forms-3.htm
As
filed
with the Securities and Exchange Commission on July 16, 2007 Registration
No. 333-
_____________________________________________________________________________________
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_______________________________
FORM
S-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
_______________________________
GSE
SYSTEMS, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
(State
or other jurisdiction of incorporation or organization)
|
52-1868008
(I.R.S.
Employer Identification Number)
|
7133
Rutherford Road, Suite 200
Baltimore,
MD 21244
(410)
277-3740
(Address,
including zip code, and telephone number, including area code, of registrant's
principal executive offices)
John
V. Moran
Chief
Executive Officer
GSE
Systems, Inc.
7133
Rutherford Road, Suite 200
Baltimore,
MD 21244
Tel:
(410) 277-3740
(Name
and address, including zip code, and telephone number, including area code,
of
agent for service)
Copy
to:
Michael
D. Schwamm, Esq.
Duane
Morris LLP
1540
Broadway
New
York,
NY 10036-4086Washington, DC 20006
Tel:
(212) 692-1054
Fax:
(212) 692-1020
Approximate
date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration
Statement.
If
the
only securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. (
)
If
any of
the securities being registered on this form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. (x )
If
this
form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ( )
If
this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ( )
If
this
form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the commission pursuant Rule 462(e) under the Securities Act, check the
following box: ( )
If
this
form is a post-effective amendment to a registration statement filed pursuant
to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box: ( )
Calculation
of Registration Fee
|
Title
of each class of securities
to
be registered
|
Amount
to
be
registered
(1)
|
Proposed
maximum
offering
price
per
share (2)
|
Proposed
maximum
aggregate
offering
price
(2)
|
Amount
of
registration
fee
|
|
Common
stock, par value $0.01 per share
|
2,000,001
|
$6.78
|
$13,560,007
|
$416.29
|
(1) Consists
of the registration for resale of (a) 1,666,667 shares of issued and outstanding
common stock, (b) 166,667 shares of common stock issuable upon exercise of
outstanding warrants and (c) 166,667 shares of common stock issuable upon
exercise of warrants that may be issued as liquidated damages under the terms
of
a certain registration rights agreement. Pursuant to Rule 416 of the Securities
Act of 1933, as amended (the ‘‘Securities Act’’), this Registration Statement
also registers such additional shares of common stock as may become issuable
to
prevent dilution as a result of stock splits, stock dividends or similar
transactions.
(2)
Estimated solely for purposes of calculating the registration fee pursuant
to
Rule 457(c) of Regulation C under the Securities Act, based on the average
of the high and low prices for the Common Stock on July 12, 2007 as reported
on
the American Stock Exchange.
The
Registrant hereby amends this Registration Statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission acting
pursuant to said Section 8(a), may determine.
The
information in this Prospectus is not complete and may be changed. The selling
stockholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer
to
buy these securities in any state where the offer or sale is not
permitted.
Subject
to Completion, dated July 16, 2007
PROSPECTUS
GSE
SYSTEMS, INC.
2,000,001
Shares of Common Stock
___________________
This
prospectus covers the potential resale of up to 2,000,001 shares of our common
stock by the stockholders identified in the ‘‘Selling Stockholders’’ section of
this prospectus. Of these shares, 1,666,667 are issued and outstanding, up
to
166,667 shares are issuable upon the exercise of currently outstanding warrants
and up to 166,667 shares are issuable upon the exercise of warrants that we
are
obligated to issue in the event of a default of certain of our obligations
under
the terms of the registration rights agreement we entered into with the selling
stockholders.
The
selling stockholders may offer their shares from time to time through public
or
private transactions, including, without limitation, through any means described
in the section of this prospectus entitled “Plan of Distribution,” at prevailing
market prices or at privately negotiated prices. The timing and
amount of any sale are within the sole discretion of the selling
stockholders. The selling stockholders may make sales directly to
purchasers, through brokers, agents or dealers, or through a combination of
these methods. The selling stockholders will bear all commissions and
other compensation, if any, paid in connection with the sale of their
shares. See ‘‘Plan of Distribution’’ beginning on page 13 for a
further description of how the selling stockholder may dispose of the shares
covered by this prospectus.
We
are
not selling any securities under this prospectus and will not receive any of
the
proceeds from the sale of the shares by the selling stockholders. See
"Use of Proceeds." All costs associated with this registration statement
will be borne by us.
Our
common stock is listed on the American Stock Exchange under the symbol “GVP.” On
July 13, 2007, the last reported sale price of our common stock was $6.90 per
share.
_______________
This
investment involves a high degree of risk. See “Risk Factors” beginning on page
4 for a description of certain matters which you should consider before
investing in our common stock.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
_______________
The
date
of this Prospectus is __________ , 2007.
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TABLE
OF CONTENTS
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Page
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PROSPECTUS
SUMMARY
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3
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RISK
FACTORS
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4
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FORWARD-LOOKING
STATEMENTS
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8
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USE
OF PROCEEDS
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10
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PRIVATE
PLACEMENT OF COMMON STOCK AND WARRANTS
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10
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SELLING
STOCKHOLDERS
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11
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PLAN
OF DISTRIBUTION
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13
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LEGAL
MATTERS
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16
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|
EXPERTS
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16
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|
WHERE
YOU CAN FIND MORE INFORMATION
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16
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______________________________
You
should rely only on the information contained in this prospectus and in any
prospectus supplements. We have not, and the selling stockholders
have not, authorized anyone to provide you with information different from
that
contained in this prospectus and in any prospectus supplements. The
selling stockholders are not making an offer to sell or seeking offers to buy
these securities in any jurisdiction where the offer or sale is not
permitted. The information contained in this prospectus is complete
and accurate as of the date of this prospectus, but the information may have
changed since that date.
Unless
the context otherwise indicates,
references in this prospectus to the terms “GSE,” “the Company,” “we,” “our” and
“us” refer to GSE Systems, Inc. and its subsidiaries.
PROSPECTUS
SUMMARY
This
summary highlights selected information contained elsewhere in this prospectus
or incorporated by reference in this prospectus. This summary does
not contain all of the information that you should consider before investing
in
our common stock. You should read carefully the entire prospectus,
including “Risk Factors” and the other information contained or incorporated by
reference in this prospectus, before making an investment
decision
The
Company
GSE
is
incorporated under the laws of the State of Delaware and is a leader in
real-time, high fidelity simulation. The Company provides simulation solutions
and services to the nuclear and fossil electric utility industry and the
chemical and petrochemical industries. In addition, the Company provides plant
monitoring and signal analysis monitoring and optimization software primarily
to
the power industry.
