Room 4561
August 5, 2005
John V. Moran
Chief Executive Officer
GSE Systems, Inc.
9189 Red Branch Road
Columbia, MD 21045
Re: GSE Systems, Inc.
Registration Statement on Form S-3
Filed July 8, 2005
File No. 333-126472
Form 10-K for the year ended December 31, 2004
File No. 1-14785
Dear Mr. Moran:
We have limited our review of the above-referenced Form S-3
registration statement to form eligibility, identification of
underwriters and cover page disclosure and to the controls and
procedures in the above-cited Form 10-K. Where indicated, we
think
you should revise your document in response to these comments. If
you disagree, we will consider your explanation as to why our
comment
is inapplicable or a revision is unnecessary. Please be as
detailed
as necessary in your explanation. In some of our comments, we may
ask you to provide us with supplemental information so we may
better
understand your disclosure. After reviewing this information, we
may
or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We welcome any questions you may have about our comments or on any
other aspect of our review and look forward to working with you.
Feel free to call us at the telephone numbers listed at the end of
this letter.
General
1. While a spin-off transaction may be registered using Form S-3,
it
appears that you do not meet the transactional requirements of
General Instruction I.B.1 of Form S-3 as GSE Systems, Inc. has an
aggregate market value of less than $75 million. Please see
telephone interpretation G.26 relating to Form S-3. We suggest
therefore that you amend this filing on an appropriate form such
as
Form S-2 or S-1.
2. In view of the role of General Physics Corp and GP Strategies
in
the spin-off transaction in which GSE Systems shares will
ultimately
be distributed to the shareholders of GP Strategies, please
provide
us with your analysis of why General Physics Corp and GP
Strategies
should not be named as underwriters, as defined in Section
2(a)(11)
of the Securities Act.
Outside Front Cover Page
2. Please revise so that the outside cover page of the document
provided to investors conforms to the requirements of Item 501 of
Regulation S-K. Putting the information required by Item 501 on
the
second page of your document is not appropriate. Note that Item
501
of Regulation S-K limits the presentation of information required
on
the cover page to a single page. It appears the key information
concerning your proposed transaction can be presented on a single
page.
Form 10-K for the year ended December 31, 2004
Disclosure Controls and Procedure
3. Given the conclusion of your principal executive and financial
officers that your disclosure controls and procedures were not
effective as of December 31, 2004, amend your disclosure to
identify
the period for which the material weakness existed.
4. We note your statement that the company "is revising its
controls
around derivative transactions to ensure that these transactions
will
be captured and accounted for in a timely manner. Revise to
discuss
in greater detail the specific steps that the company has taken,
if
any, or plans to take to remediate the material weakness.
Identify
the costs associated with the remedial measures, if material, and
disclose whether the company believes that the material weakness
still existed at December 31, 2004.
5. Your disclosure states that there were "no other significant
changes in internal controls, or in factors that could
significantly
affect internal controls, subsequent to the date of the . . .
evaluation." This language does note conform to the requirements
of
Item 308(c) of Regulation S-K, which requires disclosure of any
change in the registrant`s internal control over financial
reporting
that occurred during the registrant`s fourth fiscal quarter that
has
materially affected, or is reasonably likely to materially affect,
the registrant`s internal control over financial reporting.
Please
revise accordingly.
As appropriate, please amend your 10-K filing within 10
business days or tell us when you will provide us with a response.
You may wish to provide us with marked copies of the amendment to
expedite our review. Please furnish a cover letter with your
amendment that keys your responses to our comments and provides
any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing your amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to
delegated authority, declare the filing effective, it does not
foreclose the Commission from taking any action with respect to
the
filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rule 461 regarding requesting
acceleration of a registration statement. Please allow adequate
time
after the filing of any amendment for further review before
submitting a request for acceleration. Please provide this
request
at least two business days in advance of the requested effective
date.
Any questions should be directed to Maryse Mills-Apenteng at
(202) 551-3457 or, in her absence, the undersigned at (202) 551-
3462.
If you still require further assistance, you may contact Barbara
C.
Jacobs, Assistant Director, at (202)-551-3730.
Sincerely,
Mark P. Shuman
Branch Chief - Legal
cc: Via facsimile: 212-692-1000
Robert J. Hasday, Esq.
Duane Morris LLP
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John V. Moran
GSE Systems, Inc.
August 5, 2005
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