Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 06, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Deep Down, Inc. | |
Entity Central Index Key | 1,110,607 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
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 | 13,736,243 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 | |
Entity Small Business | true |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash | $ 2,423 | $ 3,939 |
Short term investment (certificate of deposit) | 1,026 | 1,017 |
Accounts receivable, net of allowance of $10 | 4,774 | 4,142 |
Contract Assets | 653 | 925 |
Prepaid expenses and other current assets | 126 | 302 |
Total current assets | 9,002 | 10,325 |
Property, plant and equipment, net | 12,367 | 12,352 |
Intangibles, net | 60 | 63 |
Other assets | 1,017 | 1,230 |
Total assets | 22,446 | 23,970 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 844 | 1,511 |
Contract liabilities | 241 | 612 |
Current portion of long-term debt | 9 | 0 |
Total current liabilities | 1,094 | 2,123 |
Long-term debt | 53 | 0 |
Total liabilities | 1,147 | 2,123 |
Commitments and contingencies (Note 8) | 0 | 0 |
Stockholders' equity: | ||
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value, 24,500,000 shares authorized, 15,438,660 shares issued | 15 | 15 |
Treasury stock | (2,040) | (2,040) |
Additional paid-in capital | 73,256 | 73,246 |
Accumulated deficit | (49,932) | (49,374) |
Total stockholders' equity | 21,299 | 21,847 |
Total liabilities and stockholders' equity | $ 22,446 | $ 23,970 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
ASSETS | ||
Accounts receivable allowance | $ 10 | $ 10 |
Stockholders' equity: | ||
Preferred stock par value | $ .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 | 15,438,660 | 15,438,660 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenues | $ 4,104 | $ 5,379 | $ 7,810 | $ 10,987 |
Cost of sales: | ||||
Cost of sales | 2,211 | 2,393 | 4,429 | 5,047 |
Depreciation expense | 242 | 323 | 596 | 633 |
Total cost of sales | 2,453 | 2,716 | 5,025 | 5,680 |
Gross profit | 1,651 | 2,663 | 2,785 | 5,307 |
Operating expenses: | ||||
Selling, general and administrative | 1,745 | 2,223 | 3,662 | 4,732 |
Depreciation and amortization | 58 | 79 | 129 | 158 |
Total operating expenses | 1,803 | 2,302 | 3,791 | 4,890 |
Operating (loss) income | (152) | 361 | (1,006) | 417 |
Other income: | ||||
Interest income, net | 10 | 12 | 19 | 26 |
Equity in net income of joint venture | 0 | 94 | 0 | 94 |
Gain on sale of assets | 439 | 14 | 439 | 14 |
Total other income | 449 | 120 | 458 | 134 |
Income (loss) before income taxes | 297 | 481 | (548) | 551 |
Income tax expense | (5) | (5) | (10) | (10) |
Net income (loss) | $ 292 | $ 476 | $ (558) | $ 541 |
Net income (loss) per share: | ||||
Basic | $ 0.02 | $ 0.03 | $ (0.04) | $ 0.04 |
Fully diluted | $ 0.02 | $ 0.03 | $ (0.04) | $ 0.04 |
Weighted-average shares outstanding: | ||||
Basic | 13,436 | 15,154 | 13,436 | 15,264 |
Fully diluted | 13,436 | 15,154 | 13,436 | 15,264 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (558) | $ 541 |
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||
Share-based compensation | 10 | 67 |
Depreciation and amortization | 725 | 791 |
Gain on sale of assets | (439) | (14) |
Equity in net income of joint venture | 0 | (94) |
Changes in assets and liabilities: | ||
Accounts receivable, net of allowance | (842) | 2,096 |
Contract Assets | 272 | 890 |
Prepaid expenses and other current assets | 176 | 134 |
Other assets | 205 | (167) |
Accounts payable and accrued liabilities | (667) | (481) |
Contract Liabilities | (371) | (2,749) |
Net cash (used in) provided by operating activities | (1,489) | 1,014 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (559) | (1,588) |
Proceeds from sale of assets | 538 | 18 |
Repayments received on notes receivable | 8 | 13 |
Short term investment-certificate of deposit | (9) | 0 |
Cash distribution received from joint venture | 0 | 94 |
Net cash used in investing activities | (22) | (1,463) |
Cash flows from financing activities: | ||
Principal payment on long-term debt | (5) | 0 |
Cash paid for purchase of our common stock | 0 | (558) |
Net cash used in financing activities | (5) | (558) |
Change in cash | (1,516) | (1,007) |
Cash, beginning of period | 3,939 | 8,203 |
Cash, end of period | 2,423 | 7,196 |
Supplemental schedule of investing and financing activities: | ||
Addition of property, plant and equipment (non-cash) | $ 317 | $ 0 |
1. BASIS OF PRESENTATION
1. BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | NOTE 1: BASIS OF PRESENTATION Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Deep Down, Inc. and its directly and indirectly wholly-owned subsidiaries (“Deep Down,” “we,” “us” or the “Company”) were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC” or the “Commission”) pertaining to interim financial information and instructions to Form 10-Q. As permitted under those rules, certain footnotes or other financial information that are normally required by United States generally accepted accounting principles (“US GAAP”) can be condensed or omitted. Therefore, these statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed on March 28, 2018 with the Commission. Preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosed amounts of contingent assets and liabilities and the reported amounts of revenues and expenses. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, then the actual amounts may differ from those included in the accompanying unaudited condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Liquidity The Company’s primary and potential sources of liquidity include cash and cash equivalents on hand, cash from operating activities, and proceeds from opportunistic sales of non-core equipment. The Company’s cash as of June 30, 2018 and December 31, 2017 was $2,423 and $3,939, respectively. The reduction in cash was caused by cash used in operating activities of $1,489 primarily because of our net loss of $558 and an increase of $632 in accounts receivable during the six months ended June 30, 2018. The Company’s plans to mitigate its limited liquidity include: closely monitoring capital expenditures planned for the remainder of 2018 and beyond to conserve capital; possibly selling certain non-core equipment; further reducing administrative costs, if necessary; and potentially establishing a line of credit to further supplement our operating requirements. The Company’s operations are influenced by a number of factors that are beyond its control, including general conditions of the offshore energy sector, oil and gas operators’ willingness to spend development capital, and other factors that could adversely affect the Company’s financial position, results of operations and liquidity. Principles of Consolidation The unaudited condensed consolidated financial statements presented herein include the accounts of Deep Down, Inc. and its directly and indirectly wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated. Segments For the quarters ended June 30, 2018 and 2017, we had one operating and reporting segment, Deep Down Delaware. Recently Issued Accounting Standards Not Yet Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). 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 2016-02 will have a material effect on our results of operations or financial position, but we are still evaluating the impact on both. All other new accounting pronouncements that have been issued but not yet effective are currently being evaluated to determine if they will have a material impact on our financial position or results of operations. |
2. REVENUES_ ADOPTION OF ASC 60
2. REVENUES: ADOPTION OF ASC 606 | 6 Months Ended |
Jun. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
REVENUES: ADOPTION OF ASC 606 | NOTE 2: REVENUES: ADOPTION OF ASC 606, “REVENUE FROM CONTRACTS WITH CUSTOMERS” On January 1, 2018, we adopted ASC Topic 606 (“ASC 606”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Revenue Recognition ASC Topic 605. There was no significant impact upon the adoption of ASC 606. We did not record any adjustments to opening retained earnings as of January 1, 2018 because the Company’s revenue recognition methodologies for both fixed price contracts (over time using cost to cost as an input measure of performance) and for service contracts (over time as services are incurred) do not materially change by the adoption of the new standard. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. To determine the proper revenue recognition method for our customer contracts, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts or separate the combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. For most of our fixed price contracts, the customer contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability (even if that single project results in the delivery of multiple units). Hence, the entire contract is accounted for as one performance obligation. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Disaggregation of Revenue The following table presents our revenues disaggregated by revenue sources of fixed price and service contracts. Sales taxes are excluded from revenues. Three Months Ended June 30, 2018 Compared to Three Months Ended June 30, 2017 June 30, 2018 June 30, 2017 Fixed Price Contracts $ 1,090 $ 749 Service Contracts 3,014 4,630 Total $ 4,104 $ 5,379 Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017 June 30, 2018 June 30, 2017 Fixed Price Contracts $ 2,933 $ 2,419 Service Contracts 4,877 8,568 Total $ 7,810 $ 10,987 Fixed price contracts For fixed price contracts, we generally recognize revenue over time as we perform because of continuous transfer of control to the customer. This continuous transfer of control to the customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process. Additionally, in other fixed price contracts, the customer typically controls the work in process as evidenced either by contractual termination clauses or by our rights to payment for work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to the Company. Because of control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. We generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. We have a companywide standard and disciplined quarterly estimate at completion (EAC) process in which management reviews the progress and execution of our performance obligations. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. Changes in estimates of net sales, cost of sales and the related impact to operating income are recognized quarterly on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation’s percentage of completion. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. When estimates of total costs to be incurred exceed total estimates of revenue to be earned on a performance obligation related to fixed price contracts, a provision for the entire loss on the performance obligation is recognized in the period the loss is estimated. Service Contracts We recognize revenue for service contracts measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The control over services is transferred over time when the services are rendered to the customer on a daily basis. Specifically, we recognize revenue as the services are provided as we have the right to invoice the customer for the services performed. Services are billed and paid on a monthly basis. Payment terms for services are usually 30 days from invoice receipt. Contract balances 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 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. As of June 30, 2018, we had no contracts whose term extended beyond one year. The following table summarizes our contract assets, which are “Costs and estimated earnings in excess of billings on uncompleted contracts” and our contract liabilities, which are “Billings in excess of costs and estimated earnings on uncompleted contracts”. June 30, 2018 December 31, 2017 Costs incurred on uncompleted contracts $ 8,749 $ 9,564 Estimated earnings on uncompleted contracts 9,019 10,741 17,768 20,305 Less: Billings to date on uncompleted contracts (17,356 ) (19,992 ) $ 412 $ 313 Included in the accompanying unaudited condensed consolidated balance sheets under the following captions: Contract Assets $ 653 $ 925 Contract Liabilities (241 ) (612 ) $ 412 $ 313 The balance in contract assets at June 30, 2018 and December 31, 2017 consisted primarily of earned but unbilled revenues related to fixed-price contracts. The balance in contract liabilities at June 30, 2018 and December 31, 2017 consisted primarily of unearned billings related to fixed-price contracts. Remaining Performance Obligations Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and excludes unexercised contract options and potential orders and also any remaining performance obligations for any sales arrangements that had not fully satisfied the criteria to be considered a contract with a customer pursuant to the requirements of ASC 606. As of June 30, 2018, all of our fixed price contracts are short-term in nature with a contract term of one year or less. Practical Expedients and Exemptions We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses. Many of our services contracts are short-term in nature with a contract term of one year or less. For those contracts, we have utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. Additionally, our payment terms are short-term in nature with settlements of one year or less. We have, therefore, utilized the practical expedient in ASC 606-10-32-18 exempting the Company from adjusting the promised amount of consideration for the effects of a significant financing component given that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Further, in many of our service contracts we have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date (for example, a service contract in which we bill a fixed amount for each hour of service provided). For those contracts, we have utilized the practical expedient in ASC 606-10-55-18, which allows us to recognize revenue in the amount for which we have the right to invoice. Accordingly, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. |