GSE
Systems, Inc.’s executive offices are located at 7133 Rutherford Road, Suite
200, Baltimore, Maryland 21244. The Company’s telephone number is (410)
277-3740 and its facsimile number is (410) 277-5287. Our common stock trades
on
the American Stock Exchange under the symbol “GVP”. GSE maintains a Web site at
http://www.gses.com. Except for any documents that are incorporated
by reference into this prospectus that may be accessed from our website, the
information available on or through our website is not part of this
prospectus.
Recent
Developments
On
June
22, 2007, we sold and issued in a private placement to a select group of
institutional accredited investors a total of 1,666,667 shares of our common
stock at a price of $6.00 per share, pursuant to the terms of a securities
purchase agreement. A part of the transaction, the purchasers
received, for no additional consideration, warrants to purchase 166,667 shares
of our common stock at an exercise price of $6.00 per share. The
warrants are immediately exercisable and expire on June 22, 2012.
The
gross
proceeds we received from the private placement were approximately $10
million. A portion of the funds were used to pay down the outstanding
borrowings under our line of credit with Laurus Master Fund, Ltd (as required
by
the terms thereof) and the balance is expected to be used for working capital
purposes.
The
Offering
|
Securities
that may be sold by the selling stockholders:
|
Up
to 1,666,667 shares of common stock currently issued and outstanding,
up
to 166,667 shares of common stock issuable upon the exercise of
outstanding warrants and up to 166,667 shares of common stock issuable
upon the exercise of warrants we may be required to issue. All
of the shares offered by this prospectus are being sold by the selling
stockholders. See “Selling Stockholders.”
|
|
Common
stock outstanding as of July
13, 2007:
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14,856,102
|
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Use
of proceeds:
|
We
will not receive any proceeds from the sale of shares of common stock
offered by this prospectus which will be sold for the account of
the
selling stockholders. See “Use of Proceeds.”
|
|
AMEX
symbol:
|
GVP
|
RISK
FACTORS
You
should carefully consider the risks described below before making an investment
decision. The risks and uncertainties described below may not be the only ones
we will face. Additional risks and uncertainties not presently known to us
or
that we currently deem not material may also impair our business operations.
If
any of the following risks actually occur, our business, financial condition
or
results of operations could be materially adversely affected. In such case,
the
trading price of our common stock could decline, and you may lose all or part
of
your investment.
The
Company's expense levels are based upon its expectations as to future revenues,
so it may be unable to adjust spending to compensate for a revenue shortfall.
Accordingly, any revenue shortfall would likely have a disproportionate effect
on the Company's operating results.
The
Company’s revenue was $27.5 million, $22.0 million, and $29.5 million for the
years ended December 31, 2006, 2005, and 2004, respectively. The Company’s
operating income (loss) was $2.1 million, ($4.7 million), and $2,000 in 2006,
2005, and 2004, respectively. The Company's operating results have fluctuated
in
the past and may fluctuate significantly in the future as a result of a variety
of factors, including purchasing patterns, timing of new products and
enhancements by the Company and its competitors, and fluctuating foreign
economic conditions. Since the Company's expense levels are based in part on
its
expectations as to future revenues and includes certain fixed costs, the Company
may be unable to adjust spending in a timely manner to compensate for any
revenue shortfall and such revenue shortfalls would likely have a
disproportionate adverse effect on operating results.
Risk
of International Sales and Operations
Sales
of
products and the provision of services to end users outside the United States
accounted for approximately 74% of the Company's consolidated revenue in 2006,
63% of the Company’s consolidated revenue in 2005, and 65% of consolidated
revenue in 2004. The Company anticipates that international sales and services
will continue to account for a significant portion of its revenue in the
foreseeable future. As a result, the Company may be subject to certain risks,
including risks associated with the application and imposition of protective
legislation and regulations relating to import or export (including export
of
high technology products) or otherwise resulting from trade or foreign policy
and risks associated with exchange rate fluctuations. Additional risks include
potentially adverse tax consequences, tariffs, quotas and other barriers,
potential difficulties involving the Company's strategic alliances and managing
foreign sales agents or representatives and potential difficulties in accounts
receivable collection. The Company currently sells products and provides
services to customers in emerging market economies such as the United Arab
Emirates, (21% of the Company’s consolidated revenue in 2006, but none in 2005
and 2004) and Russia (12%, 0% and 5% of the Company’s consolidated revenue in
2006, 2005 and 2004, respectively). Although end users in the Ukraine accounted
for 8%, 18%, and 21% of the Company’s consolidated revenue in 2006, 2005, and
2004, respectively, GSE’s customer for these projects was Battelle’s Pacific
Northwest National Laboratory, which is the purchasing agent for the U.S.
Department of Energy (“DOE”). The DOE provides funding for various projects in
Eastern and Central Europe. Accordingly, the Company is not subject to the
political and financial risks that are normally faced when doing business in
the
Ukraine. The Company has taken steps designed to reduce the additional risks
associated with doing business in these countries, but the Company believes
that
such risks may still exist and include, among others, general political and
economic instability, lack of currency convertibility, as well as uncertainty
with respect to the efficacy of applicable legal systems. There can be no
assurance that these and other factors will not have a material adverse effect
on the Company's business, financial condition or results of
operations.
For
the year ended December 31, 2006, three customers provided a substantial portion
of the Company’s revenue. There is no guarantee that the Company will be able to
generate the same level of revenue from these customers in future periods,
nor
that the Company could replace these revenues from other customers, thus causing
a material adverse effect upon the Company's future revenue and results of
operations.
For
the
year ended December 31, 2006, the Emirates Simulation Academy LLC (ESA) provided
21% of the Company’s consolidated 2006 revenue (none in 2005 and 2004); the
Federal State-Owned Enterprise Rosenergoatom (Russia) provided 12% of the
Company’s consolidated 2006 revenue (0% and 5% in 2005 and 2004, respectively),
and Battelle's Pacific Northwest National Laboratory accounted for approximately
11% of the Company’s consolidated 2006 revenue (25% and 24% in 2005 and 2004,
respectively). The Pacific Northwest National Laboratory is the purchasing
agent
for the DOE and the numerous projects the Company performs in Eastern and
Central Europe. In January 2006, the Company received a $15.1 million
contract from ESA to supply five simulators and an integrated training
program. At March 31, 2007, the backlog remaining on this project was
approximately $6.5 million. The project is exected to be completed by
October 2007. The Company may not generate comparable revenue from these
customers in future periods and may not be able to replace this revenue from
other customers, thus materially and adversely affecting the Company’s revenue
and results of operations.
