Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 24, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | Deep Down, Inc. | ||
Entity Central Index Key | 1,110,607 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 14,820,813 | ||
Entity Public Float | $ 11,531,866 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash (including a compensating balance of $3,900 at December 31, 2015 (Note 5) | $ 8,203 | $ 4,274 |
Short term investment (certificate of deposit) | 1,005 | 0 |
Accounts receivable, net of allowance of $10 and $150, respectively | 5,945 | 7,849 |
Inventory | 0 | 3,117 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 1,077 | 1,354 |
Prepaid expenses and other current assets | 864 | 229 |
Total current assets | 17,094 | 16,823 |
Property, plant and equipment, net | 7,938 | 10,762 |
Intangibles, net | 69 | 75 |
Long-term asset - Carousel | 3,117 | 0 |
Other assets | 211 | 878 |
Total assets | 28,429 | 28,538 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 1,778 | 2,162 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 3,349 | 46 |
Current portion of long-term debt | 0 | 2,747 |
Total current liabilities | 5,127 | 4,955 |
Long-term debt, net | 0 | 0 |
Total liabilities | 5,127 | 4,955 |
Commitments and contingencies (Note 1\01) | ||
Stockholders' equity: | ||
Preferred stock, $0.001 par value, 10,000 shares authorized, 0 shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value, 24,500,000 shares authorized, 15,408,660 and 15,631,714 shares issued, respectively | 15 | 16 |
Treasury stock, 587,847 and 0 shares at cost, respectively | (567) | 0 |
Additional paid-in capital | 73,112 | 72,989 |
Accumulated deficit | (49,258) | (49,422) |
Total stockholders' equity | 23,302 | 23,583 |
Total liabilities and stockholders' equity | $ 28,429 | $ 28,538 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
ASSETS | ||
Cash compensating balance | $ 0 | $ 3,900 |
Accounts receivable allowance | $ 10 | $ 150 |
Stockholders' equity: | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 24,500,000 | 24,500,000 |
Common stock issued | 15,408,660 | 15,631,000 |
Treasury stock shares | 587,847 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
Revenues | $ 25,384 | $ 24,848 |
Cost of sales: | ||
Cost of sales | 15,032 | 15,802 |
Depreciation expense | 1,335 | 1,499 |
Total cost of sales | 16,367 | 17,301 |
Gross profit | 9,017 | 7,547 |
Operating expenses: | ||
Selling, general and administrative | 9,672 | 9,113 |
Depreciation and amortization | 197 | 205 |
Total operating expenses | 9,869 | 9,318 |
Operating loss | (852) | (1,771) |
Other income (expense): | ||
Interest expense, net | (34) | (247) |
Gain on sale of assets | 1,070 | 7 |
Equity in net income of joint venture and other income | 0 | 226 |
Other, net | 0 | (20) |
Total other income (expense) | 1,036 | (34) |
Income (loss) before income taxes | 184 | (1,805) |
Income tax expense | (20) | (36) |
Net income (loss) | $ 164 | $ (1,841) |
Net income (loss) per share: | ||
Basic | $ 0.01 | $ (0.12) |
Diluted | $ 0.01 | $ (0.12) |
Weighted-average shares outstanding: | ||
Basic | 15,520,000 | 15,104,000 |
Diluted | 15,520,000 | 15,104,000 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock [Member] | Treasury Stock | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Beginning Balance, Shares at Dec. 31, 2014 | 15,130,000 | ||||
Beginning Balance, Amount at Dec. 31, 2014 | $ 15 | $ 0 | $ 72,532 | $ (47,581) | $ 24,966 |
Net loss | (1,841) | (1,841) | |||
Restricted stock awards, shares | 600,000 | ||||
Restricted stock awards, value | $ 1 | (1) | |||
Shares surrendered to settle employee tax liabilities and retired, shares | (99,000) | ||||
Shares surrendered to settle employee tax liabilities and retired, value | (58) | (58) | |||
Share-based compensation | 516 | 516 | |||
Ending Balance, Shares at Dec. 31, 2015 | 15,631,000 | ||||
Ending Balance, Amount at Dec. 31, 2015 | $ 16 | 0 | 72,989 | (49,422) | 23,583 |
Net loss | 164 | ||||
Restricted stock awards, shares | 30,000 | ||||
Shares surrendered to settle employee tax liabilities and retired, shares | (253,000) | ||||
Shares surrendered to settle employee tax liabilities and retired, value | $ (1) | (221) | (222) | ||
Shares repurchased to treasury stock | (567) | (567) | |||
Share-based compensation | 344 | 344 | |||
Ending Balance, Shares at Dec. 31, 2016 | 15,408,000 | ||||
Ending Balance, Amount at Dec. 31, 2016 | $ 15 | $ (567) | $ 73,112 | $ (49,258) | $ 23,302 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 164 | $ (1,841) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 1,532 | 1,704 |
Share-based compensation | 344 | 516 |
Bad debt expense | 167 | 70 |
Write off of deferred financing fees | 23 | 0 |
Equity in net income of joint venture and other income | 0 | (133) |
Gain on sale of assets | (1,070) | (7) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 1,355 | (1,421) |
Inventory | 0 | 10 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 277 | 5,454 |
Prepaid expenses and other current assets | (67) | 51 |
Other assets | 5 | 3 |
Accounts payable and accrued liabilities | (419) | (1,977) |
Billings in excess of costs and estimated earnings on uncompleted contracts | 3,303 | 46 |
Net cash provided by operating activities | 5,614 | 2,475 |
Cash flows from investing activities: | ||
Proceeds from sale of property, plant and equipment | 3,800 | 12 |
Payments received on employee receivable | 27 | 23 |
Purchases of property, plant and equipment | (1,339) | (720) |
Cash used in short term investment | (1,005) | 0 |
Cash distribution received from joint venture | 161 | 65 |
Net cash provided by (used in) investing activities | 1,644 | (620) |
Cash flows from financing activities: | ||
Proceeds from long-term debt | 300 | 1,750 |
Repayments of long-term debt | (3,047) | (4,618) |
Release of compensating balance | 3,900 | 0 |
Cash paid for deferred financing costs | (15) | (25) |
Cash paid for purchase of our common stock | (567) | 0 |
Net cash provided by (used in) financing activities | 571 | (2,893) |
Change in cash | 7,829 | (1,038) |
Cash, beginning of year, net of compensating balance of $3,900 | 374 | 1,412 |
Cash, end of year | 8,203 | 374 |
Supplemental schedule of operating, investing and financing activities: | ||
Cash paid for interest | 47 | 218 |
Equity income receivable | 0 | 68 |
Shares of common stock surrendered to settle employee payroll tax liabilities | 222 | 58 |
Reclassification of equipment from inventory to other assets | 3,117 | 0 |
Reclassification of a note receivable from other assets to other current assets | $ 568 | $ 0 |
1. DESCRIPTION OF BUSINESS AND
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES | Description of Business Deep Down, Inc., a Nevada corporation (“Deep Down Nevada”), and its directly and indirectly wholly-owned subsidiaries, Deep Down, Inc., a Delaware corporation (“Deep Down Delaware”); Deep Down International Holdings, LLC, a Nevada limited liability company; and Deep Down Brasil - Solucoes em Petroleo e Gas, Ltda, a Brazilian limited liability company (“Deep Down Brasil”), (collectively referred to as “Deep Down”, “we”, “us” or the “Company”) is an oilfield services company specializing in complex deepwater and ultra-deepwater oil production distribution system support services, serving the worldwide offshore exploration and production industry. Our services and technological solutions include distribution system installation support and engineering services, umbilical terminations, loose-tube steel flying leads, flotation and Remote Operated Vehicles (“ROVs”) and related services. We support subsea engineering, installation, commissioning, and maintenance projects through specialized, highly experienced service teams and engineered technological solutions. Deep Down’s primary focus is on more complex deepwater and ultra-deepwater oil production distribution system support services and technologies, used between the platform and the wellhead. Liquidity As a deepwater service provider, our revenues, profitability, cash flows, and future rate of growth are generally dependent on the condition of the global oil and gas industry, and our customers’ ability to invest capital for offshore exploration, drilling and production and maintain or increase levels of expenditures for maintenance of offshore drilling and production facilities. Oil and gas prices and the level of offshore drilling and production activity have historically been characterized by significant volatility. We enter into large, fixed-price contracts which may require significant lead time and investment. A decline in offshore drilling and production activity could result in lower contract volume or delays in significant contracts which could negatively impact our earnings and cash flows. Our earnings and cash flows could also be negatively affected by delays in payments by significant customers or delays in completion of our contracts for any reason. While our objective is to enter into contracts with our customers that are cash flow positive, we may not always be able to achieve this objective. We are dependent on our cash flows from operations to fund our working capital requirements and the uncertainties noted above create risks that we may not achieve our planned earnings or cash flow from operations, which may require us to raise additional debt or equity capital. There can be no assurance that we could raise additional capital. During the fiscal years ended December 31, 2016 and 2015, we supplemented the financing of our capital needs primarily through debt and operating cash flow. Since 2008, we had maintained a credit facility with Whitney Bank, a state chartered bank (“Whitney”); see additional discussion in Note 5, “Long-Term Debt”, of the Notes to Consolidated Financial Statements. Summary of Significant Accounting Policies and Estimates Principles of Consolidation The consolidated financial statements include the accounts of Deep Down and its wholly-owned subsidiaries for the years ended December 31, 2016 and 2015. All intercompany transactions and balances have been eliminated. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have not resulted in any changes to previously reported net income (loss) or cash flows. Use of Estimates The preparation of these financial statements in accordance with US GAAP requires us to make estimates and judgments that may affect assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition and related allowances, costs incurred and estimated earnings incurred in excess of billings on uncompleted contracts, impairments of long-lived assets, including intangibles, income taxes including the valuation allowance for deferred tax assets, billings in excess of costs incurred and estimated earnings on uncompleted contracts, contingencies and litigation, and share-based payments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Segments For the years ended December 31, 2016 and 2015, we only had one operating and reporting segment, Deep Down Delaware. Cash and Cash Equivalents We consider all highly liquid investments with maturities from date of purchase of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with domestic banks and, at times, may exceed federally insured limits. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We utilize a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy has three levels of inputs that may be used to measure fair value: Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 - Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. Our financial instruments consist primarily of cash, trade receivables and payables, note receivable, and debt instruments. The carrying values of cash, trade receivables and payables approximated their fair values at December 31, 2016 and 2015 due to their short-term maturities. The carrying values of our debt instruments and note receivable approximate their fair values at December 31, 2016 and 2015 because the interest rates approximate current market rates. Accounts Receivable Trade receivables are uncollateralized customer obligations due under normal trade terms. We provide an allowance for doubtful trade receivables based on a specific review of each customer’s trade receivable balance with respect to their ability to make payments. Generally, we do not charge interest on past due accounts. When specific accounts are determined to require an allowance, they are expensed by a provision for bad debts in that period. At December 31, 2016 and 2015, we estimated the allowance for doubtful accounts requirement to be $10 and $150, respectively. Bad debt expense (credit) totaled $167 and $70 for the years ended December 31, 2016 and 2015, respectively. Concentration of Credit Risk As of December 31, 2016, three of our customers accounted for 66 percent, 7 percent and 5 percent of total trade accounts receivable. As of December 31, 2015, three of our customers accounted for 35 percent, 26 percent and 17 percent of total trade accounts receivable. For the year ended December 31, 2016, our five largest customers accounted for 60 percent, 10 percent, 7 percent, 3 percent and 3 percent of total revenues. For the year ended December 31, 2015, our five largest customers accounted for 34 percent, 21 percent, 10 percent, 7 percent and 5 percent of total revenues. The loss of one or more of these customers could have a material impact on our results of operations. Inventory Inventory, which consists of a 3.5 MT portable umbilical carousel, is stated at the lower of cost or market, net of reserve for obsolescence. The obsolescence reserve was $0 as of December 31, 2015 and due to a reclassification of our carousel from inventory to other assets, there is no longer an inventory balance at December 31, 2016. The reclassification was made due to the uncertainty of when it will be sold or put on rent. Long-Lived Assets Property, plant and equipment. Equity Method Investments Equity method investments in joint ventures are reported as investments in joint venture on the consolidated balance sheets, and our share of earnings or losses in the joint venture is reported as equity in net income or loss of joint venture in the consolidated statements of operations. We currently have no remaining investment, but still expect equity distributions from time to time. Lease Obligations We lease land, buildings, vehicles and certain equipment under non-cancellable operating leases. Since February 2009, we have leased our corporate headquarters in Houston, Texas, under a non-cancellable operating lease. As of August 1, 2016, we assigned our lease for our corporate headquarters to the company we had previously sub-leased a portion of our office space to. Deep Down Delaware leases indoor manufacturing space and leases office, warehouse and operating space in Houston, Texas and in Morgan City, Louisiana, under a non-cancellable operating lease. As a result of the consolidation of Mako Technology, LLC’s operations into Deep Down Delaware in August 2012, in December 2012, we sub-leased our leased property in Morgan City, Louisiana to a third party. This lease expired on May 31, 2016 and we did not renew it. Additionally, we lease space in Mobile, Alabama to house our 3.4 ton carousel system. We also lease certain office and other operating equipment under capital leases; the related assets are included with property, plant and equipment on the consolidated balance sheets. At the inception of a lease, we evaluate the agreement to determine whether the lease will be accounted for as an operating or capital lease. The term of the lease used for such an evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably assured and failure to exercise such option would result in an economic penalty. Revenue Recognition We recognize revenue once the following four criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery of the equipment has occurred or services have been rendered, (iii) the price of the equipment or service is fixed or determinable and (iv) collectability of the related receivable is reasonably assured. Service revenue is recognized as the service is provided, and time and materials contracts are billed on a bi-weekly or monthly basis as costs are incurred. Customer billings for shipping and handling charges are included in revenue. Revenues are recorded net of sales taxes. From time to time, we enter into fixed-price contracts. The percentage-of-completion method is used as a basis for recognizing revenue on these contracts. We recognize revenue as costs are incurred because we believe the incurrence of cost reasonably reflects progress made toward project completion. Provisions for estimated losses on uncompleted large fixed-price contracts (if any) are recorded in the period in which it is determined it is more likely than not a loss will be incurred. Changes in job performance, job conditions, and total contract values may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Unapproved change orders are accounted for in revenue and cost when it is probable that the costs will be recovered through a change in the contract price. In circumstances where recovery is considered probable but the revenues cannot be reliably estimated, costs attributable to change orders are deferred pending determination of contract price. Costs and estimated earnings in excess of billings on uncompleted contracts arise when revenues are recorded on a percentage-of-completion basis but cannot be invoiced under the terms of the contract. Such amounts are invoiced upon completion of contractual milestones. Billings in excess of costs and estimated earnings on uncompleted contracts arise when milestone billings are permissible under the contract, but the related costs have not yet been incurred. All contract costs are recognized currently on jobs formally approved by the customer and contracts are not shown as complete until virtually all anticipated costs have been incurred and the risk of loss has passed to the customer. Assets and liabilities related to costs and estimated earnings in excess of billings on uncompleted contracts, as well as liabilities related to billings in excess of costs and estimated earnings on uncompleted contracts, have been classified as current. The contract cycle for certain long-term contracts may extend beyond one year, thus complete collection of amounts related to these contracts may extend beyond one year, though such long-term contracts include contractual milestone billings as discussed above. Income Taxes We follow the asset and liability method of accounting for income taxes. This method takes into account the differences between financial statement treatment and tax treatment of certain transactions. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date. We record a valuation allowance to reduce the carrying value of our deferred tax assets when it is more likely than not that some or all of the deferred tax assets will expire before realization of the benefit or that future deductibility is not probable. The ultimate realization of the deferred tax assets depends upon our ability to generate sufficient taxable income of the appropriate character in the future. This requires management to use estimates and make assumptions regarding significant future events such as the taxability of entities operating in the various taxing jurisdictions. In evaluating our ability to recover our deferred tax assets, we consider all reasonably available positive and negative evidence, including our past operating results, the existence of cumulative losses in the most recent years and our forecast of future taxable income. In estimating future taxable income, we develop assumptions, including the amount of future state, and federal pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment. When the likelihood of the realization of existing deferred tax assets changes, adjustments to the valuation allowance are charged in the period in which the determination is made, either to income or goodwill, depending upon when that portion of the valuation allowance was originally created. We record an estimated tax liability or tax benefit for income and other taxes based on what we determine will likely be paid in the various tax jurisdictions in which we operate. We use our best judgment in the determination of these amounts. However, the liabilities ultimately realized and paid are dependent upon various matters, including resolution of tax audits, and may differ from amounts recorded. An adjustment to the estimated liability would be recorded as a provision or benefit to income tax expense in the period in which it becomes probable that the amount of the actual liability or benefit differs from the recorded amount. Our future effective tax rates could be adversely affected by changes in the valuation of our deferred tax assets or liabilities or changes in tax laws or interpretations thereof. If and when our deferred tax assets are no longer fully reserved, we will begin to provide for taxes at the full statutory rate. In addition, we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Share-Based Compensation We record share-based awards exchanged for employee service at fair value on the date of grant and expense the awards in the consolidated statements of operations over the requisite employee service period. Share-based compensation expense includes an estimate for forfeitures and is generally recognized over the expected term of the award on a straight-line basis. At December 31, 2016, we had two types of share-based employee compensation: restricted stock. Key assumptions used in the Black-Scholes model for stock option valuations include (1) expected volatility (2) expected term (3) discount rate and (4) expected dividend yield. Volumes are low and small trades can have a major impact on prices, so we based our estimates of volatility on a representative peer group consisting of companies in the same industry, with similar market capitalizations and similar stage of development. Additionally, we continue to use the simplified method related to employee option grants. Earnings or Loss per Common Share Basic earnings or loss per common share (“EPS”) is calculated by dividing net earnings or loss by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net earnings or loss by the weighted average number of common shares and dilutive common stock equivalents (stock options) outstanding during the period. Diluted EPS reflects the potential dilution that could occur if stock options and warrants to purchase common stock were exercised for shares of common stock. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. Recently Issued Accounting Standards Not Yet Adopted In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). This update provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract. The effective date for this standard was deferred in July 2015 and will now be effective for us beginning January 1, 2018. The standard provides for different application methods during adoption. We are currently in the process of evaluating the potential impact this new pronouncement will have on our financial statements and will not be exercising early adoption. We are reviewing our existing contracts to identify any that may be impacted by this standard, and evaluating new contracts we are negotiating to ensure compliance with this standard. We have not completed our full evaluation and therefore cannot conclude whether the pronouncement will have a significant impact on our financial statements at this time, but we expect requirements of this standard to significantly enhance our revenue disclosures. We currently anticipate that we will utilize the modified retrospective method of adoption, however, this expectation may change following the completion of our evaluation of the impact of this pronouncement on our financial statements. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires in scope inventory to be measured at the lower of cost and net realizable value rather than at the lower of cost or market under existing guidance. The amendments in this ASU are effective for us beginning January 1, 2017. We do not anticipate the adoption of ASU 2015-11 will have a material impact on our financial position or results of operations. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The amendments in this update require, among other things, that lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The amendments are effective for us beginning January 1, 2019. We do not anticipate the adoption of ASU 2014-15 will have a material effect on our results of operations and are still evaluating the impact on our financial position. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). Among other amendments, ASU 2016-09 requires that excess tax benefits or deficiencies are recognized as income tax expense or benefit in the income statement, gives an entity the ability to elect to estimate the number of awards that are expected to vest or account for forfeitures as they occur and permits withholding up to the maximum statutory tax rates as the threshold to qualify for equity classification. The guidance will become effective for us beginning January 1, 2017. We do not anticipate the adoption of ASU 2014-15 will have a material effect on our financial position or results of operations. In October 2016, the FASB issued ASU No. 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory.” This update requires that income tax consequences are recognized on an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this ASU are effective for us on January 1, 2018. Early application is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements. |
2. INVENTORY
2. INVENTORY | 12 Months Ended |
Dec. 31, 2016 | |
Inventory Abstract | |
INVENTORY | The finished goods inventory balance of $3,117 at December 31, 2015 consisted of a 3.5 MT portable umbilical carousel, which we fabricated and bought back from a customer in November 2013 and are currently holding for sale or rental. In 2016, the Company reclassified the carousel into other assets until a sale or rental contract is finalized. The reclassification was made due to the uncertainty of when it will be sold or put on rent. |
3. COSTS, ESTIMATED EARNINGS AN
3. COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS | 12 Months Ended |
Dec. 31, 2016 | |
Contractors [Abstract] | |
COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS | Costs, estimated earnings and billings on uncompleted contracts are summarized below: December 31, December 31, Costs incurred on uncompleted contracts $ 8,858 $ 3,220 Estimated earnings on uncompleted contracts 6,777 2,282 15,635 5,502 Less: Billings to date on uncompleted contracts (17,907 ) (4,194 ) $ (2,272 ) $ 1,308 Included in the accompanying consolidated balance sheets under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ 1,077 $ 1,354 Billings in excess of costs and estimated earnings on uncompleted contracts (3,349 ) (46 ) $ (2,272 ) $ 1,308 The balance in costs and estimated earnings in excess of billings on uncompleted contracts at December 31, 2016 and 2015 consisted primarily of earned but unbilled revenues related to fixed-price projects. The balance in billings in excess of costs and estimated earnings on uncompleted contracts at December 31, 2016 and 2015 consisted primarily of unearned billings related to fixed-price projects. |
4. PROPERTY, PLANT AND EQUIPMEN
4. PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | Property, plant and equipment consisted of the following: December 31, 2016 December 31, 2015 Range of Land $ – $ 1,582 - Buildings and improvements 5 1,447 7 - 36 years Leasehold improvements 908 825 2 - 5 years Equipment 16,360 15,435 2 - 30 years Furniture, computers and office equipment 1,274 1,468 2 - 8 years Construction in progress 586 341 - Total property, plant and equipment 19,133 21,098 Less: Accumulated depreciation and amortization (11,195 ) (10,336 ) Property, plant and equipment, net $ 7,938 $ 10,762 Depreciation expense excluded from cost of sales in the accompanying consolidated statements of operations was $134 and $187 for the years ended December 31, 2016 and 2015, respectively. Depreciation expense included in cost of sales in the accompanying consolidated statements of operations was $1,335 and $1,499 for the years ended December 31, 2016 and 2015, respectively. Construction in progress represents assets that are not ready for service or are in the construction stage. Assets begin being depreciated once they are placed in service. |
5. LONG-TERM DEBT
5. LONG-TERM DEBT | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | Credit Facility From 2008 through June 30, 2016, we maintained a credit facility (the “Facility”) with Whitney Bank. The Facility was amended and restated several times, most recently effective June 30, 2015 when we entered into the eighth amendment (“Eighth Amendment”). The relevant terms of the Eighth Amendment included: • an extension of the maturity date of the revolving credit facility (“Revolving Credit Facility”) to June 30, 2016; • a modification of the interest rate with respect to the Revolving Credit Facility to 4.0 percent per annum; • a modification of certain financial covenants; and • a requirement that we maintain a compensating balance of $3,900 in our existing interest-bearing account at Whitney, to continue until such time as we have regained compliance with all of our covenants under the Facility for two consecutive quarters commencing with the quarter ended June 30, 2015. Other terms of the Facility included: • a real estate term facility (“RE Term Facility”) of $2,000, at an interest rate of 4.0 percent per annum, maturing April 15, 2018, with the Company being obligated to make monthly increasing repayments of principal (along with accrued and unpaid interest thereon) at an amount of $9, beginning April 1, 2013, while there was any amount outstanding; • a carousel term facility (“Carousel Term Facility”) of $2,200, at an interest rate of 3.5 percent per annum, maturing October 15, 2016, with the Company being obligated to make monthly repayments of principal of $65 (along with accrued and unpaid interest thereon) beginning July 1, 2014, while there was any amount outstanding; and • outstanding balances under the Facility are secured by all of the Company’s assets. In March 2016, we paid off the RE Term Facility and the Carousel Term Facility with proceeds received from the sale of our Channelview location. Due to the expiration of our credit facility on June 30, 2016, we no longer have the requirement of a compensating balance and the $3,900 is now available for use. As of December 31, 2016, we no longer have these credit facilities available to us. |
6. EARNINGS OR LOSS PER COMMON
6. EARNINGS OR LOSS PER COMMON SHARE | 12 Months Ended |
Dec. 31, 2016 | |
Net income (loss) per share: | |
EARNINGS OR LOSS PER COMMON SHARE | The following is a reconciliation of the number of shares used in the basic and diluted net earnings or loss per common share calculation: Year Ended December 31, 2016 2015 Numerator: Net earnings (loss) $ 164 $ (1,841 ) Denominator: Weighted average number of common shares outstanding 15,520 15,104 Effect of dilutive securities – – Denominator for diluted earnings per share 15,520 15,104 Net earnings (loss) per common share outstanding, basic and fully diluted $ 0.01 $ (0.12 ) At December 31, 2016 and 2015, there were outstanding stock options convertible to 0 and 275 shares of common stock, respectively. As of these dates, these options were anti-dilutive. |
7. SHARE-BASED COMPENSATION
7. SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | We have a share-based compensation plan, the “2003 Directors, Officers and Consultants Stock Option, Stock Warrant and Stock Award Plan” (the “Plan”). Awards of stock options and stock granted under the Plan have vesting periods of three years. Once vested, stock options may be exercised for up to five years. Share-based compensation expense related to awards is based on the fair value at the date of grant, and is recognized over the requisite expected service period, net of estimated forfeitures. Under the Plan, the total number of options permitted is 15 percent of issued and outstanding common shares. Summary of Nonvested Shares of Restricted Stock The following table summarizes the activity of our nonvested restricted shares for the years ended December 31, 2016 and 2015: Restricted Weighted- Nonvested at December 31, 2014 517 $ 2.01 Granted 600 0.38 Vested (253 ) 2.02 Nonvested at December 31, 2015 864 $ 0.88 Granted 30 0.91 Vested (654 ) 1.02 Nonvested at December 31, 2016 240 $ 0.50 For the years ended December 31, 2016 and 2015, we recognized a total of $344 and $516, respectively, of share-based compensation expense related to restricted stock awards, which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations. The unamortized estimated fair value of nonvested shares of restricted stock awards was $139 at December 31, 2016. These costs are expected to be recognized as expense over a weighted average period of 0.76 years. Summary of Stock Options Based on the shares of common stock outstanding at December 31, 2016, there were approximately 2,311 options available for grant under the Plan as of that date. We determine the fair value of stock options on the date of the grant using the Black-Scholes option pricing model. The following table summarizes our stock option activity for the years ended December 31, 2016 and 2015: Shares Weighted- Weighted- Outstanding at December 31, 2014 325 $ 1.80 1.4 Cancellations & Forfeitures (50 ) 1.80 Outstanding at December 31, 2015 275 1.80 0.4 Cancellations & Forfeitures (275 ) 1.80 Outstanding at December 31, 2016 – $ – Exercisable at December 31, 2016 – $ – – |
8. TREASURY STOCK
8. TREASURY STOCK | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Treasury Stock | On May 23, 2016, our Board of Directors authorized a repurchase program (the “Repurchase Program”) under which we may repurchase up to $1,000 of our outstanding stock. The purchases may be made from time to time in the open market, through privately negotiated transactions and Rule 10b5-1 trading plans in accordance with applicable laws, rules and regulations. The Repurchase Program will be funded from cash on hand and cash provided by operating activities. The Repurchase Program will expire as of the close of business on March 31, 2017. As of December 31, 2016, we have purchased approximately 588 shares at a total cost of $567 under this Repurchase Program. The average price per share of treasury stock through December 31, 2016 has been $0.96. Treasury shares are accounted for using the cost method. See Note 11 “Subsequent Events”, of the Notes to Consolidated Financial Statements, for further explanation of our Repurchase Program. |
9. INCOME TAXES
9. INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The provision for income taxes is comprised of the following: Year Ended December 31, 2016 2015 Federal: Current $ 7 $ 4 Deferred (3 ) 34 Total $ 4 $ 38 State: Current $ 13 $ 32 Deferred 3 (34 ) Total $ 16 $ (2 ) Total income tax expense (benefit) $ 20 $ 36 The provision for income taxes differs from the amount computed by applying the U.S. statutory income tax rate before income taxes for the reasons set forth below. Year Ended December 31, 2016 2015 Income tax (expense) benefit at federal statutory rate (34.00) % 34.00 % State taxes, net of federal expense (benefit) (6.36) % 0.73 % Return to provision adjustments 0.00 % (1.08 )% Valuation allowance 29.12 % (35.60 )% Research and development credits 6.01 % 0.65 % Other permanent differences (4.88) % (0.70 )% Other, net (0.76) % 0.00 % Total effective rate (10.87) % (2.00 )% Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as operating loss and tax credit carry forwards. The tax effects of the temporary differences and carry forwards are as follows: As of December 31, 2016 2015 Deferred tax assets: Amortization of intangibles $ 68 $ 61 Net operating loss 5,439 5,300 Share-based compensation 1,137 1,206 Investment in joint venture 0 3,972 Other 574 651 Total deferred tax assets $ 7,218 $ 11,190 Deferred tax liabilities: Depreciation and amortization on property, plant and equipment $ (1,664 ) $ (1,656 ) Allowance for doubtful accounts (55 ) 70 Total deferred tax liabilities $ (1,719 ) $ (1,586 ) Less: valuation allowance (5,499 ) (9,604 ) Net deferred tax position $ – $ – We have $15,745 in federal and state net operating loss (“NOL”) carry forwards and $531 in research and development credits available to offset future taxable income. These federal NOL’s will expire at various dates through 2035. Management analyzed its current operating results and future projections and determined that a full valuation allowance was needed due to our cumulative losses in recent years. We have no uncertain tax positions at December 31, 2016. Accordingly, we do not have any accruals for penalties or interest related to our tax returns. Should an examination or audit arise, we would evaluate the need for an accrual and record one, if necessary. Our tax returns from the tax years ended December 31, 2010 through December 31, 2015 are open to examination by the IRS. Deferred tax asset of $3,972 as of December 31, 2015 related to investment in joint venture was written off during 2016 against a full valuation allowance. We have determined that this deferred tax asset should not have been reported at December 31, 2015 because the joint venture was liquidated in 2014. We have assessed the impact and determined it was not material to warrant a correction of December 31, 2015. As discussed, there was no impact on our consolidated results of operations, financial position or statement of cash flows for the year ended December 31, 2016 because it had a full valuation allowance. |
