emerging growth company
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
|
|
|
Page
|
||
PART I.
|
FINANCIAL INFORMATION
|
3
|
Item 1.
|
Financial Statements (unaudited)
|
|
3
|
||
4
|
||
5
|
||
6
|
||
8
|
||
9
|
||
Item 2.
|
26
|
|
Item 3.
|
35
|
|
Item 4.
|
36
|
|
PART II.
|
37
|
|
Item 1.
|
37
|
|
Item 1A.
|
37
|
|
Item 2.
|
37
|
|
Item 3
|
37
|
|
Item 4
|
37
|
|
Item 5.
|
37
|
|
Item 6.
|
38
|
June 30, 2023
|
December 31, 2022
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash, current
|
||||||||
Contract receivables, net of allowance for credit loss
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Equipment, software and leasehold improvements, net
|
|
|
||||||
Software development costs, net
|
|
|
||||||
Goodwill
|
|
|
||||||
Intangible assets, net
|
|
|
||||||
Restricted cash - long term | ||||||||
Operating lease right-of-use assets, net
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term note
|
$
|
|
$
|
|
||||
Accounts payable
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Accrued compensation
|
|
|
||||||
Billings in excess of revenue earned
|
|
|
||||||
Accrued warranty
|
|
|
||||||
Income taxes payable
|
|
|
||||||
Derivative liabilities
|
||||||||
Other current liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Long-term note, less current portion
|
|
|
||||||
Operating lease liabilities noncurrent
|
|
|
||||||
Other noncurrent liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies (Note 16)
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock $
|
|
|
||||||
Common stock $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Accumulated other comprehensive income
|
|
|
||||||
Treasury stock at cost,
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three months ended
|
Six months ended
|
|||||||||||||||
June 30,
2023
|
June 30,
2022
|
June 30,
2023
|
June 30,
2022
|
|||||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Cost of revenue
|
|
|
|
|
||||||||||||
Gross profit
|
|
|
|
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Selling, general and administrative
|
|
|
|
|
||||||||||||
Research and development
|
|
|
|
|
||||||||||||
Depreciation
|
|
|
|
|
||||||||||||
Amortization of intangible assets
|
|
|
|
|
||||||||||||
Total operating expenses
|
|
|
|
|
||||||||||||
Operating loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Interest expense, net
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Change in fair value of derivative instruments, net
|
|
|
|
|
||||||||||||
Other loss, net
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Loss before income taxes
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Provision for (benefit from) income taxes |
|
(
|
)
|
(
|
)
|
|
||||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Net loss per common share - basic and diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Weighted average shares outstanding used to compute net
loss per share - basic and diluted
|
|
|
|
|
Three months ended
|
Six months ended
|
|||||||||||||||
June 30, 2023
|
June 30, 2022
|
June 30, 2023
|
June 30, 2022
|
|||||||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Cumulative translation adjustment
|
|
(
|
)
|
|
|
|||||||||||
Comprehensive loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Common Stock
|
Treasury Stock
|
|||||||||||||||||||||||||||||||
Six Months Ended
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated Other
Comprehensive Loss
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||||
Balance, January 1, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
Adoption of Current Expected Credit Losses (CECL)
|
( |
) | ( |
) | ||||||||||||||||||||||||||||
Adjusted balance, January 1, 2023
|
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
(
|
)
|
|
|
-
|
|
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Repayment of convertible note in shares |