The
Company's business is substantially dependent on sales to the nuclear power
industry. Any disruption in this industry would have a material adverse effect
upon the Company's revenue.
In
2006,
60% of GSE’s revenue was from customers in the nuclear power industry (83% in
2005 and 85% in 2004). The Company will continue to derive a significant portion
of its revenue from customers in the nuclear power industry for the foreseeable
future. The Company's ability to supply nuclear power plant simulators and
related products and services is dependent on the continued operation of nuclear
power plants and, to a lesser extent, on the construction of new nuclear power
plants. A wide range of factors affect the continued operation and construction
of nuclear power plants, including the political and regulatory environment,
the
availability and cost of alternative means of power generation, the occurrence
of future nuclear incidents, and general economic conditions.
The
Company's line of credit agreement with Laurus Master Fund Ltd. imposes
significant operating and financial restrictions, which may prevent it from
capitalizing on business opportunities.
GSE’s
line of credit agreement with Laurus Master Fund Ltd. (as further described
in
the Company’s Form 8-K filed with the Commission on March 8, 2006 and
incorporated by reference herein) imposes significant operating and financial
restrictions. These restrictions affect, and in certain cases limit, among
other
things, the Company’s ability to:
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·
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incur
additional indebtedness and liens;
|
|
·
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make
capital expenditures;
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·
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make
investments and acquisitions;
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·
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consolidate,
merge or sell all or substantially all of its
assets.
|
There
can
be no assurance that these restrictions will not adversely affect the Company's
ability to finance its future operations or capital needs or to engage in other
business activities that may be in the interest of shareholders.
The
Company is dependent on product innovation and development, which costs are
incurred prior to revenues for new products and
improvements.
The
Company believes that its success will depend in large part on its ability
to
maintain and enhance its current product line, develop new products, maintain
technological competitiveness and meet an expanding range of customer needs.
The
Company's product development activities are aimed at the development and
expansion of its library of software modeling tools, the improvement of its
display systems and workstation technologies, and the advancement and upgrading
of its simulation technology. The life cycles for software modeling tools,
graphical user interfaces, and simulation technology are variable and largely
determined by competitive pressures. Consequently, the Company will need to
continue to make significant investments in research and development to enhance
and expand its capabilities in these areas and to maintain its competitive
advantage.
The
Company relies upon its intellectual property rights for the success of its
business; however, the steps it has taken to protect its intellectual property
may be inadequate.
Although
the Company believes that factors such as the technological and creative skills
of its personnel, new product developments, frequent product enhancements and
reliable product maintenance are important to establishing and maintaining
a
technological leadership position, the Company's business depends, in part,
on
its intellectual property rights in its proprietary technology and information.
The Company relies upon a combination of trade secret, copyright, patent and
trademark law, contractual arrangements and technical means to protect its
intellectual property rights. The Company enters into confidentiality agreements
with its employees, consultants, joint venture and alliance partners, customers
and other third parties that are granted access to its proprietary information,
and limits access to and distribution of its proprietary information. There
can
be no assurance, however, that the Company has protected or will be able to
protect its proprietary technology and information adequately, that the
unauthorized disclosure or use of the Company's proprietary information will
be
prevented, that others have not or will not develop similar technology or
information independently, or, to the extent the Company owns patents, that
others have not or will not be able to design around those patents. Furthermore,
the laws of certain countries in which the Company's products are sold do not
protect the Company's products and intellectual property rights to the same
extent as the laws of the United States.
The
industries in which GSE operates are highly competitive. This competition may
prevent the Company from raising prices at the same pace as its costs
increase.
The
Company's businesses operate in highly competitive environments with both
domestic and foreign competitors, many of whom have substantially greater
financial, marketing and other resources than the Company. The principal factors
affecting competition include price, technological proficiency, ease of system
configuration, product reliability, applications expertise, engineering support,
local presence and financial stability. The Company believes that competition
in
the simulation fields may further intensify in the future as a result of
advances in technology, consolidations and/or strategic alliances among
competitors, increased costs required to develop new technology and the
increasing importance of software content in systems and products. As the
Company's business has a significant international component, changes in the
value of the dollar could adversely affect the Company's ability to compete
internationally.
GSE
may pursue new acquisitions and joint ventures, and any of these transactions
could adversely affect its operating results or result in increased costs or
other related issues.
The
Company intends to pursue new acquisitions and joint ventures, a pursuit which
could consume substantial time and resources. Identifying appropriate
acquisition candidates and negotiating and consummating acquisitions can be
a
lengthy and costly process. The Company may also encounter substantial
unanticipated costs or other related issues such as compliance with new
regulations and regulatory schemes, additional oversight, elimination of
redundancy, and increased employee benefits costs associated with the acquired
businesses. The risks inherent in this strategy could have an adverse impact
on
the Company’s results of operation or financial position
The
nuclear power industry, the Company's largest customer group, is associated
with
a number of hazards which could create significant liabilities for the
Company.
The
Company's business could expose it to third party claims with respect to
product, environmental and other similar liabilities. Although the Company
has
sought to protect itself from these potential liabilities through a variety
of
legal and contractual provisions as well as through liability insurance, the
effectiveness of such protections has not been fully tested. Certain of the
Company's products and services are used by the nuclear power industry primarily
in operator training. Although the Company's contracts for such products and
services typically contain provisions designed to protect the Company from
potential liabilities associated with such use, there can be no assurance that
the Company would not be materially adversely affected by claims or actions
which may potentially arise.
The
Company, as a 10% owner of ESA, has provided a partial guarantee totaling $1.2
million for the credit facility that Union National
Bank has
extended to
ESA. ESA is a start-up entity; if it is unable to generate sufficient cash
flow
from operations and defaults on its credit facility, GSE may have to provide
up
to $1.2 million to Union National
Bank to
cover ESA’s
obligations.
In
May
2007, the Company deposited $1.2 million into a restricted, interest-bearing
account at Union National Bank (“UNB”) in the United Arab Emirates as a partial
guarantee for the $11.8 million credit facility that UNB has extended to ESA.
The guarantee will be in place until the expiration of the ESA credit facility
on December 31, 2014 or earlier if ESA pays down and terminates the facility.