3. PROPERTY, PLANT AND EQUIPMEN
3. PROPERTY, PLANT AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 3: PROPERTY, PLANT AND EQUIPMENT The components of property, plant and equipment, net are summarized below: June 30, 2018 December 31, 2017 Range of Asset Lives Buildings and improvements 285 285 7 - 36 years Leasehold improvements 908 908 2 - 5 years Equipment 17,343 18,933 2 - 30 years Furniture, computers and office equipment 1,319 1,245 2 - 8 years Construction in progress 2,867 2,127 – Total property, plant and equipment 22,722 23,498 Less: Accumulated depreciation and amortization (10,355 ) (11,146 ) Property, plant and equipment, net $ 12,367 $ 12,352 |
4. LONG-TERM DEBT
4. LONG-TERM DEBT | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | NOTE 4: LONG-TERM DEBT In January 2018, we financed a new Company vehicle. The financed amount was $67 and is for a term of six years with an interest rate of 0.9%, with monthly payments of $1. The financing company will hold a lien on the vehicle until all payments have been made. |
5. SHARE-BASED COMPENSATION
5. SHARE-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | NOTE 5: SHARE-BASED COMPENSATION On May 2, 2017, we granted 30 shares of restricted stock to an independent director. These shares have a fair value grant price of $1.15 per share, based on the closing price of our common stock on that day. These shares vest over three years in equal tranches on the grant date anniversary, subject to continued service on our Board of Directors. We are amortizing the related share-based compensation of $34.50 over the three-year requisite service period. For the six months ended June 30, 2018 and 2017, we recognized a total of $10 and $67, respectively, of share-based compensation expense related to restricted stock awards, which is included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. The unamortized estimated fair value of nonvested shares of restricted stock awards was $29 at June 30, 2018. These costs are expected to be recognized as expense over a weighted-average period of 1.37 years. |
6. TREASURY STOCK
6. TREASURY STOCK | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
TREASURY STOCK | NOTE 6: TREASURY STOCK On March 26, 2018, the Board of Directors authorized the repurchase of up to $1,000 of the Company’s outstanding common stock (the “Repurchase Program”). The Repurchase Program will be funded from cash on hand and cash provided by operating activities. The time of the purchases and amount of stock purchased will be determined at the discretion of management subject to market conditions, business opportunities and other appropriate factors and may include purchases through one or more broker-assisted plans and methods, including, but not limited to, open-market purchases, privately negotiated transactions and Rule 10b-18 trading plans. The Repurchase Program will expire on March 31, 2019. As of June 30, 2018, no stock repurchases had been made under the Repurchase Program. |
7. INCOME TAXES
7. INCOME TAXES | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 7: INCOME TAXES Income tax expense during interim periods is based on applying the estimated annual effective income tax rate to interim period operations. The estimated annual effective income tax rate may vary from the statutory rate due to the impact of permanent items relative to our pre-tax income, as well as by any valuation allowance recorded. We employ an asset and liability approach that results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial basis and the tax basis of those assets and liabilities. A valuation allowance is established when it is more likely than not that some of the deferred tax assets will not be realized. At June 30, 2018 and December 31, 2017 management has recorded a full deferred tax asset valuation allowance. |
8. COMMITMENTS AND CONTINGENCIE
8. COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 8: COMMITMENTS AND CONTINGENCIES 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 involved in one material legal proceeding. On August 6, 2018, GE Oil and Gas UK Ltd (“GE”) requested that the Company mediate a dispute between the parties in the ICC International Centre for ADR. The dispute involves alleged delays and defects in products manufactured by the Company for GE dating back to 2013. The Company disputes GE’s allegations and intends to vigorously defend itself against these allegations. The total amount in controversy is $2,630,261.08. At this point in the legal process, the loss to the Company is not probable; therefore no liability has been recorded in the Company’s consolidated financial statements. Operating Leases We lease certain offices, facilities, equipment and vehicles under non-cancellable operating and capital leases expiring at various dates through 2023. |