- | |||||||||||||||||||||||||||||||
Net loss
|
-
|
|
|
(
|
)
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Balance, June 30, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
Balance, January 1, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
(
|
)
|
|
|
-
|
|
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Net income
|
-
|
|
|
(
|
)
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Balance, June 30, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Common Stock
|
Treasury Stock
|
|||||||||||||||||||||||||||||||
Three Months Ended
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated Other
Comprehensive Loss
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||||
Balance, April 1, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
(
|
)
|
|
|
-
|
|
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Repayment of convertible note in shares |
- | |||||||||||||||||||||||||||||||
Net loss
|
-
|
|
|
(
|
)
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Balance, June 30, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
Balance, April 1, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
(
|
)
|
|
|
-
|
|
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Net income
|
-
|
|
|
(
|
)
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Balance, June 30, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Six months ended
|
||||||||
June 30, 2023
|
June 30, 2022
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
||||||||
Depreciation
|
|
|
||||||
Amortization of intangible assets
|
|
|
||||||
Amortization of capitalized software development costs
|
|
|
||||||
Amortization of deferred financing costs
|
|
|
||||||
Amortization of debt discount
|
||||||||
Loss on debt settled in shares
|
||||||||
Stock-based compensation expense
|
|
|
||||||
Credit loss expense
|
|
|
||||||
Change in fair value of derivative instruments, net
|
(
|
)
|
(
|
)
|
||||
Foreign currency transaction (gain) loss
|
||||||||
Deferred income taxes
|
||||||||
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
|
(
|
)
|
(
|
)
|
||||
Capitalized software development costs
|
(
|
)
|
(
|
)
|
||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Repayment of line of credit
|
|
(
|
)
|
|||||
Repayment of insurance premium financing
|
(
|
)
|
(
|
)
|
||||
Proceeds from issuance of long-term debt and warrants
|
|
|
||||||
Payments of debt issuance and original discount on issuance of long-term debt and warrants
|
( |
) | ( |
) | ||||
Principal repayment of convertible note
|
( |
) | ||||||
Tax paid for shares withheld
|
(
|
)
|
(
|
)
|
||||
Net cash provided by financing activities
|
|
|
||||||
Effect of exchange rate changes on cash
|
(
|
)
|
(
|
)
|
||||
Net (decrease) increase in cash, cash equivalents and restricted cash
|
(
|
)
|
|
|||||
Cash, cash equivalents and restricted cash at beginning of the period
|
|
|
||||||
Cash, cash equivalents and restricted cash at the end of the period
|
$
|
|
$
|
|
||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash, current | ||||||||
Restricted cash included in other long-term assets | ||||||||
Total cash, cash equivalents and restricted cash | $ | $ | ||||||
Supplemental cash flow disclosures: | ||||||||
Non-cash financing activities
|
||||||||
Repayment of convertible note in shares
|
$ | $ | ||||||
Establishment of new right-of-use assets
|
||||||||
Establishment of new operating lease liability
|
( |
) | ||||||
Discount on issuance of convertible note
|
$ | $ |
•
|
had met the market value of publicly held shares requirement for continuing listing,
|
•
|
had met all other listing requirements for NASDAQ (other than bid price requirement), and
|
•
|
had provided written notice to NASDAQ with a plan of how it intends to regain compliance with the bid price requirement during
the second
|
(in thousands, except for share data)
|
Three months ended
|
Six months ended