Both of the other two owners of ESA, Al Qudra Holding PJSC and the Centre of
Excellence for Applied Research and Training, both located in the United Arab
Emirates, have each provided to UNB a bank guarantee for 100% of the $11.8
million ESA credit facility. In the event that ESA should default upon their
UNB
loan, UNB can utilize all or a portion of the guarantees that the three owners
have provided to cover ESA’s outstanding borrowings against the credit facility
and accrued interest payable. Thus, if such a default were to occur, GSE may
incur a loss of up to $1.2 million.
In
January 2006, the Company received a $15.1 million contract from ESA to supply
five simulators and an integrated training program. Under the terms
of the contract, the Company provided a $2.1 million performance bond
to ESA that will remain outstanding until the end of the warranty period on
October 31, 2008.
The
Company has provided a cash-collateralized standby letter of credit to ESA
which
can be drawn upon by ESA in the event the Company fails to cure a material
breach of the contract within 30 days of receiving written notice from ESA
regarding the nature of the breach. Although the contract is
expected to be complete by the end of October 2007 and no such material breach
is expected, if ESA were to draw upon the standby letter of credit,
GSE would incur a loss of up to $2.1 million.
Our
stock price may be volatile and could experience substantial
declines.
The
market price of our common stock
has experienced historical volatility and might continue to experience
volatility in the future in response to quarter-to-quarter variations in
operating results, changes in backlog and new business results, the issuance
of
analysts’ reports, market conditions in the industry, changes in
governmental regulations, and changes in general conditions in the economy
or
the financial markets.
The
general equity markets have also experienced significant fluctuations in value.
This volatility and the market variability has affected the market prices of
securities issued by many companies, often for reasons unrelated to their
operating performance, and may adversely affect the price of our common
stock.
We
only have a limited number of shares of Common Stock available for sale, which
could affect our ability to raise additional equity
capital
As
a
result of the issuance of the shares in our recent private placement (including
the shares we are required to reserve for issuance upon exercise of the warrants
we issued or may be required to issue) we have only 238,648 additional
authorized shares of common stock that are not issued or otherwise reserved
for
issuance. As a result, our ability to raise additional equity capital
in the short term will be limited. To increase the number of
authorized shares of our common stock, we will be required to obtain stockholder
approval and we cannot assure you that that such approval can be
obtained.
Investors
should not anticipate receiving cash dividends on our Common
Stock.
We
have
not paid any dividends on our common stock and do not anticipate paying cash
dividends in the foreseeable future. We intend to retain any earnings to
finance
the growth of our business and we may never pay cash dividends. In
addition, under the terms of our line of credit agreement with Laurus Master
Fund Ltd., we are prohibited from paying any dividends on our common
stock.
FORWARD-LOOKING
STATEMENTS
This
prospectus and the documents incorporated by reference herein contain
“forward-looking” statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act that are based on management’s
assumptions, expectations and projections about us, and the industry within
which we operate, that have been made pursuant to the Private Securities
Litigation Reform Act of 1995 which reflect our expectations regarding our
future growth, results of operations, performance and business prospects and
opportunities. Wherever possible, words such as “anticipate,” “believe,”
“continue,” “estimate”, “intend”, “may,” “plan”, “potential”, “predict”,
“expect”, “should”, “will” and similar expressions, or the negative of these
terms or other comparable terminology, have been used to identify these
forward-looking statements. These forward-looking statements may also use
different phrases. These statements regarding our expectations reflect our
current beliefs and are based on information currently available to us.
Accordingly, these statements by their nature are subject to risks and
uncertainties, including those listed under “Risk Factors,” which could cause
our actual growth, results, performance and business prospects and opportunities
to differ from those expressed in, or implied by, these statements. Discussions
containing these forward-looking statements may be found, among other places,
in
“Business” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” incorporated by reference from our most recent annual
report on Form 10-K and in our most recent quarterly report on Form 10-Q
subsequent to the filing of our most recent annual report on Form 10-K with
the
SEC, as well as any amendments thereto reflected in subsequent filings with
the
SEC. We may not actually achieve the plans, intentions or expectations disclosed
in our forward-looking statements and you should not place undue reliance on
our
forward-looking statements. Actual results or events could differ materially
from the plans, intentions and expectations disclosed in the forward-looking
statements we make. Except as otherwise required by federal securities law,
we
are not obligated to update or revise these forward-looking statements to
reflect new events or circumstances. We caution you that a variety of factors,
including but not limited to the factors described under the heading “Risk
Factors” and the following, could cause our business conditions and results to
differ materially from what is contained in forward-looking
statements:
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·
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changes
in the rate of economic growth in the United States and other major
international economies;
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changes
in investment by the nuclear and fossil electric utility industry,
the
chemical and petrochemical industries and the U.S.
military;
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changes
in the financial condition of our
customers;
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changes
in regulatory environment;
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changes
in project design or schedules;
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·
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contract
cancellations;
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·
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changes
in our estimates of costs to complete
projects;
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·
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changes
in trade, monetary and fiscal policies
worldwide;
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·
|
war
and/or terrorist attacks on facilities either owned or where equipment
or
services are or may be provided;
|
|
·
|
outcomes
of future litigation;
|
|
·
|
protection
and validity of our patents 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;
and
|
|
·
|
changes
in estimates used in our critical accounting
policies.
|
Other
factors and assumptions not identified above were also involved in the formation
of these forward looking statements and the failure of such other assumptions
to
be realized, as well as other factors, may also cause actual results to differ
materially from those projected. Most of these factors are difficult to predict
accurately and are generally beyond our control. You should consider the areas
of risk described above in connection with any forward looking statements that
may be made by us. You should not place undue reliance on any forward-looking
statements. New factors emerge from time to time, and it is not possible for
us
to predict which factors will arise.
We
undertake no obligation to publicly update any forward looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any additional disclosures we make in proxy
statements, quarterly reports on Form 10-Q, annual reports on Form 10-K and
current reports on Form 8-K filed with the SEC.
USE
OF PROCEEDS
We
will
not receive any of the proceeds from the sale of shares of our common stock
by
the selling stockholders. The proceeds from the sale of the common
stock offered pursuant to this prospectus, including shares of our common stock
issued upon exercise of the warrants, are solely for the accounts of the selling
stockholders.
