Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Mar. 30, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Entity Registrant Name | Deep Down, Inc. | ||
Entity Central Index Key | 0001110607 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2020 | ||
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 | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth | false | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation State Country Code | NV | ||
Entity File Number | 000-30351 | ||
Entity Common Stock, Shares Outstanding | 12,388,865 | ||
Entity Public Float | $ 4,460,891 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 | ||
ICFR Auditor Attestation Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash | $ 3,745 | $ 3,523 |
Accounts receivable, net of allowance of $84 and $50, respectively | 4,650 | 4,454 |
Inventory | 187 | 0 |
Contract assets | 189 | 814 |
Prepaid expenses and other current assets | 151 | 156 |
Total current assets | 8,922 | 8,947 |
Property, plant and equipment, net | 2,604 | 7,964 |
Intangibles, net | 44 | 50 |
Right-of-use operating lease assets | 3,174 | 4,334 |
Other assets | 195 | 256 |
Total assets | 14,939 | 21,551 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 1,988 | 2,204 |
Contract liabilities | 730 | 623 |
Current portion of PPP loan payable | 863 | 0 |
Current lease liabilities | 1,261 | 1,181 |
Total current liabilities | 4,842 | 4,008 |
PPP loan payable | 248 | 0 |
Operating lease liability, long-term | 1,951 | 3,180 |
Total liabilities | 7,041 | 7,188 |
Stockholders' equity: | ||
Common stock, $0.001 par value, 24,500,000 shares authorized and 15,906,010 issued | 16 | 16 |
Additional paid-in capital | 73,638 | 73,521 |
Treasury stock, 3,367,145 and 2,620,830 shares, respectively, at cost | (2,809) | (2,284) |
Accumulated deficit | (62,947) | (56,890) |
Total stockholders' equity | 7,898 | 14,363 |
Total liabilities and stockholders' equity | $ 14,939 | $ 21,551 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
ASSETS | ||
Accounts receivable allowance | $ 84 | $ 50 |
Stockholders' equity: | ||
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 24,500,000 | 24,500,000 |
Common stock issued | 15,906,010 | 15,906,010 |
Treasury stock shares | 3,367,145 | 2,620,830 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Statement [Abstract] | ||
Revenues | $ 12,977 | $ 18,915 |
Cost of sales: | ||
Cost of sales | 7,232 | 11,013 |
Depreciation expense | 830 | 1,105 |
Total cost of sales | 8,062 | 12,118 |
Gross profit | 4,915 | 6,797 |
Operating expenses: | ||
Selling, general and administrative | 6,210 | 8,926 |
Asset impairment | 4,490 | 396 |
Depreciation and amortization | 252 | 276 |
Total operating expenses | 10,952 | 9,598 |
Operating loss | (6,037) | (2,801) |
Other expense (income): | ||
Interest expense (income), net | 7 | (12) |
(Gain) on sale of property, plant and equipment | 0 | (7) |
Total other expense (income) | 7 | (19) |
Loss before income taxes | (6,044) | (2,782) |
Income tax expense (benefit) | 13 | (8) |
Net loss | $ (6,057) | $ (2,774) |
Net loss per share: | ||
Basic | $ (0.48) | $ (0.21) |
Fully diluted | $ (0.48) | $ (0.21) |
Weighted-average shares outstanding: | ||
Basic | 12,495 | 13,386 |
Fully diluted | 12,495 | 13,386 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | Total |
Beginning Balance, Shares at Dec. 31, 2018 | 15,706 | ||||
Beginning Balance, Amount at Dec. 31, 2018 | $ 16 | $ 73,271 | $ (2,062) | $ (54,116) | $ 17,109 |
Net loss | (2,774) | (2,774) | |||
Restricted stock awards, shares | 200 | ||||
Restricted stock awards, value | |||||
Treasury shares purchased | (222) | (222) | |||
Share-based compensation | 250 | 250 | |||
Ending Balance, Shares at Dec. 31, 2019 | 15,906 | ||||
Ending Balance, Amount at Dec. 31, 2019 | $ 16 | 73,521 | (2,284) | (56,890) | 14,363 |
Net loss | (6,057) | (6,057) | |||
Restricted stock awards, shares | (150) | ||||
Restricted stock awards, value | |||||
Treasury shares purchased | (525) | (525) | |||
Share-based compensation | 117 | 117 | |||
Ending Balance, Shares at Dec. 31, 2020 | 15,756 | ||||
Ending Balance, Amount at Dec. 31, 2020 | $ 16 | $ 73,638 | $ (2,809) | $ (62,947) | $ 7,898 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (6,057) | $ (2,774) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 1,082 | 1,381 |
Share-based compensation | 117 | 250 |
Non-cash lease expense | 10 | 27 |
Bad debt expense | 238 | 20 |
Gain on sale of property, plant and equipment | 0 | (7) |
Loss on asset impairment | 4,490 | 396 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (433) | (86) |
Contract assets | 625 | 1,117 |
Inventories | (187) | 0 |
Prepaid expenses and other current assets | (8) | (52) |
Other assets | 26 | 93 |
Accounts payable and accrued liabilities | (216) | 222 |
Contract Liabilities | 107 | (350) |
Net cash (used in) provided by operating activities | (206) | 237 |
Cash flows from investing activities: | ||
Proceeds from sale of property, plant and equipment | 0 | 88 |
Purchases of property, plant and equipment | (171) | (91) |
Payments received on note receivable (included in Prepaid expenses and other current assets) | 13 | 517 |
Short term investment - (certificate of deposit) | 0 | 1,035 |
Net cash (used in) provided by investing activities | (158) | 1,549 |
Cash flows from financing activities: | ||
Principal payment on long-term debt | 0 | (56) |
Repurchase of common shares | (525) | (222) |
Proceeds from PPP loan | 1,111 | 0 |
Net cash provided by (used in) financing activities | 586 | (278) |
Change in cash | 222 | 1,508 |
Cash, beginning of year | 3,523 | 2,015 |
Cash, end of year | $ 3,745 | $ 3,523 |
1. DESCRIPTION OF BUSINESS AND
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES | NOTE 1: 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 wholly owned subsidiary, Deep Down, Inc., a Delaware corporation (“Deep Down Delaware”); (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 and technologies used between the production facility and the wellhead. Our services and technological solutions include distribution system installation support and engineering services, umbilical terminations, loose-tube steel flying leads, and related services. Additionally, our highly experienced, specialized service teams can support subsea engineering, installation, commissioning, and maintenance projects located anywhere in the world. Liquidity The Company’s cash on hand was $3,745 and working capital was $4,080 as of December 31, 2020. As of December 31, 2019, cash on hand and working capital was $3,523 and $4,939, respectively. Other than loans obtained under the Paycheck Protection Program (“PPP”), the Company does not have a credit facility in place and depends on cash on hand, cash flows from operations, and the potential opportunistic sales of Property, Plant & Equipment (“PP&E”). See Note 11 and Note 12 for further discussion of the PPP loans. The Company believes it will have adequate liquidity to meet its future operating requirements through a combination of cash on hand, cash expected to be generated from operations, cash received from a second PPP loan, and potential opportunistic sales of PP&E in addition to pursuing a disciplined approach to making capital investments. However, given the abrupt decline in oil prices and global economic activity caused by COVID-19 in 2020, the Company cannot predict this with certainty. To mitigate this uncertainty and preserve liquidity, the Company will continue to pursue opportunistic cost containment initiatives, which can include workforce reductions, limiting overhead spending and research and development efforts to only critical items, and actively pursuing further cost reduction opportunities as they become available. Summary of Significant Accounting Policies and Estimates Principles of Consolidation The consolidated financial statements include the accounts of Deep Down and its wholly owned subsidiary for the years ended December 31, 2020 and 2019. All intercompany transactions and balances have been eliminated. Use of Estimates The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) requires us to make estimates and judgments that may affect assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition and related allowances, contract assets and liabilities, impairments of long-lived assets, income taxes including the valuation allowance for deferred tax assets, 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, 2020 and 2019, 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, accounts receivables and payables, and notes receivable (included in other assets). The carrying values of cash, accounts receivables, and payables approximated their fair values at December 31, 2020 and 2019 due to their short-term maturities. The carrying values of our notes receivable approximate their fair values at December 31, 2020 and 2019 because the interest rates approximate current market rates. Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms. The Company provides an allowance on accounts receivables based on a specific review of each customer’s accounts receivable balance with respect to its ability to make payments. Generally, the Company does 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, 2020 and 2019, the Company estimated the allowance for doubtful accounts requirement to be $84 and $50, respectively. Bad debt expense totaled $238 and $20 for the years ended December 31, 2020 and 2019, respectively. Concentration of Revenues and Credit Risk Deep Down’s revenues are derived from the sale of products and services to customers who participate in the offshore sector of the oil and gas industry. Customers may be similarly affected by economic and other changes in the oil and gas industry. For the year ended December 31, 2020, our five largest customers accounted for 43 percent, 10 percent, 8 percent, 8 percent, and 5 percent of total revenues. For the year ended December 31, 2019, our five largest customers accounted for 44 percent, 20 percent, 7 percent, 6 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 and cash flows. As of December 31, 2020, three of our customers accounted for 52 percent, 12 percent, and 9 percent of total accounts receivable. As of December 31, 2019, three of our customers accounted for 41 percent, 17 percent, and 9 percent of total accounts receivable. Property, plant and equipment PP&E is stated at cost, net of accumulated depreciation, amortization, and related impairments. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets. Replacements and betterments are capitalized, while maintenance and repairs are expensed as incurred. It is our policy to include amortization expense on assets acquired under finance leases with depreciation expense on owned assets. Additionally, we record depreciation and amortization expense related to revenue-generating assets as a component of cost of sales in the accompanying consolidated statements of operations. If circumstances associated with our PP&E have changed or a significant event has occurred that may affect the recoverability of the carrying amount of our PP&E, an impairment indicator exists, and we test the PP&E for impairment. Before testing for impairment, we group PP&E with other finite-lived long-lived assets (“long-lived assets”) at the lowest level of identifiable cash flows that are largely independent of cash flows from other assets or groups of assets. Testing long-lived assets for impairment is a two-step process: Step 1 - We test the long-lived asset group for recoverability by comparing the carrying amount of the asset group with the sum of the undiscounted future cash flows from use and the eventual disposal of the asset group. If the carrying amount of the long-lived asset group is determined to be greater than the sum of the undiscounted future cash flows from use and disposal, we would need to perform step 2. Step 2 - If the long-lived group of assets fails the recoverability test in step 1, we would record an impairment expense for the difference between the carrying amount and the fair value of the long-lived asset group. During the year ended December 31, 2020, the Company recorded a charge of $4,490 for the impairment of certain idle, long-lived assets, which were evaluated at the asset level. The impairment was the result of an analysis of the carrying value of the assets and our inability to objectively project future cash flows from the sale or lease of these assets, particularly in light of the impact of the COVID-19 pandemic and resulting global economic disruption. Prior to performing the impairment analysis of our long-lived assets on a group level as of December 31, 2019, the Company conducted an evaluation of the carrying amount of certain specific long-lived assets that are non-strategic to the core operations of the business and recorded impairment charges of $396. The Company did not record any further impairment of its long-lived assets. The valuation of impaired equipment is a Level 3 non-recurring fair value measurement. Impaired assets discussed above were written down to zero value. 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 investments in joint ventures. Lease Obligations At the inception of a lease, Deep Down evaluates the agreement to determine whether the lease will be accounted for as an operating or finance 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 if the contract contains a substantial penalty for failure to renew or extend the lease, it could lead the lessee to conclude it has a significant economic incentive to extend the lease beyond the base rental period. Deep Down leases land, buildings, vehicles, and certain equipment under non-cancellable operating leases. The Company leases office, indoor manufacturing, warehouse, and operating space in Houston, Texas and leases storage space in Mobile, Alabama to house its 3,400 metric ton carousel system. Lease Concessions As it relates to lease concessions related to its leases affected by economic disruption caused by the COVID-19 pandemic, the Company elected to account for the deferred payments as variable lease payments. As such, the Company recorded a reduction to rent expense in the period of the deferral. When the Company later incurs the deferred rent, it will recognize it as variable rent expense. PPP Loan Payable The Company elected to account for the PPP loan received as a debt arrangement. This debt is recorded on the consolidated balance sheets as a liability, both current and long-term. Interest is accrued over the term of the loan at the effective interest rate. Debt will be derecognized when the debt is extinguished. Debt is extinguished when either the debtor pays the creditor or the debtor is legally released from being the primary obligor. A PPP loan is forgiven in total or in part only after the SBA has paid the lender the amount of the PPP loan the SBA has determined is eligible for forgiveness, at which point, the lender should notify the borrower of the forgiveness of the PPP loan. When the debt is extinguished, any amount that is forgiven (including accrued but unpaid interest) is recognized in the income statement as a gain upon debt extinguishment; however, there is no guarantee that any portion of the debt balance will be forgiven. Income Taxes We follow the asset and liability method of accounting for income taxes. This method considers 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, 2020 and 2019 we had two types of share-based compensation: stock options and restricted stock. See further discussion in Note 6. 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 In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12 “Income Taxes (Topic 740).” Topic 740 is effective for fiscal years and interim periods beginning after December 15, 2020. This update simplifies the accounting for income taxes by removing certain exceptions such as the exception to the incremental approach for intra-period tax allocation, the exception to the requirement to recognize a deferred tax liability for equity method investments, the exception to the ability not to recognize a deferred tax liability for a foreign subsidiary and the exception to the general methodology for calculating income taxes in an interim period. The adoption of ASU No. 2019-12 is not expected to have a material impact on our financial statements and disclosures. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments,” as modified by subsequently issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” The guidance introduces a new credit reserving model known as the Current Expected Credit Loss (“CECL”) model, which is based on expected losses, and differs significantly from the incurred loss approach used today. The CECL model requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. These ASUs affect an entity to varying degrees depending on the credit quality for the assets held by the entity, their duration and how the entity applies current US GAAP. These ASUs were initially effective for the Company beginning January 1, 2020. In November 2019, the FASB issued ASU No. 2019-10 “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates.” The FASB issued this update to extend and simplify how effective dates are staggered between larger public companies and all other entities for the aforementioned major updates. Topic 326 is effective for fiscal years and interim periods beginning after December 15, 2022 for smaller reporting companies. We are currently evaluating the impact of these updates on our financial statements and related disclosures, but at this time, we do not expect a material impact on our financial statements and disclosures. |