|
||||||||||||||
June 30, 2023
|
June 30, 2022
|
June 30, 2023
|
June 30, 2022
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net loss attributed to common stockholders
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Denominator:
|
||||||||||||||||
Weighted-average shares outstanding for basic earnings per share
|
|
|
|
|
||||||||||||
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share
|
|
|
|
|
||||||||||||
Total shares considered for dilution
|
|
|
|
|
(in thousands)
|
June 30, 2023
|
December 31, 2022
|
||||||
Billed receivables
|
$
|
|
$
|
|
||||
Unbilled receivables
|
|
|
||||||
Allowance for credit loss
|
(
|
)
|
(
|
)
|
||||
Total contract receivables, net
|
$
|
|
$
|
|
(in thousands)
|
||||
Beginning balance at January 1, 2023
|
$
|
|
||
Adoption of ASC326 Current Expected Credit Losses (CECL)
|
||||
Adjusted balance at January 1, 2023
|
||||
Current period provision for expected credit loss
|
|
|||
Write-offs charged against the allowance, net of recoveries
|
(
|
)
|
||
Currency adjustment |
( |
) | ||
Balance at June 30, 2023
|
$
|
|
|
Goodwill
|
Accumulated
Impairment
|
Net
|
|||||||||
|
||||||||||||
Engineering
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Workforce Solutions
|
|
(
|
)
|
|
||||||||
Net book value at June 30,
2023
|
$
|
|
$
|
(
|
)
|
$
|
|
|
Goodwill
|
Accumulated
Impairment
|
Net
|
|||||||||
|
||||||||||||
Engineering
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Workforce Solutions
|
|
(
|
)
|
|
||||||||
Net book value at December 31, 2022
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
As of June 30, 2023
|
|||||||||||||||
Gross Carrying
Amount
|
Accumulated
Amortization
|
Impairment |
Net
|
|||||||||||||
Amortized intangible assets:
|
||||||||||||||||
Customer relationships
|
$
|
|
$
|
(
|
)
|
$ | ( |
) |
$
|
|
||||||
Trade names
|
|
(
|
)
|
|
||||||||||||
Developed technology
|
|
(
|
)
|
|
||||||||||||
Non-contractual customer relationships
|
|
(
|
)
|
|
||||||||||||
Noncompete agreement
|
|
(
|
)
|
|
||||||||||||
Alliance agreement
|
|
(
|
)
|
|
||||||||||||
Others
|
|
(
|
)
|
|
||||||||||||
Total
|
$
|
|
$
|
(
|
)
|
$ | ( |
) |
$
|
|
(in thousands)
|
As of December 31, 2022
|
|||||||||||||||
Gross Carrying
Amount
|
Accumulated Amortization
|
Impairment
|
Net
|
|||||||||||||
Amortized intangible assets:
|
||||||||||||||||
Customer relationships
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||
Trade names
|
|
(
|
)
|
|
|
|||||||||||
Developed technology
|
|
(
|
)
|
|
|
|||||||||||
Non-contractual customer relationships
|
|
(
|
)
|
|
|
|||||||||||
Noncompete agreement
|
|
(
|
)
|
|
|
|||||||||||
Alliance agreement
|
|
(
|
)
|
|
|
|||||||||||
Others
|
|
(
|
)
|
|
|
|||||||||||
Total
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
||||
Years ended December 31:
|
||||
2023 remainder
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
Thereafter
|
|
|||
Total
|
$
|
|
(in thousands)
|
||||||||
June 30, 2023
|
December 31, 2022
|
|||||||
Computer and equipment
|
$
|
|
$
|
|
||||
Software
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Furniture and fixtures
|
|
|
||||||
|
|
|||||||
Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
Equipment, software and leasehold improvements, net
|
$
|
|
$
|
|
Amended 2022
Convertible Note
|
2023 Convertible
Note
|
|||||||
Exercise Price
|
$ | $ | ||||||
Common Stock Price
|
$ |
$
|
|
|||||
Risk Free Rate
|
||||||||
Volatility
|
||||||||
Term (in years)
|
(in thousands)
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
Significant
Other Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
||||||||||||
Derivative liability | $ | $ | $ | $ | ||||||||||||
Warrant liability |
||||||||||||||||
Cash settled performance-vesting restricted stock units
|
||||||||||||||||
Total liabilities | $ | $ | $ | $ |
(in thousands)
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