The
selling stockholders will pay any underwriting discounts and commissions and
expenses incurred by the selling stockholders for brokerage, accounting, tax
or
legal services or any other expenses incurred by the selling stockholders in
disposing of the shares. We will bear all other costs, fees and expenses
incurred in effecting the registration of the shares covered by this prospectus,
including, without limitation, all registration and filing fees and fees and
expenses of our counsel and our accountants.
A
portion of
the shares covered by this prospectus are issuable upon exercise of warrants
to
purchase our common stock. Upon any exercise for cash of the warrants, the
selling stockholders will pay us the exercise price of the warrants. The
cash exercise price of the warrants is $6.00 per share. Any proceeds
we receive from the exercise of outstanding warrants on a cash basis will be
used for general corporate purposes. The warrants are also
exercisable on a cashless basis. We will not receive any cash payment from
the
selling stockholders upon any exercise of the warrants on a cashless
basis.
PRIVATE
PLACEMENT OF COMMON STOCK AND WARRANTS
On
June
22, 2007, we sold and issued in a private placement to a select group of
institutional accredited investors a total of 1,666,667 shares of our common
stock at a price of $6.00 per share, pursuant to the terms of a securities
purchase agreement. As part of the transaction, the purchasers
received, for no additional consideration, warrants to purchase 166,667 shares
of our common stock at an exercise price of $6.00 per share. The warrants are
immediately exercisable and expire on June 22, 2012.
The
gross
proceeds we received from the private placement were approximately
$10,000,000. A potion of the funds were used to pay down the
outstanding borrowings under our line of credit with Laurus Master Fund, Ltd
(as
required by the terms thereof) and the balance is expected to be used
for working capital purposes.
In
connection with the private placement, we entered into a registration rights
agreement with the purchasers providing for the filing of a registration
statement with the Securities and Exchange Commission registering the shares
issued in the private placement as well as the shares issuable upon exercise
of
the warrants. We are obligated to use our commercially reasonable efforts to
(i)
file the registration statement within 60 days of the closing date of the
private placement, or August 21, 2007, (ii) file a request for acceleration
of the effectiveness of the registration statement within five
trading days after the Company has been advised that the Registration Statement
will not be “reviewed,” or not subject to further review, (iii) prior to the
effective date of the registration statement, file a pre-effective amendment
and
otherwise respond in writing to comments made by the Commission within 15
calendar days after the receipt, (iv) cause the registration statement to be
declared effective no later 120 day after the closing date of the private
placement, or October 20, 2007, (v) after its effective date, cause the
Registration Statement to remain continuously effective as to all the shares
covered thereby, other than for an aggregate of more than 30 consecutive trading
days or for more than an aggregate of 60 trading days in any 12-month
period. In the event of a default of any of the foregoing
obligations, we will be required to issue to each purchaser, as liquidated
damages, on the date the foregoing default occurs and each monthly anniversary
thereafter, a number of warrants (on the same terms as the warrants) equal
to 2%
of the number of shares then held by such purchaser, not to exceed 10% of the
total number of shares then held by such purchaser (or warrants to acquire
166,667 shares of common stock in the aggregate, collectively, the
“liquidated damages warrants”), and thereafter cash, in an amount equal to 2% of
the aggregate purchase price paid by such purchaser, not to exceed 30% of the
aggregate purchase price paid by such purchaser.
Each
of
the selling stockholders has agreed not to engage, directly or indirectly,
in
any short sales involving the Company’s securities until the earlier of (a) 60
days following the closing date of the private placement, or August 21, 2007
and
(ii) the effective date of the registration statement, of which this prospectus
is a part.
In
connection with the transaction, we paid Roth Capital Partners, LLC, the
placement agent, a fee of $600,000 and reimbursed the placement
agent $48,000 in expenses.
The
description of the terms of the securities purchase agreement, warrant and
registration rights agreement in this prospectus is a summary and does not
purport to be a complete description of those terms. You should refer
to the full text of the documents, which are filed as an exhibit to the
registration statement of which this prospectus is a part.
SELLING
STOCKHOLDERS
The
shares of common stock being offered by the selling stockholders are those
previously issued to the selling stockholders and those issuable to the selling
stockholders upon exercise of the warrants. For additional
information regarding the issuances of common stock and the warrants, see
“Private Placement of Common Stock and Warrants” above. We are
registering the shares of common stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except
for the ownership of the shares of common stock and the warrants, the selling
stockholders have not had any material relationship with us within the past
three years.
The
table
below lists the selling stockholders and other information regarding the
beneficial ownership of the shares of common stock by each of the selling
stockholders. The second column lists the number of shares of common
stock beneficially owned by each selling stockholder, based on its ownership
of
the shares of common stock and the warrants, as of June 22, 2007, assuming
exercise of the warrants held by the selling stockholders on that
date.
The
third
column lists the shares of common stock being offered by this prospectus by
the
selling stockholders.
In
accordance with the terms of registration rights agreements with the holders
of
the shares of common stock and the warrants, this prospectus generally covers
the resale of the sum of (i) the number of shares of common stock issued and
(ii) the shares of common stock issued and issuable upon exercise of the related
warrants and any warrants that may be issued as liquidated damages under the
registration rights agreement, determined as if the outstanding warrants were
exercised, as applicable, in full, as of the trading day immediately preceding
the date this registration statement was initially filed with the Securities
and
Exchange Commission. The fourth column assumes the sale of all of the
shares offered by the selling stockholders pursuant to this
prospectus.
The
selling stockholders may sell all, some or none of their shares in this
offering. See “Plan of Distribution.”
|
Name
of Selling Stockholder
|
Number
of Shares of Common Stock Owned Prior to
Offering
|
Maximum
Number of Shares of Common Stock to be Sold Pursuant to this
Prospectus
|
Number
of Shares of Common Stock Owned After
Offering
|
|
Ashdon
Select Manager Trust-Ashdon Investment Management, LLC
(10)
|
12,360(1)
|
12,360
|
0
|
|
Compass
SAV, LLC (10)
|
139,200(2)
|
139,200
|
0
|
|
US
Dollar Cell of Compass Offshore SAV PCC, Ltd.