2. LEASES
2. LEASES | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
LEASES | NOTE 2: LEASES In February 2016, the FASB issued ASU 2016-02, Leases (“ASC Topic 842”). Under this guidance, lessees are required to recognize on the balance sheet a lease liability and a right-of-use (“ROU”) asset for all leases, except for short-term leases with terms of twelve months or less. The lease liability represents the lessee’s obligation to make lease payments arising from a lease and will initially be measured as the present value of the lease payments. The ROU asset represents the lessee’s right to use a specified asset for the lease term, and will be measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee’s initial direct costs. ASC Topic 842 provides for certain practical expedients when adopting the guidance. The Company elected the package of practical expedients allowing the Company, for all leases that commenced prior to the adoption date, to not reassess whether any expired or existing contracts are, or contain, leases, the lease classification for any expired or existing leases, or initial direct costs for any expired or existing leases. The Company utilizes the land easements practical expedient allowing the Company to not assess whether any expired or existing land easements are, or contain, leases if they were not previously accounted for as leases under the existing leasing guidance. Instead, the Company will continue to apply its existing accounting policies to historical land easements. The Company elects to apply the short-term lease exception; therefore, the Company will not record an ROU asset or corresponding lease liability for leases with an initial term of twelve months or less that are not reasonably certain of being renewed and instead will recognize a single lease cost allocated over the lease term, generally on a straight-line basis. The Company elects to apply the practical expedient to not separate lease components from non-lease components and instead account for both as a single lease component for all asset classes. The Company elects to not capitalize any lease in which the estimated value of the underlying asset at the commencement date is less than the Company’s capitalization threshold. A lease would need to qualify for the low value exception based on various criteria. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at the lease commencement date. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and a portion is recorded in cost of sales, and the remainder is recorded in selling, general and administrative expenses. The accounting for some leases may require significant judgment, which includes determining whether a contract contains a lease, determining the incremental borrowing rate to utilize in our net present value calculation of lease payments for lease agreements which do not provide an implicit rate, and assessing the likelihood of renewal or termination options. During the year ended December 31, 2019, the Company removed $164 in lease liabilities and ROU assets associated with a related party lease that was on a month-to-month basis. As of December 31, 2020 and 2019, the Company does not have any finance lease assets or liabilities, nor does the Company have any subleases. The following tables present information about our operating leases: December 31, 2020 December 31, 2019 Assets: Right-of-use operating lease assets $ 3,174 $ 4,334 Liabilities: Current lease liabilities 1,261 1,181 Non-current lease liabilities 1,951 3,180 Total lease liabilities $ 3,212 $ 4,361 The components of our lease expense were as follows: Year Ended December 31, 2020 2019 Operating lease expense included in Cost of sales $ 977 $ 1,238 Operating lease expense included in SG&A $ 139 $ 240 Short term lease expense $ 194 $ 309 Total lease expense $ 1,310 $ 1,787 Lease Term and Discount Rate: December 31, 2020 December 31, 2019 Weighted-average remaining lease terms (years) on operating leases 2.43 3.28 Weighted-average discount rates on operating leases 5.374% 5.374% For the year ended December 31, 2020, the Company did not have any sale/leaseback transactions. Present value of lease liabilities: Years ending December 31, Operating Leases 2021 1,399 2022 1,415 2023 597 2024 8 Thereafter 4 Total minimum lease payments $ 3,423 Less: Interest (211 ) Present value of lease liabilities $ 3,212 |
3. REVENUE FROM CONTRACTS WITH
3. REVENUE FROM CONTRACTS WITH CUSTOMERS | 12 Months Ended |
Dec. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE FROM CONTRACTS WITH CUSTOMERS | NOTE 3: REVENUE FROM CONTRACTS WITH CUSTOMERS 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 fixed price and service contracts. Sales taxes are excluded from revenues. Year Ended December 31, 2020 2019 Fixed Price Contracts $ 8,664 $ 12,337 Service Contracts 4,313 6,578 Total $ 12,977 $ 18,915 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. In our fixed price contracts, the customer either controls the work in process or we deliver products with no alternative use to the Company and have rights to payment for work performed to date plus a reasonable profit as evidenced by contractual termination clauses. 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 company-wide standard and disciplined quarterly estimate at completion 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 but have increased to 45 days during the recent industry downturn. Contract balances Costs and estimated earnings in excess of billings on uncompleted contracts arise when revenues are recorded based on the extent of progress towards completion 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. For the years ending 2020 and 2019, there were no contracts with terms that 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”. December 31, 2020 December 31, 2019 Costs incurred on uncompleted contracts $ 2,098 $ 1,687 Estimated earnings on uncompleted contracts 3,153 2,294 5,251 3,981 Less: Billings to date on uncompleted contracts (5,792 ) (3,790 ) $ (541 ) $ 191 Included in the accompanying consolidated balance sheets under the following captions: Contract assets $ 189 $ 814 Contract liabilities (730 ) (623 ) $ (541 ) $ 191 The contract asset and liability balances at December 31, 2020 and 2019 consisted primarily of revenue related to fixed-price projects. 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, potential orders, and 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. 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. |
4. PROPERTY, PLANT AND EQUIPMEN
4. PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 4: PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following: Range of December 31, 2020 December 31, 2019 Asset Lives Buildings and improvements $ 285 $ 285 7 - 36 years Leasehold improvements 906 896 2 - 5 years Equipment 12,343 17,887 2 - 30 years Furniture, computers and office equipment 907 901 2 - 8 years Construction in progress 84 64 – Total property, plant and equipment 14,525 20,033 Less: Accumulated depreciation (11,921 ) (12,069 ) Property, plant and equipment, net $ 2,604 $ 7,964 Depreciation expense included in cost of sales in the accompanying consolidated statements of operations was $830 and $1,105 for the years ended December 31, 2020 and 2019, respectively. Depreciation expense excluded from cost of sales in the accompanying consolidated statements of operations was $252 and $276 for the years ended December 31, 2020 and 2019, respectively. Construction in progress represents assets that are not ready for service or are in the construction stage. Assets are depreciated once they are placed in service. See discussion in Note 1 for any impairment charges related to these assets. |