Significant
Other Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
||||||||||||
Derivative liability | $ | $ | $ | $ | ||||||||||||
Warrant liability |
||||||||||||||||
Cash settled performance-vesting restricted stock units
|
||||||||||||||||
Total liabilities | $ | $ | $ | $ |
(in thousands)
|
Embedded
Redemption
Features
|
Warrant |
Cash Settled
PRSUs
|
Level 3 Total |
||||||||||||
Balance at December 31, 2022
|
$
|
|
$ | $ | $ | |||||||||||
FV of derivatives with new convertible note issuance
|
||||||||||||||||
Change in FV included in gain on
|
( |
) | ( |
) | ||||||||||||
Stock compensation less payments made
|
||||||||||||||||
Balance at June 30, 2023
|
$
|
|
$ | $ | $ |
2022
Convertible
Note
|
2023
Convertible
Note
|
Total
Convertible
Notes
|
||||||||||
Amount
|
Amount | Amount | ||||||||||
Convertible Note issued
|
$ | |||||||||||
Debt discount
|
( |
) | ( |
) | ( |
) | ||||||
Issuance cost:
|
||||||||||||
Commitment fee
|
( |
) | ( |
) | ( |
) | ||||||
Balance of investor’s counsel fees
|
( |
) | ( |
) | ( |
) | ||||||
Net proceeds of Convertible Note
|
$ | |||||||||||
Additional OID costs not in original funds flow | ( |
) | ( |
) | ( |
) | ||||||
Fair value of Warrant Liabilities on issuance |
( |
) | ( |
) | ( |
) | ||||||
Fair value of Conversion Feature on issuance |
( |
) | ( |
) | ( |
) | ||||||
Allocated OID costs to Warrants | ||||||||||||
Additional OID costs not in original funds flow
|
( |
) | ||||||||||
Interest expense accrued on Convertible Note as of June 30, 2023 |
||||||||||||
Principal and interest payments through June 30, 2023 | ( |
) | ( |
) | ||||||||
Balance of Convertible Note as of June 30, 2023 | $ |
(in thousands)
|
||||
Balance at January 1, 2023
|
$
|
|
||
Current period recovery
|
(
|
)
|
||
Current period claims
|
(
|
)
|
||
Currency adjustment
|
(
|
)
|
||
Balance at June 30, 2023
|
$
|
|
(in thousands)
|
Three months ended
|
Six months ended
|
||||||||||||||
June 30,
2023
|
June 30,
2022
|
June 30,
2023
|
June 30,
2022
|
|||||||||||||
Engineering
|
||||||||||||||||
System Design and Build
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Over time |
||||||||||||||||
Software and Support
|
|
|
|
|
||||||||||||
Point in time
|
|
|
|
|
||||||||||||
Over time
|
|
|
|
|
||||||||||||
Training and Consulting Services
|
|
|
|
|
||||||||||||
Point in time
|
|
|
|
|
||||||||||||
Over time
|
|
|
|
|
||||||||||||
Workforce Solutions |
||||||||||||||||
Training and Consulting Services
|
|
|
|
|
||||||||||||
Point in time
|
|
|
|
|
||||||||||||
Over time
|
|
|
|
|
||||||||||||
Total revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
(in thousands)
|
Three months ended
|
Six months ended
|
||||||||||||||
June 30,
2023
|
June 30,
2022
|
June 30,
2023
|
June 30,
2022
|
|||||||||||||
Revenue recognized in the period from amounts included in billings in excess of revenue earned at the beginning of the period
|
$
|
|
$
|
|
$
|
|
$
|
|
(in thousands)
|
Three months ended
|
Six months ended
|
||||||||||||||
June 30,
2023
|
June 30,
2022
|
June 30,
2023
|
June 30,
2022
|
|||||||||||||
(Loss) income before income taxes
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Provision for (benefit from) income taxes
|
|
(
|
)
|
(
|
)
|
|
||||||||||
Effective tax rate
|
(
|
)%
|
|
%
|
|
%
|
(
|
)%
|
|
As of |
|||||||||
Operating Leases
|
Classification
|
June 30, 2023
|
December 31, 2022
|
|||||||
Leased Assets
|
||||||||||
Operating lease - right of use assets
|
|
$
|
|
$
|
|
|||||
Lease Liabilities
|
||||||||||
Operating lease liabilities - Current
|
|
|
|
|||||||
Operating lease liabilities
|
|
|
|
|||||||
$
|
|
$
|
|
Three months ended
|
Six months ended |
|||||||||||||||||
Lease Cost
|
Classification
|
June 30, 2023
|
June 30, 2022
|
June 30, 2023 | June 30, 2022 | |||||||||||||
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
|
|||
2023 remainder