(10)
|
139,200(3)
|
139,200
|
0
|
|
Daimler
Chrysler Retirement Trust (10)
|
295,200(4)
|
295,200
|
0
|
|
Harry-Anna
Investment Fund, Inc. (10)
|
86,400(5)
|
86,400
|
0
|
|
Hallador
Equity Fund, LLC (10)
|
55,200(6)
|
55,200
|
0
|
|
Peninsula
Master Fund Ltd.
|
600,000(7)
|
600,000
|
0
|
|
QueensCare,
Inc. (10)
|
61,680
(8)
|
61,680
|
0
|
|
Westcliff
Fund, LP (10)
|
610,761(9)
|
610,761
|
0
|
________________________
(1) Consists
of (a) 10,300 shares of common stock owned directly by the selling stockholder,
(b) 1,030 shares of common stock that may be acquired upon exercise of the
warrants owned directly by the selling stockholder, and (c) 1,030 shares of
common stock that may be acquired upon exercise of the liquidated damages
warrants that may be issued to the selling stockholder.
(2)
Consists of (a) 116,000 shares of common stock owned directly by the selling
stockholder, (b) 11,600 shares of common stock that may be acquired upon
exercise of the warrants owned directly by the selling stockholder, and (c)
11,600 shares of common stock that may be acquired upon exercise of the
liquidated damages warrants that may be issued to the selling
stockholder.
(3)
Consists of (a) 116,000 shares of common stock owned directly by the selling
stockholder, (b) 11,600 shares of common stock that may be acquired upon
exercise of the warrants owned directly by the selling stockholder, and (c)
11,600 shares of common stock that may be acquired upon exercise of the
liquidated damages warrants that may be issued to the selling
stockholder.
(4)
Consists of (a) 246,000 shares of common stock owned directly by the selling
stockholder, (b) 24,600 shares of common stock that may be acquired upon
exercise of the warrants owned directly by the selling stockholder, and (c)
24,600 shares of common stock that may be acquired upon exercise of the
liquidated damages warrants that may be issued to the selling
stockholder.
(5)
Consists of (a) 72,000 shares of common stock owned directly by the selling
stockholder, (b) 7,200 shares of common stock that may be acquired upon exercise
of the warrants owned directly by the selling stockholder, and (c) 7,200 shares
of common stock that may be acquired upon exercise of the liquidated damages
warrants that may be issued to the selling stockholder.
(6)
Consists of (a) 46,000 shares of common stock owned directly by the selling
stockholder, (b) 4,600 shares of common stock that may be acquired upon exercise
of the warrants owned directly by the selling stockholder, and (c) 4,600 shares
of common stock that may be acquired upon exercise of the liquidated damages
warrants that may be issued to the selling stockholder.
(7)
Consists of (a) 500,000 shares of common stock owned directly by the selling
stockholder, (b) 50,000 shares of common stock that may be acquired upon
exercise of the warrants owned directly by the selling stockholder, and (c)
50,
000shares of common stock that may be acquired upon exercise of the liquidated
damages warrants that may be issued to the selling stockholder.
(8)
Consists of (a) 51,400 shares of common stock owned directly by the selling
stockholder, (b) 5,140 shares of common stock that may be acquired upon exercise
of the warrants owned directly by the selling stockholder, and (c) 5,140 shares
of common stock that may be acquired upon exercise of the liquidated damages
warrants that may be issued to the selling stockholder.
(9)
Consists of (a) 508,967 shares of common stock owned directly by the selling
stockholder, (b) 50,897 shares of common stock that may be acquired upon
exercise of the warrants owned directly by the selling stockholder, and (c)
50,897 shares of common stock that may be acquired upon exercise of the
liquidated damages warrants that may be issued to the selling
stockholder.
(10) Richard
S. Spencer III, in his capacity as managing member of Westcliff Capital
Management, LLC, the general partner of Westcliff Fund L.P., and the investment
advisor for Ashdon Select Manager Trust-Ashdon Investment Management, LLC,
Compass SAV, LLC, US Dollar Cell of Compass Offshore SAV PCC, Ltd.,
Daimler Chrysler Retirement Trust, Harry-Anna Investment Fund, Inc., Hallador
Equity Fund, LLC, and QueensCare, Inc. holds the power to vote or dispose of
the
shares held by those entities. Mr. Spencer and Westcliff Capital Management,
LLC
each disclaims beneficial ownership as to those shares. In
addition, certain other funds, of which Westcliff Capital Management, LLC,
is
either the general partner or investment advisor, also own shares of our common
stock.
PLAN
OF DISTRIBUTION
We
are
registering the shares of Common Stock issued to the selling stockholders and
issuable upon exercise of the warrants to permit the resale of these shares
of
Common Stock by the holders of the shares of Common Stock and warrants from
time
to time after the date of this prospectus. We will not receive any of
the proceeds from the sale by the selling stockholders of the shares of Common
Stock. We will bear all fees and expenses incident to our obligation
to register the shares of Common Stock.
The
selling stockholders may sell all or a portion of the shares of Common Stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the
shares of Common Stock are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or
commissions or agent's commissions. The shares of Common Stock may be
sold on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale, in the over-the-counter
market or in transactions otherwise than on these exchanges or systems or in
the
over-the-counter market and in one or more transactions at fixed prices, at
prevailing market prices at the time of the sale, at varying prices determined
at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions. The
selling stockholders may use any one or more of the following methods when
selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether such options are listed on an options exchange or
otherwise;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, as
permitted by that rule, or Section 4(1) under the Securities Act, if
available, rather than under this prospectus, provided that they meet the
criteria and conform to the requirements of those provisions.
Broker-dealers
engaged by the selling stockholders may arrange for other broker-dealers to
participate in sales. If the selling stockholders effect such transactions
by
selling shares of Common Stock to or through underwriters, broker-dealers or
agents, such underwriters, broker-dealers or agents may receive commissions
in
the form of discounts, concessions or commissions from the selling stockholders
or commissions from purchasers of the shares of Common Stock for whom they
may
act as agent or to whom they may sell as principal. Such commissions will be
in
amounts to be negotiated, but, except as set forth in a supplement to this
Prospectus, in the case of an agency transaction will not be in excess of a
customary brokerage commission in compliance with NASD Rule 2440; and in the
case of a principal transaction a markup or markdown in compliance with NASD
IM-2440.
In
connection with sales of the shares of Common Stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the shares
of
Common Stock in the course of hedging in positions they assume. The
selling stockholders may also sell shares of Common Stock short and if such
short sale shall take place after the date that this Registration Statement
is
declared effective by the Commission, the selling stockholders may deliver
shares of Common Stock covered by this prospectus to close out short positions
and to return borrowed shares in connection with such short
sales. The selling stockholders may also loan or pledge shares of
Common Stock to broker-dealers that in turn may sell such shares, to the extent
permitted by applicable law. The selling stockholders may also enter into option
or other transactions with broker-dealers or other financial institutions or
the
creation of one or more derivative securities which require the delivery to
such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution
may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction). Notwithstanding the foregoing, the selling stockholders have
been
advised that they may not use shares registered on this registration statement
to cover short sales of our common stock made prior to the date the registration
statement, of which this prospectus forms a part, has been declared effective
by
the SEC.