5. INCOME OR LOSS PER COMMON SH
5. INCOME OR LOSS PER COMMON SHARE | 12 Months Ended |
Dec. 31, 2020 | |
Net loss per share: | |
INCOME OR LOSS PER COMMON SHARE | NOTE 5: INCOME OR LOSS PER COMMON SHARE The following is a reconciliation of the number of shares used in the basic and diluted net income or loss per common share calculation: Year Ended December 31, 2020 2019 Numerator: Net loss $ (6,057 ) $ (2,774 ) Denominator: Weighted average number of common shares outstanding 12,495 13,386 Denominator for diluted earnings per share 12,495 13,386 Net loss per common share outstanding, basic and fully diluted $ (0.48 ) $ (0.21 ) At December 31, 2020, there were outstanding options that were vested and exercisable into 300 shares of common stock; however, they have been excluded from the calculation of EPS because their exercise would be anti-dilutive. At December 31, 2019, there were outstanding options that were vested and exercisable into 225 shares of common stock; however, they have been excluded from the calculation of EPS because their exercise would be anti-dilutive. |
6. SHARE-BASED COMPENSATION
6. SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | NOTE 6: SHARE-BASED COMPENSATION The following table summarizes the activity of our nonvested restricted shares for the years ended December 31, 2020 and 2019: Restricted Weighted- Nonvested at December 31, 2018 230 $ 0.83 Granted 200 0.65 Vested (170 ) 0.78 Nonvested at December 31, 2019 260 $ 0.72 Granted – – Vested (110 ) 0.82 Cancellations & Forfeitures (150 ) 0.65 Nonvested at December 31, 2020 – $ – The following table summarizes the activity of our nonvested stock options for the years ended December 31, 2020 and 2019: Shares Underlying Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Outstanding at December 31, 2018 – $ – – Granted 300 0.70 Vested (75 ) 0.75 Outstanding at December 31, 2019 225 $ 0.68 4.7 Granted 200 0.47 Vested (225 ) 0.59 Outstanding at December 31, 2020 200 $ 0.57 4.1 Exercisable at December 31, 2020 300 $ 0.63 3.8 For the years ended December 31, 2020 and 2019, we recognized a total of $117 and $250, respectively, of share-based compensation expense related to restricted stock awards and stock options, 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 and stock options was $48 and $134 at December 31, 2020 and 2019, respectively. These costs are expected to be recognized as expense over a weighted-average period of 0.35 years. |
7. TREASURY STOCK
7. TREASURY STOCK | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Treasury Stock | NOTE 7: TREASURY STOCK During the year ended December 31, 2019, the Company repurchased 588 shares of common stock at a total cost of $218 under a repurchase program authorized on March 26, 2018 and repurchased 6 shares of common stock at a total cost of $4 under the 2019 Repurchase Program. The average price per share of treasury stock purchased in 2019 was $0.37. On December 31, 2019, the Company had 2,621 shares of common stock held in treasury. On December 23, 2019, the Board of Directors authorized a repurchase program (the “2019 Repurchase Program”) under which the Company could repurchase up to 500 shares of outstanding stock. The 2019 Repurchase Program was funded from cash on hand and cash provided by operating activities. During the year ended December 31, 2020, the Company repurchased an aggregate of 743 shares of common stock at a total cost of $524 under the 2019 Repurchase Program and in a privately negotiated transaction. 495 shares were purchased under the 2019 Repurchase Program, and the remaining 248 shares were separately authorized by the Board. The 2019 Repurchase Program was exhausted at the conclusion of this transaction. Additionally, the Company purchased 3 shares of common stock at an average price of approximately $0.43 per share totaling $1 in a privately negotiated transaction during the year ended December 31, 2020. On December 31, 2020, the Company had 3,367 shares of common stock held in treasury. Treasury shares are accounted for using the cost method. |
8. INCOME TAXES
8. INCOME TAXES | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 8: INCOME TAXES Income tax (benefit) expense is comprised of the following: Year Ended December 31, 2020 2019 Federal: Current $ – $ – Deferred 10 5 Total $ 10 $ 5 State: Current $ 13 $ (8 ) Deferred (10 ) (5 ) Total $ 3 $ (13 ) Total income tax expense (benefit) $ 13 $ (8 ) Income tax expense (benefit) differs from the amount computed by applying the U.S. statutory income tax rate to loss before income taxes for the reasons set forth below. Year Ended December 31, 2020 2019 Income tax benefit at federal statutory rate (21.00)% (21.00)% State taxes, net of federal benefit 0.01 % (0.50)% Valuation allowance 20.76 % 19.98 % Research and development credits 0.21 % 0.79 % Other permanent differences 0.24 % 0.44 % Total effective rate 0.21 % (0.29)% 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: December 31, 2020 2019 Deferred tax assets: Net operating loss carryforwards $ 5,339 $ 4,521 R&D and other credit carryforwards 650 663 Share-based compensation 774 757 Intangible amortization 6 11 Allowance for bad debt 18 2 Other 137 193 Total deferred tax assets $ 6,924 $ 6,147 Less: valuation allowance (6,637 ) (5,385 ) Net deferred tax assets $ 287 $ 762 Deferred tax liabilities: Depreciation on property and equipment $ (287 ) $ (762 ) Total deferred tax liabilities $ (287 ) $ (762 ) Net deferred tax position $ – $ – We have $25,017 of federal and $1,148 of state NOL carry forwards and $650 in research and development and other credits available to offset future taxable income. These federal and state NOLs will expire at various dates through 2034, except for federal NOLs generated in 2018 and subsequent years. 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, 2020. 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 federal tax returns from the tax years ended December 31, 2017 through December 31, 2019 are open to examination by the IRS. |
9. COMMITMENTS AND CONTINGENCIE
9. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 9: COMMITMENTS AND CONTINGENCIES 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. We had no outstanding letters of credit at December 31, 2020 or 2019. Employment Agreement Our Chief Executive Officer is employed under an employment agreement containing severance provisions. In the event of termination of the CEO’s employment for any reason, the CEO will be entitled to receive all accrued, unpaid salary and vacation time through the date of termination and all benefits to which the CEO is entitled or vested under the terms of all employee benefit and compensation plans, agreements, and arrangements in which the CEO participants as of the date of termination. In addition, subject to executing a general release in favor of the Company, the CEO 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 CEO with “good reason.” These severance payments include: (i) a lump sum in cash equal to one to two times the CEO’s annual base salary; (ii) a lump sum in cash equal to one to two times the average annual bonus paid to the CEO 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 the CEO’s annual base salary; and (iv) if the CEO’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 CEO shall immediately vest and become exercisable. On April 1, 2020, the Company eliminated the position of Chief Operating Officer (“COO”) and relieved the COO of his duties pursuant to the terms of his employment agreement. In addition to payment of accrued and unpaid salary, vacation time, and other benefits referred to above, the Company is required to pay the former COO one time his contractual annual base salary of $245, payable over 12 months. This amount is included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the twelve months ended December 31, 2020. Litigation From time to time, the Company is party to various legal proceedings arising in the ordinary course of business. The Company expenses or accrues legal costs as incurred and is involved in only one material legal proceeding as of the date of this Report. In November 2011, the Company delivered equipment to Aker Solutions, Inc. (“Aker”), but Aker declined to pay the final invoice in the aggregate amount of $270 alleging some warranty items needed to be repaired. The Company made repairs, but Aker continued to claim further work was required. The Company repeatedly attempted to collect on the receivable and ultimately filed suit on November 16, 2012, in the Harris County District Court. Aker subsequently filed a counter claim on March 20, 2013 in the aggregate amount of $1,000 for reimbursement of insurance payments allegedly made for repairs. The parties have not reached a resolution on this matter. At this point, it is not clear as to whether an unfavorable outcome is either probable or remote, and the Company is unable to determine the likelihood of an unfavorable outcome or the amount or range of potential loss if the outcome should be unfavorable. 