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
Thereafter |
||||
Total lease payments
|
$
|
|
||
Less: Interest
|
|
|||
Present value of lease payments
|
$
|
|
Lease Term and Discount Rate
|
June 30, 2023
|
December 31, 2022
|
||||||
Weighted-average remaining lease term (years)
|
||||||||
Operating leases
|
|
|
||||||
Weighted-average discount rate
|
||||||||
Operating leases
|
(in thousands)
|
Six months ended
|
|||||||
Cash paid for amounts included in
measurement of liabilities
|
June 30, 2023
|
June 30, 2022
|
||||||
Operating cash flows used in operating leases
|
$
|
|
$
|
|
Three months ended
|
Six months ended
|
|||||||||||||||
(in thousands)
|
June 30, 2023
|
June 30, 2022
|
June 30, 2023
|
June 30, 2022
|
||||||||||||
Revenue:
|
||||||||||||||||
Engineering
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Workforce Solutions
|
|
|
|
|
||||||||||||
Total revenue
|
|
|
|
|
||||||||||||
Gross Profit
|
||||||||||||||||
Engineering
|
||||||||||||||||
Workforce Solutions
|
||||||||||||||||
Total gross profit
|
||||||||||||||||
Operating loss
|
||||||||||||||||
Engineering
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Workforce Solutions
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Operating loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Interest expense, net
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Change in fair value of derivative instruments, net |
|
|
|
|
||||||||||||
Other income, net
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Loss before income taxes
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||||||||||||||||||
(in thousands)
|
June 30, 2023
|
June 30, 2022
|
June 30, 2023
|
June 30, 2022
|
||||||||||||||||||||||||||||
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
|||||||||||||||||||||
Revenue
|
$
|
12,387
|
100.0
|
%
|
$
|
12,745
|
100.0
|
%
|
$
|
23,260
|
100.0
|
%
|
$
|
25,020
|
100.0
|
%
|
||||||||||||||||
Cost of revenue
|
9,172
|
74.0
|
%
|
9,573
|
75.1
|
%
|
17,650
|
75.9
|
%
|
19,421
|
77.6
|
%
|
||||||||||||||||||||
Gross profit
|
3,215
|
26.0
|
%
|
3,172
|
24.9
|
%
|
5,610
|
24.1
|
%
|
5,599
|
22.4
|
%
|
||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
Selling, general and administrative
|
3,653
|
29.5
|
%
|
4,410
|
34.6
|
%
|
8,441
|
36.3
|
%
|
8,917
|
35.6
|
%
|
||||||||||||||||||||
Research and development
|
154
|
1.2
|
%
|
182
|
1.4
|
%
|
335
|
1.4
|
%
|
324
|
1.3
|
%
|
||||||||||||||||||||
Depreciation
|
53
|
0.4
|
%
|
72
|
0.6
|
%
|
101
|
0.4
|
%
|
144
|
0.6
|
%
|
||||||||||||||||||||
Amortization of intangible assets
|
131
|
1.1
|
%
|
231
|
1.8
|
%
|
292
|
1.3
|
%
|
491
|
2.0
|
%
|
||||||||||||||||||||
Total operating expenses
|
3,991
|
32.2
|
%
|
4,895
|
38.4
|
%
|
9,169
|
39.4
|
%
|
9,876
|
39.5
|
%
|
||||||||||||||||||||
Operating loss
|
(776
|
)
|
(6.3
|
)%
|
(1,723
|
)
|
(13.5
|
)%
|
(3,559
|
)
|
(15.4
|
)%
|
(4,277
|
)
|
(17.2
|
)%
|
||||||||||||||||
Interest expense, net
|
(767
|
)
|
(6.2
|
)%
|
(358
|
)
|
(2.8
|
)%
|
(1,053
|
)
|
(4.5
|
)%
|
(506
|
)
|
(2.0
|
)%
|
||||||||||||||||
Change in fair value of derivative instruments, net
|
171
|
1.4
|
%
|
695
|
5.5
|
%
|
240
|
1.0
|
%
|
114
|
0.5
|
%
|
||||||||||||||||||||
Other income, net
|
(98
|
)
|
(0.8
|
)%
|
(72
|
)
|
(0.6
|
)%
|
(88
|
)
|
(0.4
|
)%
|
(56
|
)
|
(0.2
|
)%
|
||||||||||||||||
Loss before income taxes
|
(1,470
|
)
|
(11.9
|
)%
|
(1,458
|
)
|
(11.4
|
)%
|
(4,460
|
)
|
(19.2
|
)%
|
(4,725
|
)
|
(18.9
|
)%
|
||||||||||||||||
Provision for (benefit from) income taxes
|
28
|
0.2
|
%
|
(57
|
)
|
(0.4
|
)%
|
(11
|
)
|
0.0
|
%
|
110
|
0.4
|
%
|
||||||||||||||||||
Net loss
|
$
|
(1,498
|
)
|
(12.1
|
)%
|
$
|
(1,401
|
)
|
(11.0
|
)%
|
$
|
(4,449
|
)
|
(19.1
|
)%
|
$
|
(4,835
|
)
|
(19.3
|
)%
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||||||||||||||||||
(in thousands)
|
June 30, 2023
|
June 30, 2022
|
Change
|
June 30, 2023
|
June 30, 2022