10. COMMITMENTS AND CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Operating Leases We lease certain offices, facilities, equipment and vehicles under non-cancellable operating and capital leases expiring at various dates through 2023. At December 31, 2016, future minimum contractual lease obligations were as follows: Years ending December 31,: Operating Leases 2017 $ 1,453 2018 1,455 2019 1,455 2020 1,455 2021 1,395 Thereafter 2,837 Total minimum lease payments $ 10,050 Rent expense for the years ended December 31, 2016 and 2015 was $1,440 and $1,447, respectively. Letters of Credit Certain customers could require us to issue standby letters of credit in the normal course of business to ensure performance under terms of contracts or as a form of product warranty. The beneficiary of a letter of credit could demand payment from the issuing bank for the amount of the outstanding letter of credit. Letters of credit outstanding at December 31, 2015 under the Eighth Amendment with Whitney were $0. Employment Agreements Certain of our Executives are employed under employment agreements containing severance provisions. In the event of termination of an Executive’s employment for any reason, the Executive will be entitled to receive all accrued, unpaid salary and vacation time through the date of termination and all benefits to which the Executive is entitled or vested under the terms of all employee benefit and compensation plans, agreements and arrangements in which the Executive is a participant as of the date of termination. In addition, subject to executing a general release in favor of the Company, the Executive will be entitled to receive certain severance payments in the event his employment is terminated by the Company “other than for cause” or by the Executive with “good reason.” These severance payments include: (i) a lump sum in cash equal to one to three times the Executive’s annual base salary; (ii) a lump sum in cash equal to one to two times the average annual bonus paid to the Executive for the prior two full fiscal years preceding the date of termination; (iii) a lump sum in cash equal to a pro rata portion of the annual bonus payable for the period in which the date of termination occurs based on the actual performance under the Company’s annual incentive bonus arrangement, but no less than fifty percent of Executive’s annual base salary; and (iv) if the Executive’s termination occurs prior to the date that is twelve months following a change of control, then each and every share option, restricted share award and other equity-based award that is outstanding and held by the Executive shall immediately vest and become exercisable. Litigation From time to time we are involved in legal proceedings arising from the normal course of business. As of the date of this report, we are engaged in one material legal dispute, arising from the non-payment of equipment rental and services by one of our customers. In December 2014, at the request of a customer, we delivered a carousel to the customer on a lease or purchase arrangement. We honored this request in order to support its requirement for a critical umbilical project. At the completion of our customer’s requirement, we were advised by the customer it was not going to purchase the carousel, so we picked up the carousel and returned it to our facility. We then invoiced the customer on a rental basis. The customer has declined to pay the invoices. We are pursuing collection through arbitration. |
11. SUBSEQUENT EVENTS
11. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | We have evaluated subsequent events through the date the consolidated financial statements were filed with the Securities and Exchange Commission. In March 2017, the Board of Directors of the Company renewed and extended the repurchase program for up to an additional $1 million of common stock until March 31, 2018 (the “Repurchase Program”). See Note 8 “Treasury Stock”, of the Notes to Consolidated Financial Statements, for further explanation of our Repurchase Program. |
1. DESCRIPTION OF BUSINESS AN18
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Description of Business | Description of Business Deep Down, Inc., a Nevada corporation (“Deep Down Nevada”), and its directly and indirectly wholly-owned subsidiaries, Deep Down, Inc., a Delaware corporation (“Deep Down Delaware”); Deep Down International Holdings, LLC, a Nevada limited liability company; and Deep Down Brasil - Solucoes em Petroleo e Gas, Ltda, a Brazilian limited liability company (“Deep Down Brasil”), (collectively referred to as “Deep Down”, “we”, “us” or the “Company”) is an oilfield services company specializing in complex deepwater and ultra-deepwater oil production distribution system support services, serving the worldwide offshore exploration and production industry. Our services and technological solutions include distribution system installation support and engineering services, umbilical terminations, loose-tube steel flying leads, flotation and Remote Operated Vehicles (“ROVs”) and related services. We support subsea engineering, installation, commissioning, and maintenance projects through specialized, highly experienced service teams and engineered technological solutions. Deep Down’s primary focus is on more complex deepwater and ultra-deepwater oil production distribution system support services and technologies, used between the platform and the wellhead. |
Liquidity | Liquidity As a deepwater service provider, our revenues, profitability, cash flows, and future rate of growth are generally dependent on the condition of the global oil and gas industry, and our customers’ ability to invest capital for offshore exploration, drilling and production and maintain or increase levels of expenditures for maintenance of offshore drilling and production facilities. Oil and gas prices and the level of offshore drilling and production activity have historically been characterized by significant volatility. We enter into large, fixed-price contracts which may require significant lead time and investment. A decline in offshore drilling and production activity could result in lower contract volume or delays in significant contracts which could negatively impact our earnings and cash flows. Our earnings and cash flows could also be negatively affected by delays in payments by significant customers or delays in completion of our contracts for any reason. While our objective is to enter into contracts with our customers that are cash flow positive, we may not always be able to achieve this objective. We are dependent on our cash flows from operations to fund our working capital requirements and the uncertainties noted above create risks that we may not achieve our planned earnings or cash flow from operations, which may require us to raise additional debt or equity capital. There can be no assurance that we could raise additional capital. During the fiscal years ended December 31, 2016 and 2015, we supplemented the financing of our capital needs primarily through debt and equity financings. Since 2008, we have maintained a credit facility with Whitney Bank, a state chartered bank (“Whitney”); see additional discussion in Note 5, “Long-Term Debt”, of the Notes to Consolidated Financial Statements. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Deep Down and its wholly-owned subsidiaries for the years ended December 31, 2016 and 2015. All intercompany transactions and balances have been eliminated. |
Reclassifications | Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have not resulted in any changes to previously reported net income (loss) or cash flows. |
Use of Estimates | Use of Estimates The preparation of these financial statements in accordance with US GAAP requires us to make estimates and judgments that may affect assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition and related allowances, costs incurred and estimated earnings incurred in excess of billings on uncompleted contracts, impairments of long-lived assets, including intangibles, income taxes including the valuation allowance for deferred tax assets, billings in excess of costs incurred and estimated earnings on uncompleted contracts, contingencies and litigation, and share-based payments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. |