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 (“ICC”). The dispute involved alleged delays and defects in products manufactured by the Company for GE dating back to 2013. During the second quarter of 2020, the parties finalized the terms of a definitive settlement agreement which is now final and binding. Per the terms of the settlement, the Company shall pay GE $750 in total, which shall be paid on a monthly basis through December 2021. The Company accrued a liability related to this matter in the amount of $750 for the year ended December 31, 2019. The remaining liability was $420 at December 31, 2020. |
10. RELATED PARTY TRANSACTIONS
10. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 10: RELATED PARTY TRANSACTIONS On August 15, 2019, Mr. Ronald E. Smith, the Company's Founder, resigned as Chief Executive Officer and as a member of the Board, effective as of August 31, 2019. In connection with Mr. Smith's resignation, the Company entered into a Transition Agreement with him, effective as of September 1, 2019 (the “Transition Agreement”). The Transition Agreement provides for Mr. Smith to serve as an independent consultant to the Company from September 1, 2019 through December 31, 2021. The Company agreed to pay Mr. Smith $42 per month, from September 1, 2019 through December 31, 2019, and $15 per month, from January 1, 2020 through December 31, 2021, in exchange for his future services. Under the terms of the Transition Agreement, the Company agreed to pay Mr. Smith a severance payment of $250, which was fully accrued during the nine-month period ended September 30, 2019 and was paid in structured payments through December 31, 2019. Additionally, under the terms of the Transition Agreement, the Company accepted 300 of Mr. Smith's shares of the Company’s common stock in exchange for certain previously impaired Company equipment ($0 carrying value at the time of the exchange). Because the assets had an approximate fair value of $0 at the time of the exchange no value was recorded to treasury stock. The Transition Agreement also provides for the Company to transfer a Company truck to Mr. Smith with the associated liability assumed by Mr. Smith. We recognized a $7 loss on this transaction. In addition to the other payments provided for under the Transition Agreement, the Company also agreed to pay Mr. Smith 1.5% of the net sale or lease value of two carousels owned by Company, if such sale or lease occurs prior to December 31, 2021, unless those assets are sold or leased in conjunction with a sale of all or substantially all of the assets or stock of Deep Down, in which case no commission is due. As part of the Transition Agreement, Mr. Smith is bound by certain non-disclosure and confidentiality provisions, and a non-compete and non-hire agreement. |
11. SMALL BUSINESS ADMINISTRATI
11. SMALL BUSINESS ADMINISTRATION'S PAYCHECK PROTECTION PROGRAM LOAN | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
SMALL BUSINESS ADMINISTRATION'S PAYCHECK PROTECTION PROGRAM LOAN | NOTE 11. SMALL BUSINESS ADMINISTRATION’S PAYCHECK PROTECTION PROGRAM LOAN As a result of the abrupt decline in oil prices and global economic activity caused by COVID-19, the Company applied for a loan under the Small Business Administration’s (“SBA”) Paycheck Protection Program, and on April 29, 2020, the Company received a loan (“April 2020 PPP loan”) in the amount of $1,111, which was used to finance payroll during the second and third quarters of 2020. The April 2020 PPP loan is evidenced by a promissory note, dated to be effective as of April 27, 2020, between the Company and the lender. The promissory note matures on April 27, 2022 and bears interest at a fixed rate of 1.00 percent per annum, payable in 18 monthly payments commencing on November 27, 2020. Subsequent to the effective date of the April 2020 PPP loan, the U.S. Treasury and SBA refined its payment deferral guidance whereby payment of principal, interest, and fees for PPP loans are to be deferred until the amount of forgiveness determined under section 1106 of the CARES Act is remitted to the lender if the loan forgiveness application is submitted within ten months after the end of the loan forgiveness covered period. Additionally, certain conditions detailed in the loan agreement could cause the note to become immediately due and payable at the lender’s option. The Company applied for forgiveness of the April 2020 PPP loan in its entirety in October 2020, which falls within ten months after the end of the Company’s loan forgiveness covered period. The Company has not received guidance from its lender regarding the timing or ultimate outcome of its forgiveness application. |
12. SUBSEQUENT EVENTS
12. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12: SUBSEQUENT EVENTS We have evaluated subsequent events through the date the consolidated financial statements were filed with the Securities and Exchange Commission. The Company applied for a second loan under the SBA’s Paycheck Protection Program, and on March 1, 2021, the Company received a potentially forgivable loan (“March 2021 PPP loan”) in the amount of $1,111. The March 2021 PPP loan is evidenced by a promissory note, dated to be effective as of March 1, 2021, between the Company and the lender. The promissory note matures on March 1, 2026 and bears interest at a fixed rate of 1.00 percent per annum, beginning on the date of advance until the loan maturity date. |
1. DESCRIPTION OF BUSINESS AN_2
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Description of Business | Description of Business Deep Down, Inc., a Nevada corporation (“Deep Down Nevada”), and its directly wholly owned subsidiary, Deep Down, Inc., a Delaware corporation (“Deep Down Delaware”); (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 and technologies used between the production facility and the wellhead. Our services and technological solutions include distribution system installation support and engineering services, umbilical terminations, loose-tube steel flying leads, and related services. Additionally, our highly experienced, specialized service teams can support subsea engineering, installation, commissioning, and maintenance projects located anywhere in the world. |
Liquidity | Liquidity The Company’s cash on hand was $3,745 and working capital was $4,080 as of December 31, 2020. As of December 31, 2019, cash on hand and working capital was $3,523 and $4,939, respectively. Other than loans obtained under the Paycheck Protection Program (“PPP”), the Company does not have a credit facility in place and depends on cash on hand, cash flows from operations, and the potential opportunistic sales of Property, Plant & Equipment (“PP&E”). See Note 11 and Note 12 for further discussion of the PPP loans. The Company believes it will have adequate liquidity to meet its future operating requirements through a combination of cash on hand, cash expected to be generated from operations, cash received from a second PPP loan, and potential opportunistic sales of PP&E in addition to pursuing a disciplined approach to making capital investments. However, given the abrupt decline in oil prices and global economic activity caused by COVID-19 in 2020, the Company cannot predict this with certainty. To mitigate this uncertainty and preserve liquidity, the Company will continue to pursue opportunistic cost containment initiatives, which can include workforce reductions, limiting overhead spending and research and development efforts to only critical items, and actively pursuing further cost reduction opportunities as they become available. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Deep Down and its wholly owned subsidiary for the years ended December 31, 2020 and 2019. All intercompany transactions and balances have been eliminated. |