The
selling stockholders may, from time to time, pledge or grant a security interest
in some or all of the warrants or shares of Common Stock owned by them and,
if
they default in the performance of their secured obligations, the pledgees
or
secured parties may offer and sell the shares of Common Stock from time to
time
pursuant to this prospectus or any amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include
the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus. The selling stockholders also may transfer and
donate the shares of Common Stock in other circumstances in which case the
transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.
The
selling stockholders and any broker-dealer or agents participating in the
distribution of the shares of Common Stock may be deemed to be “underwriters”
within the meaning of Section 2(11) of the Securities Act in connection with
such sales. In such event, any commissions paid, or any discounts or
concessions allowed to, any such broker-dealer or agent and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Selling Stockholders who
are
“underwriters” within the meaning of Section 2(11) of the Securities Act will be
subject to the prospectus delivery requirements of the Securities Act and may
be
subject to certain statutory liabilities of, including but not limited to,
Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the
Securities Exchange Act of 1934, as amended, or the Exchange Act.
Each
selling stockholder has informed the Company that it is not a registered
broker-dealer and does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common
Stock. Upon the Company being notified in writing by a selling
stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of common stock through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by
a
broker or dealer, a supplement to this prospectus will be filed, if required,
pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of
each such selling stockholder and of the participating broker-dealer(s), (ii)
the number of shares involved, (iii) the price at which such the shares of
Common Stock were sold, (iv) the commissions paid or discounts or concessions
allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information
set
out or incorporated by reference in this prospectus, and (vi) other facts
material to the transaction. In no event shall any broker-dealer
receive fees, commissions and markups, which, in the aggregate, would exceed
eight percent (8%).
Under
the
securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers. In
addition, in some states the shares of Common Stock may not be sold unless
such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied
with.
There
can
be no assurance that any selling stockholder will sell any or all of the shares
of Common Stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
The
selling stockholder and any other person participating in such distribution
will
be subject to applicable provisions of the Securities Exchange Act of 1934,
as
amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of Common Stock by the selling
stockholder and any other participating person. Regulation M may also
restrict the ability of any person engaged in the distribution of the shares
of
Common Stock to engage in market-making activities with respect to the shares
of
Common Stock. All of the foregoing may affect the marketability of
the shares of Common Stock and the ability of any person or entity to engage
in
market-making activities with respect to the shares of Common
Stock.
We
will
pay all expenses of the registration of the shares of Common Stock pursuant
to
the registration rights agreement, including, without limitation, Securities
and
Exchange Commission filing fees and expenses of compliance with state securities
or “blue sky” laws; provided, however, that a selling
stockholder will pay all underwriting discounts and selling commissions, if
any
and any related legal expenses incurred by it. We will indemnify the
selling stockholders against certain liabilities, including some liabilities
under the Securities Act, in accordance with the registration rights agreements,
or the selling stockholders will be entitled to contribution. We may
be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling stockholders specifically for use
in
this prospectus, in accordance with the related registration rights agreements,
or we may be entitled to contribution.
LEGAL
MATTERS
The
validity of the shares of common stock offered by this prospectus has been
passed upon by Duane Morris LLP, New York, New York.
EXPERTS
The
consolidated financial statements of GSE Systems, Inc. as of December 31, 2006
and 2005, and for each of the years in the three-year period ended December
31,
2006 have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG LLP, independent registered
public accounting firm, incorporated by reference herein, and upon the authority
of said firm as experts in auditing and accounting. The audit report covering
the December 31, 2006 financial statements refers to a change in accounting
for
share based payments as the Company adopted Statement of Financial Accounting
Standards No. 123 (Revised 2004), Share-Based Payment, on January 1,
2006.
WHERE
YOU CAN FIND MORE INFORMATION
We
file
annual, quarterly and special reports, proxy statements and other information
with the Securities and Exchange Commission. You may read and copy any documents
we file at the Securities and Exchange Commission’s Public Reference Room at 100
F Street, N.E., Washington, D.C. 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for information on the operation of the Public
Reference Room. Our Securities and Exchange Commission filings are also
available to the public from the Securities and Exchange Commission’s Website at
“http://www.sec.gov.”
The
Securities and Exchange Commission allows us to “incorporate by reference” the
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and
information we later file with the Securities and Exchange Commission will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings we will make with the
Securities and Exchange Commission under Sections 13(a), 13(c), 14 and 15(d)
of
the Exchange Act until this offering is completed:
|
·
|
Our
Annual Report on Form 10-K for the fiscal year ended December 31,
2006;
|
|
·
|
Our
Quarterly Report on Form 10-Q for the quarterly period ended March
31,
2007;
|
|
·
|
Our
Current Reports on Form 8-K filed on February 8, 2007, March 12,
2007,
April 3, 2007, April 6, 2007, May 16, 2007, June 18, 2007 and June
25,
2007; and
|
|
·
|
The
description of our common stock contained in the Registration Statement
on
Form 8-A filed on July 24, 1995, under Section 12(g) of the Securities
Exchange Act of 1934, as amended.
|
You
may
request a copy of these filings, at no cost, by writing or telephoning us at
the
following address:
GSE
Systems, Inc.
7133
Rutherford Road, Suite 200
Baltimore,
Maryland 21244
Attn:
Secretary
(410)
277-3740
You
should rely only on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone
else
to provide you with different information. This prospectus is not an offer
of
our common stock in any state where the offer is not permitted. You should
not
assume that the information in this prospectus or any prospectus supplement
is
accurate as of any date other than the date on the front of those
documents.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
Item
14.
|
Other
Expenses of Issuance and Distribution.
|
The
expenses (excluding placement agent fees) payable by us in connection with
the
issuance and distribution of the securities being registered are set forth
in
the following table (all amounts except the registration fee are
estimated). The selling stockholders will not bear any portion of
these expenses.