Segments | Segments For the years ended December 31, 2016 and 2015, we only had one operating and reporting segment, Deep Down Delaware. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with maturities from date of purchase of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with domestic banks and, at times, may exceed federally insured limits. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We utilize a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy has three levels of inputs that may be used to measure fair value: Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 - Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. Our financial instruments consist primarily of cash, trade receivables and payables, note receivable, and debt instruments. The carrying values of cash, trade receivables and payables approximated their fair values at December 31, 2016 and 2015 due to their short-term maturities. The carrying values of our debt instruments and note receivable approximate their fair values at December 31, 2016 and 2015 because the interest rates approximate current market rates. |
Accounts Receivable | Accounts Receivable Trade receivables are uncollateralized customer obligations due under normal trade terms. We provide an allowance for doubtful trade receivables based on a specific review of each customer’s trade receivable balance with respect to their ability to make payments. Generally, we do not charge interest on past due accounts. When specific accounts are determined to require an allowance, they are expensed by a provision for bad debts in that period. At December 31, 2016 and 2015, we estimated the allowance for doubtful accounts requirement to be $10 and $150, respectively. Bad debt expense (credit) totaled $167 and $70 for the years ended December 31, 2016 and 2015, respectively. |
Concentration of Credit Risk | Concentration of Credit Risk As of December 31, 2016, three of our customers accounted for 66 percent, 7 percent and 5 percent of total trade accounts receivable. As of December 31, 2015, three of our customers accounted for 35 percent, 26 percent and 17 percent of total trade accounts receivable. For the year ended December 31, 2016, our five largest customers accounted for 60 percent, 10 percent, 7 percent, 3 percent and 3 percent of total revenues. For the year ended December 31, 2015, our five largest customers accounted for 34 percent, 21 percent, 10 percent, 7 percent and 5 percent of total revenues. The loss of one or more of these customers could have a material impact on our results of operations. |
Inventory | Inventory Inventory, which consists of a 3.5 MT portable umbilical carousel, is stated at the lower of cost or market, net of reserve for obsolescence. The obsolescence reserve was $0 as of December 31, 2015 and due to a reclassification of our carousel from inventory to other assets, there is no longer an inventory balance at December 31, 2016. The reclassification was made due to the uncertainty of when it will be sold or put on rent. |
Long-Lived Assets | Long-Lived Assets Property, plant and equipment. |
Equity Method Investments | Equity Method Investments Equity method investments in joint ventures are reported as investments in joint venture on the consolidated balance sheets, and our share of earnings or losses in the joint venture is reported as equity in net income or loss of joint venture in the consolidated statements of operations. We currently have no remaining investment, but still expect equity distributions from time to time. |
Lease Obligations | Lease Obligations We lease land, buildings, vehicles and certain equipment under non-cancellable operating leases. Since February 2009, we have leased our corporate headquarters in Houston, Texas, under a non-cancellable operating lease. As of August 1, 2016, we assigned our lease for our corporate headquarters to the company we had previously sub-leased a portion of our office space to. Deep Down Delaware leases indoor manufacturing space and leases office, warehouse and operating space in Houston, Texas and in Morgan City, Louisiana, under a non-cancellable operating lease. As a result of the consolidation of Mako Technology, LLC’s operations into Deep Down Delaware in August 2012, in December 2012, we sub-leased our leased property in Morgan City, Louisiana to a third party. This lease expired on May 31, 2016 and we did not renew it. Additionally, we lease space in Mobile, Alabama to house our 3.4 ton carousel system. We also lease certain office and other operating equipment under capital leases; the related assets are included with property, plant and equipment on the consolidated balance sheets. At the inception of a lease, we evaluate the agreement to determine whether the lease will be accounted for as an operating or capital lease. The term of the lease used for such an evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably assured and failure to exercise such option would result in an economic penalty. |
Revenue Recognition | Revenue Recognition We recognize revenue once the following four criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery of the equipment has occurred or services have been rendered, (iii) the price of the equipment or service is fixed or determinable and (iv) collectability of the related receivable is reasonably assured. Service revenue is recognized as the service is provided, and time and materials contracts are billed on a bi-weekly or monthly basis as costs are incurred. Customer billings for shipping and handling charges are included in revenue. Revenues are recorded net of sales taxes. From time to time, we enter into fixed-price contracts. The percentage-of-completion method is used as a basis for recognizing revenue on these contracts. We recognize revenue as costs are incurred because we believe the incurrence of cost reasonably reflects progress made toward project completion. Provisions for estimated losses on uncompleted large fixed-price contracts (if any) are recorded in the period in which it is determined it is more likely than not a loss will be incurred. Changes in job performance, job conditions, and total contract values may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Unapproved change orders are accounted for in revenue and cost when it is probable that the costs will be recovered through a change in the contract price. In circumstances where recovery is considered probable but the revenues cannot be reliably estimated, costs attributable to change orders are deferred pending determination of contract price. Costs and estimated earnings in excess of billings on uncompleted contracts arise when revenues are recorded on a percentage-of-completion basis but cannot be invoiced under the terms of the contract. Such amounts are invoiced upon completion of contractual milestones. Billings in excess of costs and estimated earnings on uncompleted contracts arise when milestone billings are permissible under the contract, but the related costs have not yet been incurred. All contract costs are recognized currently on jobs formally approved by the customer and contracts are not shown as complete until virtually all anticipated costs have been incurred and the risk of loss has passed to the customer. Assets and liabilities related to costs and estimated earnings in excess of billings on uncompleted contracts, as well as liabilities related to billings in excess of costs and estimated earnings on uncompleted contracts, have been classified as current. The contract cycle for certain long-term contracts may extend beyond one year, thus complete collection of amounts related to these contracts may extend beyond one year, though such long-term contracts include contractual milestone billings as discussed above. |
Income Taxes | Income Taxes We follow the asset and liability method of accounting for income taxes. This method takes into account the differences between financial statement treatment and tax treatment of certain transactions. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date. We record a valuation allowance to reduce the carrying value of our deferred tax assets when it is more likely than not that some or all of the deferred tax assets will expire before realization of the benefit or that future deductibility is not probable. The ultimate realization of the deferred tax assets depends upon our ability to generate sufficient taxable income of the appropriate character in the future. This requires management to use estimates and make assumptions regarding significant future events such as the taxability of entities operating in the various taxing jurisdictions. In evaluating our ability to recover our deferred tax assets, we consider all reasonably available positive and negative evidence, including our past operating results, the existence of cumulative losses in the most recent years and our forecast of future taxable income. In estimating future taxable income, we develop assumptions, including the amount of future state, and federal pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment. When the likelihood of the realization of existing deferred tax assets changes, adjustments to the valuation allowance are charged in the period in which the determination is made, either to income or goodwill, depending upon when that portion of the valuation allowance was originally created. We record an estimated tax liability or tax benefit for income and other taxes based on what we determine will likely be paid in the various tax jurisdictions in which we operate. We use our best judgment in the determination of these amounts. However, the liabilities ultimately realized and paid are dependent upon various matters, including resolution of tax audits, and may differ from amounts recorded. An adjustment to the estimated liability would be recorded as a provision or benefit to income tax expense in the period in which it becomes probable that the amount of the actual liability or benefit differs from the recorded amount. Our future effective tax rates could be adversely affected by changes in the valuation of our deferred tax assets or liabilities or changes in tax laws or interpretations thereof. If and when our deferred tax assets are no longer fully reserved, we will begin to provide for taxes at the full statutory rate. In addition, we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. |