Use of Estimates | Use of Estimates The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) requires us to make estimates and judgments that may affect assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition and related allowances, contract assets and liabilities, impairments of long-lived assets, income taxes including the valuation allowance for deferred tax assets, 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, 2020 and 2019, 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, accounts receivables and payables, and notes receivable (included in other assets). The carrying values of cash, accounts receivables, and payables approximated their fair values at December 31, 2020 and 2019 due to their short-term maturities. The carrying values of our notes receivable approximate their fair values at December 31, 2020 and 2019 because the interest rates approximate current market rates. |
Accounts Receivable | Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms. The Company provides an allowance on accounts receivables based on a specific review of each customer’s accounts receivable balance with respect to its ability to make payments. Generally, the Company does 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, 2020 and 2019, the Company estimated the allowance for doubtful accounts requirement to be $84 and $50, respectively. Bad debt expense totaled $238 and $20 for the years ended December 31, 2020 and 2019, respectively. |
Concentration of Revenues and Credit Risk | Concentration of Revenues and Credit Risk Deep Down’s revenues are derived from the sale of products and services to customers who participate in the offshore sector of the oil and gas industry. Customers may be similarly affected by economic and other changes in the oil and gas industry. For the year ended December 31, 2020, our five largest customers accounted for 43 percent, 10 percent, 8 percent, 8 percent, and 5 percent of total revenues. For the year ended December 31, 2019, our five largest customers accounted for 44 percent, 20 percent, 7 percent, 6 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 and cash flows. As of December 31, 2020, three of our customers accounted for 52 percent, 12 percent, and 9 percent of total accounts receivable. As of December 31, 2019, three of our customers accounted for 41 percent, 17 percent, and 9 percent of total accounts receivable. |
Property Plant and Equipment | Property, plant and equipment PP&E is stated at cost, net of accumulated depreciation, amortization, and related impairments. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets. Replacements and betterments are capitalized, while maintenance and repairs are expensed as incurred. It is our policy to include amortization expense on assets acquired under finance leases with depreciation expense on owned assets. Additionally, we record depreciation and amortization expense related to revenue-generating assets as a component of cost of sales in the accompanying consolidated statements of operations. If circumstances associated with our PP&E have changed or a significant event has occurred that may affect the recoverability of the carrying amount of our PP&E, an impairment indicator exists, and we test the PP&E for impairment. Before testing for impairment, we group PP&E with other finite-lived long-lived assets (“long-lived assets”) at the lowest level of identifiable cash flows that are largely independent of cash flows from other assets or groups of assets. Testing long-lived assets for impairment is a two-step process: Step 1 - We test the long-lived asset group for recoverability by comparing the carrying amount of the asset group with the sum of the undiscounted future cash flows from use and the eventual disposal of the asset group. If the carrying amount of the long-lived asset group is determined to be greater than the sum of the undiscounted future cash flows from use and disposal, we would need to perform step 2. Step 2 - If the long-lived group of assets fails the recoverability test in step 1, we would record an impairment expense for the difference between the carrying amount and the fair value of the long-lived asset group. During the year ended December 31, 2020, the Company recorded a charge of $4,490 for the impairment of certain idle, long-lived assets, which were evaluated at the asset level. The impairment was the result of an analysis of the carrying value of the assets and our inability to objectively project future cash flows from the sale or lease of these assets, particularly in light of the impact of the COVID-19 pandemic and resulting global economic disruption. Prior to performing the impairment analysis of our long-lived assets on a group level as of December 31, 2019, the Company conducted an evaluation of the carrying amount of certain specific long-lived assets that are non-strategic to the core operations of the business and recorded impairment charges of $396. The Company did not record any further impairment of its long-lived assets. The valuation of impaired equipment is a Level 3 non-recurring fair value measurement. Impaired assets discussed above were written down to zero value. |
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 investments in joint ventures. |
Lease Obligations | Lease Obligations At the inception of a lease, Deep Down evaluates the agreement to determine whether the lease will be accounted for as an operating or finance 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 if the contract contains a substantial penalty for failure to renew or extend the lease, it could lead the lessee to conclude it has a significant economic incentive to extend the lease beyond the base rental period. Deep Down leases land, buildings, vehicles, and certain equipment under non-cancellable operating leases. The Company leases office, indoor manufacturing, warehouse, and operating space in Houston, Texas and leases storage space in Mobile, Alabama to house its 3,400 metric ton carousel system. |
Lease Concessions | Lease Concessions As it relates to lease concessions related to its leases affected by economic disruption caused by the COVID-19 pandemic, the Company elected to account for the deferred payments as variable lease payments. As such, the Company recorded a reduction to rent expense in the period of the deferral. When the Company later incurs the deferred rent, it will recognize it as variable rent expense. |
PPP Loan Payable | PPP Loan Payable The Company elected to account for the PPP loan received as a debt arrangement. This debt is recorded on the consolidated balance sheets as a liability, both current and long-term. Interest is accrued over the term of the loan at the effective interest rate. Debt will be derecognized when the debt is extinguished. Debt is extinguished when either the debtor pays the creditor or the debtor is legally released from being the primary obligor. A PPP loan is forgiven in total or in part only after the SBA has paid the lender the amount of the PPP loan the SBA has determined is eligible for forgiveness, at which point, the lender should notify the borrower of the forgiveness of the PPP loan. When the debt is extinguished, any amount that is forgiven (including accrued but unpaid interest) is recognized in the income statement as a gain upon debt extinguishment; however, there is no guarantee that any portion of the debt balance will be forgiven. |
Income Taxes | Income Taxes We follow the asset and liability method of accounting for income taxes. This method considers 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, 2020 and 2019 we had two types of share-based compensation: stock options and restricted stock. See further discussion in Note 6. |