|
Change
|
||||||||||||||||||||||||||
Revenue:
|
$ |
|
%
|
$ |
|
%
|
||||||||||||||||||||||||||
Engineering
|
$
|
9,044
|
$
|
7,953
|
1,091
|
14
|
%
|
$
|
15,986
|
$
|
14,350
|
1,636
|
11
|
%
|
||||||||||||||||||
Workforce Solutions
|
3,343
|
4,792
|
(1,449
|
)
|
(30
|
)%
|
7,274
|
10,670
|
(3,396
|
)
|
(32
|
)%
|
||||||||||||||||||||
Total revenue
|
$
|
12,387
|
$
|
12,745
|
(358
|
)
|
(3
|
)%
|
$
|
23,260
|
$
|
25,020
|
(1,760
|
)
|
(7
|
)%
|
(in thousands)
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||||||||||||||||||
June 30, 2023
|
June 30, 2022
|
June 30, 2023
|
June 30, 2022
|
|||||||||||||||||||||||||||||
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
$ |
|
%
|
|||||||||||||||||||||
Gross profit:
|
||||||||||||||||||||||||||||||||
Engineering
|
$
|
2,742
|
30.3
|
%
|
$
|
2,568
|
32.3
|
%
|
$
|
4,622
|
28.9
|
%
|
$
|
4,383
|
30.5
|
%
|
||||||||||||||||
Workforce Solutions
|
473
|
14.1
|
%
|
604
|
12.6
|
%
|
988
|
13.6
|
%
|
1,216
|
11.4
|
%
|
||||||||||||||||||||
Total gross profit
|
$
|
3,215
|
26.0
|
%
|
$
|
3,172
|
24.9
|
%
|
$
|
5,610
|
24.1
|
%
|
$
|
5,599
|
22.4
|
%
|
Three months ended
|
Six months ended
|
|||||||||||||||
(in thousands)
|
June 30, 2023
|
June 30, 2022
|
June 30, 2023
|
June 30, 2022
|
||||||||||||
Corporate charges
|
$
|
2,446
|
$
|
3,375
|
$
|
5,932
|
$
|
6,857
|
||||||||
Business development
|
1,062
|
721
|
2,178
|
1,560
|
||||||||||||
Facility operation & maintenance (O&M)
|
146
|
216
|
287
|
393
|
||||||||||||
Credit loss expense (recovery)
|
(2
|
)
|
97
|
30
|
97
|
|||||||||||
Other
|
1
|
1
|
14
|
10
|
||||||||||||
Total
|
$
|
3,653
|
$
|
4,410
|
$
|
8,441
|
$
|
8,917
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2023
|
June 30, 2022
|
June 30, 2023
|
June 30, 2022
|
|||||||||||||
Net loss
|
$
|
(1,498
|
)
|
$
|
(1,401
|
)
|
$
|
(4,449
|
)
|
$
|
(4,835
|
)
|
||||
Interest expense, net
|
767
|
358
|
1,053
|
506
|
||||||||||||
(Benefit from) provision for income taxes
|
28
|
(57
|
)
|
(11
|
)
|
110
|
||||||||||
Depreciation and amortization
|
267
|
387
|
560
|
802
|
||||||||||||
EBITDA
|
(436
|
)
|
(713
|
)
|
(2,847
|
)
|
(3,417
|
)
|
||||||||
Stock-based compensation expense
|
246
|
693
|
531
|
1,101
|
||||||||||||
Change in fair value of derivative instruments, net
|
(171
|
)
|
(695
|
)
|
(240
|
)
|
(114
|
)
|
||||||||
Adjusted EBITDA
|
$
|
(361
|
)
|
$
|
(715
|
)
|
$
|
(2,556
|
)
|
$
|
(2,430
|
)
|
(in thousands)
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
June 30, 2023
|
June 30, 2022
|
June 30, 2023
|
June 30, 2022
|
|||||||||||||
Net loss
|
$
|
(1,498
|
)
|
$
|
(1,401
|
)
|
$
|
(4,449
|
)
|
$
|
(4,835
|
)
|
||||
Stock-based compensation expense
|
246
|
693
|
531
|
1,101
|
||||||||||||
Change in fair value of derivative instruments, net
|
(171
|
)
|
(695
|
)
|
(240
|
)
|
(114
|
)
|
||||||||
Amortization of intangible assets related to acquisitions
|
131
|
231
|
292
|
491
|
||||||||||||
Adjusted net loss
|
$
|
(1,292
|
)
|
$
|
(1,172
|
)
|
$
|
(3,866
|
)
|
$
|
(3,357
|
)
|
||||
Adjusted net loss per common share – diluted
|
$
|
(0.05
|
)
|
$
|
(0.06
|
)
|
$
|
(0.16
|
)
|
$
|
(0.16
|
)
|
||||
Weighted average shares outstanding used to compute adjusted net loss per share - diluted(1)
|
24,188,265
|
21,033,447
|
23,564,133
|
21,006,910
|
Item 3. |
Quantitative and Qualitative Disclosure about Market Risk
|
Item 4. |
Controls and Procedures
|
Item 1. |
Legal Proceedings
|
Item 1A. |
Risk Factors
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3. |
Defaults Upon Senior Securities
|
Item 4. |
Mine Safety Disclosures
|
Item 5. |
Other Information
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002, filed herewith.
|
||
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
||
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
|
||
101.INS*
|
XBRL Instance Document
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase
|