Share-Based Compensation | Share-Based Compensation We record share-based awards exchanged for employee service at fair value on the date of grant and expense the awards in the consolidated statements of operations over the requisite employee service period. Share-based compensation expense includes an estimate for forfeitures and is generally recognized over the expected term of the award on a straight-line basis. At December 31, 2016, we had two types of share-based employee compensation: restricted stock. Key assumptions used in the Black-Scholes model for stock option valuations include (1) expected volatility (2) expected term (3) discount rate and (4) expected dividend yield. Volumes are low and small trades can have a major impact on prices, so we based our estimates of volatility on a representative peer group consisting of companies in the same industry, with similar market capitalizations and similar stage of development. Additionally, we continue to use the simplified method related to employee option grants. |
Earnings or Loss per Common Share | Earnings or Loss per Common Share Basic earnings or loss per common share (“EPS”) is calculated by dividing net earnings or loss by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net earnings or loss by the weighted average number of common shares and dilutive common stock equivalents (stock options) outstanding during the period. Diluted EPS reflects the potential dilution that could occur if stock options and warrants to purchase common stock were exercised for shares of common stock. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. |
Recent Accounting Pronouncements | Recently Issued Accounting Standards Not Yet Adopted In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). This update provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract. The effective date for this standard was deferred in July 2015 and will now be effective for us beginning January 1, 2018. The standard provides for different application methods during adoption. We are currently in the process of evaluating the potential impact this new pronouncement will have on our financial statements and will not be exercising early adoption. We are reviewing our existing contracts to identify any that may be impacted by this standard, and evaluating new contracts we are negotiating to ensure compliance with this standard. We have not completed our full evaluation and therefore cannot conclude whether the pronouncement will have a significant impact on our financial statements at this time, but we expect requirements of this standard to significantly enhance our revenue disclosures. We currently anticipate that we will utilize the modified retrospective method of adoption, however, this expectation may change following the completion of our evaluation of the impact of this pronouncement on our financial statements. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires in scope inventory to be measured at the lower of cost and net realizable value rather than at the lower of cost or market under existing guidance. The amendments in this ASU are effective for us beginning January 1, 2017. We do not anticipate the adoption of ASU 2015-11 will have a material impact on our financial position or results of operations. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The amendments in this update require, among other things, that lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The amendments are effective for us beginning January 1, 2019. We do not anticipate the adoption of ASU 2014-15 will have a material effect on our results of operations and are still evaluating the impact on our financial position. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). Among other amendments, ASU 2016-09 requires that excess tax benefits or deficiencies are recognized as income tax expense or benefit in the income statement, gives an entity the ability to elect to estimate the number of awards that are expected to vest or account for forfeitures as they occur and permits withholding up to the maximum statutory tax rates as the threshold to qualify for equity classification. The guidance will become effective for us beginning January 1, 2017. We do not anticipate the adoption of ASU 2014-15 will have a material effect on our financial position or results of operations. In October 2016, the FASB issued ASU No. 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory.” This update requires that income tax consequences are recognized on an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this ASU are effective for us on January 1, 2018. Early application is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements. |
3. COSTS, ESTIMATED EARNINGS 19
3. COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Contractors [Abstract] | |
COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS | December 31, December 31, Costs incurred on uncompleted contracts $ 8,858 $ 3,220 Estimated earnings on uncompleted contracts 6,777 2,282 15,635 5,502 Less: Billings to date on uncompleted contracts (17,907 ) (4,194 ) $ (2,272 ) $ 1,308 Included in the accompanying consolidated balance sheets under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ 1,077 $ 1,354 Billings in excess of costs and estimated earnings on uncompleted contracts (3,349 ) (46 ) $ (2,272 ) $ 1,308 |
4. PROPERTY, PLANT AND EQUIPM20
4. PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Net Property, plant and equipment | December 31, 2016 December 31, 2015 Range of Land $ – $ 1,582 - Buildings and improvements 5 1,447 7 - 36 years Leasehold improvements 908 825 2 - 5 years Equipment 16,360 15,435 2 - 30 years Furniture, computers and office equipment 1,274 1,468 2 - 8 years Construction in progress 586 341 - Total property, plant and equipment 19,133 21,098 Less: Accumulated depreciation and amortization (11,195 ) (10,336 ) Property, plant and equipment, net $ 7,938 $ 10,762 |
6. EARNINGS OR LOSS PER COMMO21
6. EARNINGS OR LOSS PER COMMON SHARE (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Net income (loss) per share: | |
Reconciliation of number of shares in earnings per share calculation | Year Ended December 31, 2016 2015 Numerator: Net earnings (loss) $ 164 $ (1,841 ) Denominator: Weighted average number of common shares outstanding 15,520 15,104 Effect of dilutive securities – – Denominator for diluted earnings per share 15,520 15,104 Net earnings (loss) per common share outstanding, basic and fully diluted $ 0.01 $ (0.12 ) |
7. SHARE-BASED COMPENSATION (Ta
7. SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Restricted stock activity | Restricted Weighted- Nonvested at December 31, 2014 517 $ 2.01 Granted 600 0.38 Vested (253 ) 2.02 Nonvested at December 31, 2015 864 $ 0.88 Granted 30 0.91 Vested (654 ) 1.02 Nonvested at December 31, 2016 240 $ 0.50 |
Stock option activity | Shares Weighted- Weighted- Outstanding at December 31, 2014 325 $ 1.80 1.4 Cancellations & Forfeitures (50 ) 1.80 Outstanding at December 31, 2015 275 1.80 0.4 Cancellations & Forfeitures (275 ) 1.80 Outstanding at December 31, 2016 – $ – Exercisable at December 31, 2016 – $ – – |
9. INCOME TAXES (Tables)
9. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Provision for income taxes | Year Ended December 31, 2016 2015 Federal: Current $ 7 $ 4 Deferred (3 ) 34 Total $ 4 $ 38 State: Current $ 13 $ 32 Deferred 3 (34 ) Total $ 16 $ (2 ) Total income tax expense (benefit) $ 20 $ 36 |
Reconciliation of effective income tax rate | Year Ended December 31, 2016 2015 Income tax (expense) benefit at federal statutory rate (34.00) % 34.00 % State taxes, net of federal expense (benefit) (6.36) % 0.73 % Return to provision adjustments 0.00 % (1.08 )% Valuation allowance 29.12 % (35.60 )% Research and development credits 6.01 % 0.65 % Other permanent differences (4.88) % (0.70 )% Other, net (0.76) % 0.00 % Total effective rate (10.87) % (2.00 )% |
Schedule of deferred taxes | As of December 31, 2016 2015 Deferred tax assets: Amortization of intangibles $ 68 $ 61 Net operating loss 5,439 5,300 Share-based compensation 1,137 1,206 Investment in joint venture 0 3,972 Other 574 651 Total deferred tax assets $ 7,218 $ 11,190 Deferred tax liabilities: Depreciation and amortization on property, plant and equipment $ (1,664 ) $ (1,656 ) Allowance for doubtful accounts (55 ) 70 Total deferred tax liabilities $ (1,719 ) $ (1,586 ) Less: valuation allowance (5,499 ) (9,604 ) Net deferred tax position $ – $ – |
10. COMMITMENTS AND CONTINGEN24
10. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum contractual lease obligations | Years ending December 31,: Operating Leases 2017 $ 1,453 2018 1,455 2019 1,455 2020 1,455 2021 1,395 Thereafter 2,837 Total minimum lease payments $ 10,050 |
1. DESCRIPTION OF BUSINESS AN25
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Allowance for doubtful accounts | $ 10 | $ 150 |
Bad debt expense | $ 167 | 70 |
Inventory obsolescence reserve | $ 0 | |
Sales [Member] | Customer 1 [Member] | ||
Concentration risk percentage | 60.00% | 34.00% |
Sales [Member] | Customer 2 [Member] | ||
Concentration risk percentage | 10.00% | 21.00% |
Sales [Member] | Customer 3 [Member] | ||
Concentration risk percentage | 7.00% | 10.00% |
Sales [Member] | Customer 4 [Member] | ||
Concentration risk percentage | 3.00% | 7.00% |
Sales [Member] | Customer 5 [Member] | ||
Concentration risk percentage | 3.00% | 5.00% |
Accounts Receivable [Member] | Customer 1 [Member] | ||
Concentration risk percentage | 66.00% | 35.00% |
Accounts Receivable [Member] | Customer 2 [Member] | ||
Concentration risk percentage | 7.00% | 26.00% |
Accounts Receivable [Member] | Customer 3 [Member] | ||
Concentration risk percentage | 5.00% | 17.00% |
2. INVENTORY (Details Narrative
2. INVENTORY (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Inventory Details Narrative | ||
Finished goods | $ 3,117 | $ 3,117 |
3. COSTS, ESTIMATED EARNINGS 27
3. COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Billings In Excess Of Costs And Estimated Earnings On Uncompleted Contracts And Deferred Revenues | ||
Costs incurred on uncompleted contracts | $ 8,858 | $ 3,220 |
Estimated earnings on uncompleted contracts | 6,777 | 2,282 |
Gross costs and estimated earnings | 15,635 | 5,502 |
Less: Billings to date on uncompleted contracts | (17,907) | (4,194) |
Costs incurred plus estimated earning less billings on uncompleted contracts, net | (2,272) | 1,308 |
Included in the accompanying consolidated balance sheets under the following captions: | ||
Costs and estimated earnings in excess of billings on uncompleted contracts | 1,077 | 1,354 |
Billings in excess of costs and estimated earnings on uncompleted contracts | (3,349) | (46) |
Total costs and estimated earnings and billings in excess of cost on uncompleted contracts | $ (2,272) | $ 1,308 |
4. PROPERTY, PLANT AND EQUIPM28
4. PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Property Plant And Equipment | ||
Total property, plant and equipment | $ 19,133 | $ 21,098 |
Less: Accumulated depreciation and amortization | (11,195) | (10,336) |
Property, plant and equipment, net | 7,938 | 10,762 |
Building and improvements [Member] | ||
Property Plant And Equipment | ||
Total property, plant and equipment | $ 5 | 1,447 |
Range of Asset Lives | 7 to 36 years | |
Leasehold Improvements [Member] | ||
Property Plant And Equipment | ||
Total property, plant and equipment | $ 908 | 825 |
Range of Asset Lives | 2 to 5 years | |
Equipment [Member] | ||
Property Plant And Equipment | ||
Total property, plant and equipment | $ 16,360 | 15,435 |
Range of Asset Lives | 2 to 30 years | |
Furniture, computers and office equipment [Member] | ||
Property Plant And Equipment | ||
Total property, plant and equipment | $ 1,274 | 1,468 |
Range of Asset Lives | 2 to 8 years | |
Land [Member] | ||
Property Plant And Equipment | ||
Total property, plant and equipment | $ 0 | 1,582 |
Construction in Progress [Member] | ||
Property Plant And Equipment | ||
Total property, plant and equipment | $ 586 | $ 341 |
4. PROPERTY, PLANT AND EQUIPM29
4. PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | ||
Assets under capital lease | $ 0 | $ 253 |
Accumulated amortization capital leased assets | 0 | 72 |
Depreciation expense excluded from cost of sales | 134 | 187 |
Depreciation expense included in cost of sales | $ 1,335 | $ 1,449 |
5. LONG-TERM DEBT (Details Narr
5. LONG-TERM DEBT (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Compensating balance | $ 3,900 | $ 0 |
Revolving Credit Facililty [Member] | ||
Line of credit outstanding | 0 | |
Compensating balance | $ 3,900 |
6. EARNINGS OR LOSS PER COMMO31
6. EARNINGS OR LOSS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Net income (loss) per share: | ||
Net loss | $ 164 | $ (1,841) |
Denominator: | ||
Weighted average number of common shares outstanding | 15,520,000 | 15,104,000 |
Effect of dilutive securities | 0 | 0 |
Denominator for diluted earnings per share | 15,520,000 | 15,104,000 |
Net loss per common share outstanding, basic and diluted | $ .01 | $ (.12) |
6. EARNINGS PER COMMON SHARE (D
6. EARNINGS PER COMMON SHARE (Details Narrative) - shares | Dec. 31, 2016 | Dec. 31, 2015 |
Net income (loss) per share: | ||
Options outstanding available to be convertible into common stock | 0 | 275,000 |
7. SHARE-BASED COMPENSATION (De
7. SHARE-BASED COMPENSATION (Details - Restricted stock activity) - Restricted Stock [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Restricted Shares | ||
Nonvested Outstanding, beginning balance | 864,000 | 517,000 |
Granted | 30,000 | 600,000 |
Vested | (654,000) | (253,000) |
Nonvested Outstanding, ending balance | 240,000 | 864,000 |
Weighted Average Grant-Date Fair Value | ||
Nonvested Outstanding, beginning balance | $ 0.88 | $ 2.01 |
Granted | .91 | 0.38 |
Vested | 1.02 | 2.02 |
Nonvested Outstanding, ending balance | $ 0.50 | $ 0.88 |
7. SHARE-BASED COMPENSATION (34
7. SHARE-BASED COMPENSATION (Details - Option activity) - $ / shares | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Shares Underlying Options | |||
Outstanding, beginning balance | 275,000 | ||
Outstanding, ending balance | 0 | 275,000 | |
Stock Options [Member] | |||
Shares Underlying Options | |||
Outstanding, beginning balance | 275,000 | 325,000 | |
Cancellations & Forfeitures | (275,000) | (50,000) | |
Outstanding, ending balance | 0 | 275,000 | 325,000 |
Exercisable | 0 | ||
Weighted-Average Exercise Price | |||
Outstanding, beginning balance | $ 1.80 | $ 1.80 | |
Cancellations & Forfeitures | 1.80 | 1.80 | |
Outstanding, ending balance | $ 1.80 | $ 1.80 | |
Exercisable | $ 1.80 | ||
Weighted-Average Remaining Contractual Term (in years) | |||
Weighted average remaining contractual term | 4 months 24 days | 1 year 4 months 24 days |
7. SHARE-BASED COMPENSATION (35
7. SHARE-BASED COMPENSATION (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Restricted Stock Awards [Member] | ||
Share-based compensation | $ 344 | $ 516 |
Unamortized estimated fair value of stock award | $ 139 | |
Unamortized expense recognition period | 9 months 4 days | |
Stock Options [Member] | ||
Aggregate intrinsic value per share | $ 1.40 | |
Stock options available for grant | 2,311,000 | |
Aggregate intrinsic value stock options | $ 0 | |
Fair value of options vested | $ 0 |
8. TREASURY STOCK (Details Narr
8. TREASURY STOCK (Details Narrative) - Treasury Stock [Member] $ / shares in Units, $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($)$ / sharesshares | |
Stock repurchased, shares | shares | 588,000 |
Payments to repurchase stock | $ | $ 567,000 |
Average stock price | $ / shares | $ 0.96 |
9. INCOME TAXES (Details - Prov
9. INCOME TAXES (Details - Provision for income taxes) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Federal: | ||
Current | $ 7 | $ 4 |
Deferred | (3) | 34 |
Total | 4 | 38 |
State: | ||
Current | 13 | 32 |
Deferred | 3 | (34) |
Total | 16 | (2) |
Total income tax expense (benefit) | $ 20 | $ 36 |
9. INCOME TAXES (Details - Tax
9. INCOME TAXES (Details - Tax rates) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Income tax benefit at federal statutory rate | (34.00%) | 34.00% |
State taxes, net of federal expense | (6.36%) | 0.73% |
Return to provision adjustments | 0.00% | (1.08%) |
Valuation allowance | 29.12% | (35.60%) |
Research and development credits | 6.01% | 0.65% |
Other permanent differences | (4.88%) | (0.70%) |
Other , net | (0.76%) | 0.00% |
Total effective rate | (10.87%) | (2.00%) |
9. INCOME TAXES (Details - Defe
9. INCOME TAXES (Details - Deferred tax assets) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred tax assets: | ||
Amortization of intangibles | $ 68 | $ 61 |
Net operating loss | 5,439 | 5,300 |
Share-based compensation | 1,137 | 1,206 |
Investment in joint venture | 0 | 3,972 |
Other | 574 | 651 |
Total deferred tax assets | 7,218 | 11,190 |
Deferred tax liabilities: | ||
Depreciation and amortization on property, plant and equipment | (1,664) | (1,656) |
Allowance for doubtful accounts | (55) | 70 |
Total deferred tax liabilities | (1,719) | (1,586) |
Less: valuation allowance | (5,499) | (9,604) |
Net deferred tax position | $ 0 | $ 0 |
9. INCOME TAXES (Details Narrat
9. INCOME TAXES (Details Narrative) $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Income Tax Disclosure [Abstract] | |
Net operating loss carryforward | $ 15,745 |
Research and development credit carryforward | $ 531 |
Operating loss expiration date | Dec. 31, 2035 |
10. COMMITMENTS AND CONTINGEN41
10. COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Operating leases | |
2,017 | $ 1,453 |
2,018 | 1,455 |
2,019 | 1,455 |
2,020 | 1,455 |
2,021 | 1,395 |
Thereafter | 2,837 |
Total minimum lease payments | $ 10,050 |
10. COMMITMENTS AND CONTINGEN42
10. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 1,440 | $ 1,447 |
Letters Of Credit Outstanding | $ 0 |