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. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12 “Income Taxes (Topic 740).” Topic 740 is effective for fiscal years and interim periods beginning after December 15, 2020. This update simplifies the accounting for income taxes by removing certain exceptions such as the exception to the incremental approach for intra-period tax allocation, the exception to the requirement to recognize a deferred tax liability for equity method investments, the exception to the ability not to recognize a deferred tax liability for a foreign subsidiary and the exception to the general methodology for calculating income taxes in an interim period. The adoption of ASU No. 2019-12 is not expected to have a material impact on our financial statements and disclosures. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments,” as modified by subsequently issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” The guidance introduces a new credit reserving model known as the Current Expected Credit Loss (“CECL”) model, which is based on expected losses, and differs significantly from the incurred loss approach used today. The CECL model requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. These ASUs affect an entity to varying degrees depending on the credit quality for the assets held by the entity, their duration and how the entity applies current US GAAP. These ASUs were initially effective for the Company beginning January 1, 2020. In November 2019, the FASB issued ASU No. 2019-10 “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates.” The FASB issued this update to extend and simplify how effective dates are staggered between larger public companies and all other entities for the aforementioned major updates. Topic 326 is effective for fiscal years and interim periods beginning after December 15, 2022 for smaller reporting companies. We are currently evaluating the impact of these updates on our financial statements and related disclosures, but at this time, we do not expect a material impact on our financial statements and disclosures. |
2. LEASES (Tables)
2. LEASES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Operating lease right to use | The following tables present information about our operating leases: December 31, 2020 December 31, 2019 Assets: Right-of-use operating lease assets $ 3,174 $ 4,334 Liabilities: Current lease liabilities 1,261 1,181 Non-current lease liabilities 1,951 3,180 Total lease liabilities $ 3,212 $ 4,361 |
Components of lease expense | The components of our lease expense were as follows: Year Ended December 31, 2020 2019 Operating lease expense included in Cost of sales $ 977 $ 1,238 Operating lease expense included in SG&A $ 139 $ 240 Short term lease expense $ 194 $ 309 Total lease expense $ 1,310 $ 1,787 Lease Term and Discount Rate: December 31, 2020 December 31, 2019 Weighted-average remaining lease terms (years) on operating leases 2.43 3.28 Weighted-average discount rates on operating leases 5.374% 5.374% |
Future minimum lease payments | Present value of lease liabilities: Years ending December 31, Operating Leases 2021 1,399 2022 1,415 2023 597 2024 8 Thereafter 4 Total minimum lease payments $ 3,423 Less: Interest (211 ) Present value of lease liabilities $ 3,212 |
3. REVENUE FROM CONTRACTS WIT_2
3. REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue - Contract Revenue | The following table presents our revenues disaggregated by fixed price and service contracts. Sales taxes are excluded from revenues. Year Ended December 31, 2020 2019 Fixed Price Contracts $ 8,664 $ 12,337 Service Contracts 4,313 6,578 Total $ 12,977 $ 18,915 |
Schedule of earnings in excess of billings on uncompleted contracts | 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”. December 31, 2020 December 31, 2019 Costs incurred on uncompleted contracts $ 2,098 $ 1,687 Estimated earnings on uncompleted contracts 3,153 2,294 5,251 3,981 Less: Billings to date on uncompleted contracts (5,792 ) (3,790 ) $ (541 ) $ 191 Included in the accompanying consolidated balance sheets under the following captions: Contract assets $ 189 $ 814 Contract liabilities (730 ) (623 ) $ (541 ) $ 191 |
4. PROPERTY, PLANT AND EQUIPM_2
4. PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Net Property, plant and equipment | Property, plant and equipment consisted of the following: Range of December 31, 2020 December 31, 2019 Asset Lives Buildings and improvements $ 285 $ 285 7 - 36 years Leasehold improvements 906 896 2 - 5 years Equipment 12,343 17,887 2 - 30 years Furniture, computers and office equipment 907 901 2 - 8 years Construction in progress 84 64 – Total property, plant and equipment 14,525 20,033 Less: Accumulated depreciation (11,921 ) (12,069 ) Property, plant and equipment, net $ 2,604 $ 7,964 |
5. INCOME OR LOSS PER COMMON _2
5. INCOME OR LOSS PER COMMON SHARE (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Net loss per share: | |
Reconciliation of number of shares in earnings per share calculation | The following is a reconciliation of the number of shares used in the basic and diluted net income or loss per common share calculation: Year Ended December 31, 2020 2019 Numerator: Net loss $ (6,057 ) $ (2,774 ) Denominator: Weighted average number of common shares outstanding 12,495 13,386 Denominator for diluted earnings per share 12,495 13,386 Net loss per common share outstanding, basic and fully diluted $ (0.48 ) $ (0.21 ) |
6. SHARE-BASED COMPENSATION (Ta
6. SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Restricted stock activity | The following table summarizes the activity of our nonvested restricted shares for the years ended December 31, 2020 and 2019: Restricted Weighted- Nonvested at December 31, 2018 230 $ 0.83 Granted 200 0.65 Vested (170 ) 0.78 Nonvested at December 31, 2019 260 $ 0.72 Granted – – Vested (110 ) 0.82 Cancellations & Forfeitures (150 ) 0.65 Nonvested at December 31, 2020 – $ – |
Nonvested stock options | The following table summarizes the activity of our nonvested stock options for the years ended December 31, 2020 and 2019: Shares Underlying Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Outstanding at December 31, 2018 – $ – – Granted 300 0.70 Vested (75 ) 0.75 Outstanding at December 31, 2019 225 $ 0.68 4.7 Granted 200 0.47 Vested (225 ) 0.59 Outstanding at December 31, 2020 200 $ 0.57 4.1 Exercisable at December 31, 2020 300 $ 0.63 3.8 |
7. INCOME TAXES (Tables)
7. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Provision for income taxes | Income tax (benefit) expense is comprised of the following: Year Ended December 31, 2020 2019 Federal: Current $ – $ – Deferred 10 5 Total $ 10 $ 5 State: Current $ 13 $ (8 ) Deferred (10 ) (5 ) Total $ 3 $ (13 ) Total income tax expense (benefit) $ 13 $ (8 ) |
Reconciliation of effective income tax rate | Income tax expense (benefit) differs from the amount computed by applying the U.S. statutory income tax rate to loss before income taxes for the reasons set forth below. Year Ended December 31, 2020 2019 Income tax benefit at federal statutory rate (21.00)% (21.00)% State taxes, net of federal benefit 0.01 % (0.50)% Valuation allowance 20.76 % 19.98 % Research and development credits 0.21 % 0.79 % Other permanent differences 0.24 % 0.44 % Total effective rate 0.21 % (0.29)% |
Schedule of deferred taxes | The tax effects of the temporary differences and carry forwards are as follows: December 31, 2020 2019 Deferred tax assets: Net operating loss carryforwards $ 5,339 $ 4,521 R&D and other credit carryforwards 650 663 Share-based compensation 774 757 Intangible amortization 6 11 Allowance for bad debt 18 2 Other 137 193 Total deferred tax assets $ 6,924 $ 6,147 Less: valuation allowance (6,637 ) (5,385 ) Net deferred tax assets $ 287 $ 762 Deferred tax liabilities: Depreciation on property and equipment $ (287 ) $ (762 ) Total deferred tax liabilities $ (287 ) $ (762 ) Net deferred tax position $ – $ – |
1. DESCRIPTION OF BUSINESS AN_3
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (Details Narrative) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020USD ($)Integer | Dec. 31, 2019USD ($)Integer | Dec. 31, 2018USD ($) | |
Cash | $ 3,745 | $ 3,523 | $ 2,015 |
Working capital | $ 4,080 | $ 4,939 | |
Number of reportable segment | Integer | 1 | 1 | |
