UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO.1)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended March 31, 2005.
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: 0-26494
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GSE SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 52-1868008
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9189 Red Branch Road, Columbia Maryland, 21045
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(Address of principal executive office and zip code)
Registrant's telephone number, including area code: (410) 772-3500
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
As of May 2, 2005, there were 8,999,706 shares of the Registrant's common stock
outstanding.
Part I - FINANCIAL INFORMATION
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Based on their
evaluation as of the end of the period covered by this Form 10-Q, the Company's
principal executive officer and principal financial officer have concluded that
the Company's disclosure controls and procedures (as defined in Rules 13a-15(e)
under the Securities Exchange Act of 1934 (the "Exchange Act")) are effective to
ensure that information required to be disclosed by the Company in reports that
it files or submits under the Exchange Act is recorded, processed, and
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms.
(b) Changes in internal control. Based upon the evaluation of internal
controls that the Company performed in the fourth quarter 2004, the Company
identified a material weakness which had existed since the second quarter 2004,
and which existed as of December 31, 2004, with respect to the identification
and accounting for derivative transactions in accordance with the requirements
of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities".
(A material weakness is a significant deficiency, or combination of significant
deficiencies, that result in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.) Specifically, the Company did not have a process in place to
ensure that it obtained information with respect to its Swedish subsidiary's
forward foreign currency contracts. Accordingly, the Company's controls did not
ensure that the fair market value of the forward foreign currency contracts
would be recorded in the financial statements. This control weakness was due to
the combination of the following factors: a resignation of a member of the
Company's corporate accounting staff who had previously monitored the accounting
for the forward foreign currency contracts, the lack of training of the Swedish
controller in the U.S. GAAP requirements for such forward foreign currency
contracts, and the transfer of the Swedish subsidiary's currency transactions to
a small branch of a new bank that was not familiar with the U.S. reporting
requirements. While management concluded that the error was immaterial to the
Company's 2004 interim financial results, we nevertheless concluded that the
lack of control could have resulted in a material error in future consolidated
financial statements.
In the first quarter 2005, the Company revised its internal controls with
respect to derivative transactions to ensure that these transactions will be
captured and accounted for in a timely manner. The specific steps that the
Company completed to remediate the material weakness consisted of:
* the training of the Swedish controller on the U.S. accounting for such
forward foreign currency contracts which differs from the Swedish
accounting requirements,
* the requirement that all forward foreign currency contracts or other
derivative transactions have corporate approval before they are
entered into, and
* the addition to the Company's quarterly subsidiary reporting
requirements that a fair market valuation report be obtained from the
issuing bank and forwarded to the chief financial officer for review.
The Company believes that these steps have eliminated the material weakness as
of March 31, 2005 and that no additional steps are necessary. There have been no
material costs incurred by the Company in instituting these control changes.
PART II - OTHER INFORMATION
Item 6. Exhibits
31.1 Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.**
31.2 Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.**
32.1 Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
* Filed previously.
** Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 16, 2005 GSE SYSTEMS, INC.
/S/ JOHN V. MORAN
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John V. Moran
Chief Executive Officer
(Principal Executive Officer)
/S/ JEFFERY G. HOUGH
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Jeffery G. Hough
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)