|
Securities
and Exchange Commission Filing Fee
|
$417
|
|
Printing
Expenses
|
-
|
|
Counsel
Fees and Expenses
|
50,000
|
|
Accounting
Fees and Expenses
|
10,000
|
|
Stock
Exchange Listing Fees
|
40,000
|
|
Fees
of Transfer Agent
|
1,600
|
|
Placement
Agent Expenses
|
48,000
|
|
Blue
Sky Expenses
|
2,000
|
|
Total:
|
$152,017
|
Item
15. Indemnification of Directors and Officers.
Under
Section 145 of the General
Corporation Law of the State of Delaware (the “DGCL”), a corporation may
indemnify its directors, officers, employees and agents and its former
directors, officers, employees and agents and those who serve, at the
corporation's request, in such capacities with another enterprise, against
expenses (including attorney's fees), as well as judgments, fines and
settlements in no derivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they
or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The DGCL provides,
however, that such person must have acted in good faith and in a manner he
or
she reasonably believed to be in (or not opposed to) the best interests of
the
corporation and, in the case of a criminal action, such person must have had
no
reasonable cause to believe his or her conduct was unlawful. In addition, the
DGCL does not permit indemnification in an action or suit by or in the right
of
the corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that, a court determines that such person fairly
and reasonably is entitled to indemnity for costs the court deems proper in
light of liability adjudication. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended.
The
Company's Third Amended and
Restated Certificate of Incorporation (the “Restated Certificate”) provides that
the Company shall indemnify and hold harmless, to the fullest extent permitted
by Section 145 of the DGCL, as the same may be amended and supplemented, every
person who was or is made a party or is threatened to be made a party or is
otherwise involved in any action, suit of proceeding by reason of the fact
that
such person is or was serving as a director or officer of the Company or, while
serving as a director or officer of the Company, is or was serving at the
request of the Company as a director, trustee, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against all expense, liability and loss reasonably incurred or suffered by
such
person in connection therewith if such person satisfied the applicable level
of
care to permit such indemnification under the DGCL. The Restated Certificate
provides that, subject to any requirements imposed by law or the Company's
Bylaws, the right to indemnification includes the right to be paid expenses
incurred in defending any proceeding in advance of its final disposition. The
Company's Amended and Restated By-Laws (the “By-Laws”) provide that, if and to
the extent required by the DGCL, such an advance payment will only be made
upon
delivery to the Company of an undertaking, by or on behalf of the director
or
officer, to repay all amounts so advanced if it is ultimately determined that
such director is not entitled to indemnification.
Section
102(b)(7) of the DGCL permits a
corporation to include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to the corporation
or its shareholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty
to
the corporation or its shareholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL (relating to unlawful payment of dividends
and unlawful stock purchase and redemption) or (iv) for any transaction from
which the director derived an improper personal benefit.
The
Restated Certificate also provides
that a director shall, to the maximum extent permitted by Section 102(b)(7)
of
the DGCL (or any successor provision), have no personal liability to the Company
or its shareholders for monetary damages for breach of fiduciary duty as a
director.
Item
16. Exhibits.
Number
Description
|
4.1
|
Form
of Warrant (incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed on June 18, 2007)
|
|
5.1
|
Opinion
of Duane Morris LLP (filed herewith)
|
|
10.1
|
Securities
Purchase Agreement, dated as of June 15, 2007 by and among GSE Systems,
Inc. and each of the purchasers named therein (incorporated by reference
to Exhibit 10.1 to our Current Report on Form 8-K filed on June 18,
2007)
|
|
10.2
|
Registration
Rights Agreement dated as of June 15, 2007 by and among GSE Systems,
Inc.
and each of the purchasers named therein (incorporated by reference
to
Exhibit 10.2 to our Current Report on Form 8-K filed on June 18,
2007)
|
|
23.1
|
Consent
of KPMG LLP (filed herewith)
|
|
23.2
|
Consent
of Duane Morris LLP (contained in Exhibit 5.1).
|
|
24
|
Power
of Attorney (included in the signature
page)
|
Item
17. Undertakings.
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To
include any prospectus required by section 10(a)(3) of the Securities Act of
1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding
the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective
registration statement.
(iii)
To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
Provided,
however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are
incorporated by reference in the registration statement or is contained in
a
form of prospectus filed pursuant to Rule 424(b) that is deemed a part of and
included in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule
430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed
to be
part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into
the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first
use,
supersede or modify any statement that was made in the registration statement
or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
(b) The
undersigned registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the Company’s annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act
of 1934 (and, where applicable, each filing of an employee benefit plan’s annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is
incorporated by reference in this registration statement shall be deemed to
be a
new registration statement relating to the securities offered thereby, and
the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Baltimore, the State of Maryland, on the 16th day of July,
2007.
GSE
SYSTEMS, INC.
By: /s/
John V.
Moran
Name:
John
V. Moran
Title:
Chief Executive Officer
POWERS
OF ATTORNEY
KNOW
ALL MEN BY THESE PRESENTS, that
each person whose signature appears below constitutes and appoints John V.
Moran
and Jeffery G. Hough, and each of them, with full power of substitution and
reconstitution and each with full power to act without the other, his or her
true and lawful attorney-in-fact and agent, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission or any state, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes
as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their, his or her
substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the
Securities Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the date indicated.
|
Signature
|
Title
|
Date
|
| /s/
John V. Moran |
Chief
Executive Officer and Director (Principal Executive
Officer) |
July
16, 2007 |
|
John
V. Moran
|
|
|
| /s/
Jeffery G. Hough |
Senior
Vice President and Chief Financial Officer |
July
16, 2007 |
|
Jeffery
G. Hough
|
(Principal
Financial and Accounting Officer)
|
|
| /s/
Jerome I. Feldman |
Chairman
of the Board |
July
16, 2007 |
|
Jerome
I. Feldman
|
|
|
| /s/
Michael D. Feldman |
Director |
July
16, 2007 |
|
Michael
D. Feldman
|
|
|
| /s/
Sheldon L. Glashow |
Director |
July
16, 2007 |
|
Dr.
Sheldon L. Glashow
|
|
|
| /s/
Scott N. Greenberg |
Director |
July
16, 2007 |
|
Scott
N. Greenberg
|
|
|
| /s/
Roger Hagengruber |
Director |
July
16, 2007 |
|
Dr.
Roger Hagengruber
|
|
|
| /s/
Joseph W. Lewis |
Director |
July
16, 2007 |
|
Joseph
W. Lewis
|
|
|
| /s/
George J. Pedersen |
Director |
July
16, 2007 |
|
George
J. Pedersen
|
|
|
| /s/
O. Lee Tawes III |
Director |
July
16, 2007 |
|
O.
Lee Tawes III
|
|
|
II-6