9. EARNINGS PER COMMON SHARE
9. EARNINGS PER COMMON SHARE | 6 Months Ended |
Jun. 30, 2018 | |
Net income (loss) per share: | |
EARNINGS PER COMMON SHARE | NOTE 9: EARNINGS PER COMMON SHARE Basic earnings per share (“EPS”) is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net income (loss) by the weighted-average number of common shares and dilutive common stock equivalents (warrants, nonvested stock awards and stock options) outstanding during the period. Diluted EPS reflects the potential dilution that could occur if options to purchase common stock were exercised for shares of common stock and all nonvested stock awards vest. At June 30, 2018 and 2017, there were no potentially dilutive securities outstanding. |
1. BASIS OF PRESENTATION (Polic
1. BASIS OF PRESENTATION (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Deep Down, Inc. and its directly and indirectly wholly-owned subsidiaries (“Deep Down,” “we,” “us” or the “Company”) were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC” or the “Commission”) pertaining to interim financial information and instructions to Form 10-Q. As permitted under those rules, certain footnotes or other financial information that are normally required by United States generally accepted accounting principles (“US GAAP”) can be condensed or omitted. Therefore, these statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed on March 28, 2018 with the Commission. Preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosed amounts of contingent assets and liabilities and the reported amounts of revenues and expenses. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, then the actual amounts may differ from those included in the accompanying unaudited condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. |
Liquidity | Liquidity The Company’s primary and potential sources of liquidity include cash and cash equivalents on hand, cash from operating activities, and proceeds from opportunistic sales of non-core equipment. The Company’s cash as of June 30, 2018 and December 31, 2017 was $2,423 and $3,939, respectively. The reduction in cash was caused by cash used in operating activities of $1,478 primarily because of our net loss of $558 and an increase of $632 in accounts receivable during the six months ended June 30, 2018. The Company’s plans to mitigate its limited liquidity include: closely monitoring capital expenditures planned for the remainder of 2018 and beyond to conserve capital; possibly selling certain non-core equipment; further reducing administrative costs, if necessary; and potentially establishing a line of credit to further supplement our operating requirements. The Company’s operations are influenced by a number of factors that are beyond its control, including general conditions of the offshore energy sector, oil and gas operators’ willingness to spend development capital, and other factors that could adversely affect the Company’s financial position, results of operations and liquidity. |
Principles of Consolidation | Principles of Consolidation The unaudited condensed consolidated financial statements presented herein include the accounts of Deep Down, Inc. and its directly and indirectly wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated. |
Segments | Segments For the quarters ended June 30, 2018 and 2017, we had one operating and reporting segment, Deep Down Delaware. |
Recently Issued Adopted Accounting Standards:Not Yet Adopted | Recently Issued Accounting Standards Not Yet Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). 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 2016-02 will have a material effect on our results of operations or financial position, but we are still evaluating the impact on both. All other new accounting pronouncements that have been issued but not yet effective are currently being evaluated to determine if they will have a material impact on our financial position or results of operations. |
2. REVENUES_ ADOPTION OF ASC 16
2. REVENUES: ADOPTION OF ASC 606 (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue - Contract Revenue | Three Months Ended June 30, 2018 Compared to Three Months Ended June 30, 2017 June 30, 2018 June 30, 2017 Fixed Price Contracts $ 1,090 $ 749 Service Contracts 3,014 4,630 Total $ 4,104 $ 5,379 Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017 June 30, 2018 June 30, 2017 Fixed Price Contracts $ 2,933 $ 2,419 Service Contracts 4,877 8,568 Total $ 7,810 $ 10,987 |
Schedule of earnings in excess of billings on uncompleted contracts | June 30, 2018 December 31, 2017 Costs incurred on uncompleted contracts $ 8,749 $ 9,564 Estimated earnings on uncompleted contracts 9,019 10,741 17,768 20,305 Less: Billings to date on uncompleted contracts (17,356 ) (19,992 ) $ 412 $ 313 Included in the accompanying unaudited condensed consolidated balance sheets under the following captions: Contract Assets $ 653 $ 925 Contract Liabilities (241 ) (612 ) $ 412 $ 313 |
3. PROPERTY, PLANT AND EQUIPM17
3. PROPERTY, PLANT AND EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, plant and equipment | June 30, 2018 December 31, 2017 Range of Asset Lives Buildings and improvements 285 285 7 - 36 years Leasehold improvements 908 908 2 - 5 years Equipment 17,343 18,933 2 - 30 years Furniture, computers and office equipment 1,319 1,245 2 - 8 years Construction in progress 2,867 2,127 – Total property, plant and equipment 22,722 23,498 Less: Accumulated depreciation and amortization (10,355 ) (11,146 ) Property, plant and equipment, net $ 12,367 $ 12,352 |
1. BASIS OF PRESENTATION (Detai
1. BASIS OF PRESENTATION (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||||||
Cash | $ 2,423 | $ 7,196 | $ 2,423 | $ 7,196 | $ 3,939 | $ 8,203 |
Cash used in operating activities | (1,489) | 1,014 | ||||
Net loss | $ 292 | $ 476 | (558) | 541 | ||
Increase in accounts receivable | $ 842 | $ (2,096) |
2. REVENUES_ ADOPTION OF ASC 19
2. REVENUES: ADOPTION OF ASC 606 (Details - Disaggregation of Revenue) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Total | $ 4,104 | $ 5,379 | $ 7,810 | $ 10,987 |
Fixed-price Contract [Member] | ||||
Total | 1,090 | 749 | 2,933 | 2,419 |
Service Contracts [Member] | ||||
Total | $ 3,014 | $ 4,630 | $ 4,877 | $ 8,568 |
2. REVENUES_ ADOPTION OF ASC 20
2. REVENUES: ADOPTION OF ASC 606 (Details - Contract balances) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Billings In Excess Of Costs And Estimated Earnings On Uncompleted Contracts And Deferred Revenues | ||
Costs incurred on uncompleted contracts | $ 8,749 | $ 9,564 |
Estimated earnings on uncompleted contracts | 9,019 | 10,741 |
Gross costs and estimated earnings | 17,768 | 20,305 |
Less: Billings to date on uncompleted contracts | (17,356) | (19,992) |
Costs incurred plus estimated earning less billings on uncompleted contracts, net | 412 | 313 |
Included in the accompanying condensed consolidated balance sheets under the following captions: | ||
Contract Assets | 653 | 925 |
Contract Liabilities | (241) | (612) |
Costs incurred plus estimated earning less billings on uncompleted contracts | $ 412 | $ 313 |
3. PROPERTY, PLANT AND EQUIPM21
3. PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Total property, plant and equipment | $ 22,722 | $ 23,498 |
Less: Accumulated depreciation and amortization | (10,355) | (11,146) |
Property, plant and equipment,net | 12,367 | 12,352 |
Buildings and improvements | ||
Total property, plant and equipment | $ 285 | 285 |
Range of Asset lives | 7-36 years | |
Leasehold Improvements | ||
Total property, plant and equipment | $ 908 | 908 |
Range of Asset lives | 2-5 years | |
Equipment | ||
Total property, plant and equipment | $ 17,343 | 18,933 |
Range of Asset lives | 2-30 years | |
Furniture, computers and office equipment | ||
Total property, plant and equipment | $ 1,319 | 1,245 |
Range of Asset lives | 2-8 years | |
Construction in Progress | ||
Total property, plant and equipment | $ 2,867 | $ 2,127 |
4. LONG-TERM DEBT (Details Narr
4. LONG-TERM DEBT (Details Narrative) - Vehicle [Member] $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Debt face amount | $ 67 |
Debt term | 6 years |
Debt stated interest rate | 0.90% |
Debt period payment | $ 1 |
Debt periodic payment frequency | monthly |
5. SHARE-BASED COMPENSATION (De
5. SHARE-BASED COMPENSATION (Details Narrative) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Share-based compensation | $ 10 | $ 67 | |
Unamortized estimated fair value of non-vested stock options | $ 29 | ||
Weighted average period of unamortized fair value | 1 year 4 months 13 days | ||
Restricted Stock [Member] | |||
Stock grants during period | 30 |
6. TREASURY STOCK (Details Narr
6. TREASURY STOCK (Details Narrative) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($)shares | |
Equity [Abstract] | |
Stock repurchase program, amount authorized | $ | $ 1,000 |
Stock repurchase program, expiration date | Mar. 31, 2019 |
Stock repurchases | shares | 0 |
9. EARNINGS PER COMMON SHARE (D
9. EARNINGS PER COMMON SHARE (Details Narrative) - shares | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Net income (loss) per share: | ||
Potentially dilutive securities | 0 | 0 |