Allowance for doubtful accounts | $ 84 | $ 50 | |
Bad debt expense | 238 | 20 | |
Loss on asset impairment | 4,490 | $ 396 | |
Asset Impairment [Member] | |||
Loss on asset impairment | 1,890 | ||
Depreciation Expense [Member] | |||
Loss on asset impairment | $ 430 | ||
Customer 1 [Member] | Sales [Member] | |||
Concentration risk percentage | 43.00% | 44.00% | |
Customer 1 [Member] | Accounts Receivable [Member] | |||
Concentration risk percentage | 52.00% | 41.00% | |
Customer 2 [Member] | Sales [Member] | |||
Concentration risk percentage | 10.00% | 20.00% | |
Customer 2 [Member] | Accounts Receivable [Member] | |||
Concentration risk percentage | 12.00% | 17.00% | |
Customer 3 [Member] | Sales [Member] | |||
Concentration risk percentage | 8.00% | 7.00% | |
Customer 3 [Member] | Accounts Receivable [Member] | |||
Concentration risk percentage | 9.00% | 9.00% | |
Customer 4 [Member] | Sales [Member] | |||
Concentration risk percentage | 8.00% | 6.00% | |
Customer 5 [Member] | Sales [Member] | |||
Concentration risk percentage | 5.00% | 5.00% |
2. LEASES (Details - Operating
2. LEASES (Details - Operating lease info) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Right of use operating lease assets | $ 3,174 | $ 4,334 |
Current lease liabilities | 1,261 | 1,181 |
Non-current lease liabilities | 1,951 | 3,180 |
Total lease liabilities | $ 3,212 | $ 4,361 |
2. LEASES (Details - Operatin_2
2. LEASES (Details - Operating Lease Expense) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Components of lease expense | ||
Short term lease expense | $ 194 | $ 309 |
Total lease expense | $ 1,310 | $ 1,787 |
Weighted average remaining lease (years) terms on operating leases | 2 years 5 months 5 days | 3 years 3 months 11 days |
Weighted average discount rates on operating leases | 5.374% | 5.374% |
Cost of Sales [Member] | ||
Components of lease expense | ||
Operating lease expense | $ 977 | $ 1,238 |
Selling, General and Administrative Expenses [Member] | ||
Components of lease expense | ||
Operating lease expense | $ 139 | $ 240 |
2. LEASES (Details - Minimum le
2. LEASES (Details - Minimum lease payments) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Future minimum lease payment 2021 | $ 1,399 | |
Future minimum lease payment 2022 | 1,415 | |
Future minimum lease payment 2023 | 597 | |
Future minimum lease payment 2024 | 8 | |
Future minimum lease payment thereafter | 4 | |
Total minimum lease payments | 3,423 | |
Less: interest | (211) | |
Present value of lease liabilities | $ 3,212 | $ 4,361 |
2. LEASES (Details Narrative)
2. LEASES (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Sale/leaseback transactions | $ 0 | $ 0 |
3. REVENUE FROM CONTRACTS WIT_3
3. REVENUE FROM CONTRACTS WITH CUSTOMERS (Details - Disaggregation of Revenue) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Revenues | $ 12,977 | $ 18,915 |
Fixed-price Contract [Member] | ||
Revenues | 8,664 | 12,337 |
Service Contracts [Member] | ||
Revenues | $ 4,313 | $ 6,578 |
3. REVENUE FROM CONTRACTS WIT_4
3. REVENUE FROM CONTRACTS WITH CUSTOMERS (Details - Contract balances) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Billings In Excess Of Costs And Estimated Earnings On Uncompleted Contracts And Deferred Revenues | ||
Costs incurred on uncompleted contracts | $ 2,098 | $ 1,687 |
Estimated earnings on uncompleted contracts | 3,153 | 2,294 |
Gross costs and estimated earnings | 5,251 | 3,981 |
Less: Billings to date on uncompleted contracts | (5,792) | (3,790) |
Costs incurred plus estimated earning less billings on uncompleted contracts, net | (541) | 191 |
Included in the accompanying condensed consolidated balance sheets under the following captions: | ||
Contract Assets | 189 | 814 |
Contract Liabilities | (730) | (623) |
Costs incurred plus estimated earning less billings on uncompleted contracts | $ (541) | $ 191 |
4. PROPERTY, PLANT AND EQUIPM_3
4. PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 14,525 | $ 20,033 |
Less: Accumulated depreciation and amortization | (11,921) | (12,069) |
Property, plant and equipment, net | 2,604 | 7,964 |
Building and improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 285 | 285 |
Range of Asset Lives | 7 to 36 years | |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 906 | 896 |
Range of Asset Lives | 2 to 5 years | |
Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 12,343 | 17,887 |
Range of Asset Lives | 2 to 30 years | |
Furniture, computers and office equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 907 | 901 |
Range of Asset Lives | 2 to 8 years | |
Construction in Progress [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 84 | $ 64 |
4. PROPERTY, PLANT AND EQUIPM_4
4. PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense excluded from cost of sales | $ 252 | $ 276 |
Depreciation expense | $ 830 | $ 1,105 |
5. INCOME OR LOSS PER COMMON _3
5. INCOME OR LOSS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Numerator: | ||
Net loss | $ (6,057) | $ (2,774) |
Denominator: | ||
Weighted average number of common shares outstanding | 12,495 | 13,386 |
Denominator for diluted earnings per share | 12,495 | 13,386 |
Net loss per common share outstanding, basic and fully diluted | $ (0.48) | $ (0.21) |
5. INCOME OR LOSS PER COMMON _4
5. INCOME OR LOSS PER COMMON SHARE (Details Narrative) - shares shares in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Net loss per share: | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 300 | 225 |
6. SHARE-BASED COMPENSATION (De
6. SHARE-BASED COMPENSATION (Details - Restricted stock activity) - Restricted Stock [Member] - $ / shares shares in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Restricted Shares | ||
Nonvested Outstanding, beginning balance | 260 | 230 |
Granted | 0 | 200 |
Vested | (110) | (170) |
Cancellations & Forfeitures | (150) | |
Nonvested Outstanding, ending balance | 0 | 260 |
Weighted Average Grant-Date Fair Value | ||
Nonvested Outstanding, beginning balance | $ 0.72 | $ 0.83 |
Granted | 0.65 | |
Vested | 0.82 | 0.78 |
Cancellations & Forfeitures | 0.65 | |
Nonvested Outstanding, ending balance | $ 0.72 |
6. SHARE-BASED COMPENSATION (_2
6. SHARE-BASED COMPENSATION (Details - Stock options) - $ / shares shares in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Outstanding options | ||
Outstanding, beginning balance | 225 | 0 |
Granted | 200 | 300 |
Vested | (225) | (75) |
Outstanding, ending balance | 200 | 225 |
Outstanding, exercisable | 300 | |
Weighted Average Exercise Price | ||
Exercise Price, beginning balance | $ 0.68 | |
Granted | 0.47 | 0.7 |
Vested | 0.59 | 0.75 |
Exercise Price, ending balance | 0.57 | $ 0.68 |
Exercise Price, exercisable | $ 0.63 | |
Weighted- Average Remaining Contractual Term (in years) | ||
Weighted- Average Remaining Contractual Term | 4 years 1 month 6 days | 4 years 8 months 12 days |
Weighted- Average Remaining Contractual Term, exercisable | 3 years 9 months 18 days |
6. SHARE-BASED COMPENSATION (_3
6. SHARE-BASED COMPENSATION (Details Narrative) - Restricted Stock Awards [Member] - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Share-based compensation | $ 117 | $ 250 |
Unamortized estimated fair value of restricted stock awards | $ 48 | $ 134 |
Unamortized expense recognition period | 4 months 6 days |
7. TREASURY STOCK (Details Narr
7. TREASURY STOCK (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 23, 2019 | |
Stock purchased, Value | $ 525 | $ 222 | |
Treasury stock shares | 3,367,145 | 2,620,830 | |
Shares price | $ 0.37 | ||
2018 Repurchase Program [Member] | |||
Stock purchased, Value | $ 218 | ||
Stock repurchases, Share | 588,000 | ||
2019 Repurchase Program [Member] | |||
Stock purchased, Value | $ 524 | $ 4 | |
Stock repurchases, Share | 743,000 | 6,000 | |
Shares authorized to be repurchase | 500,000 | ||
2019 Repurchase Program [Member] | Additional [Member] | |||
Stock purchased, Value | $ 1 | ||
Stock repurchases, Share | 3,000 | ||
Shares price | $ 0.43 |
8. INCOME TAXES (Details - Prov
8. INCOME TAXES (Details - Provision for income taxes) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Federal: | ||
Current | $ 0 | $ 0 |
Deferred | 10 | 5 |
Total | 10 | 5 |
State: | ||
Current | 13 | (8) |
Deferred | (10) | (5) |
Total | 3 | (13) |
Total income tax expense (benefit) | $ 13 | $ (8) |
8. INCOME TAXES (Details - Tax
8. INCOME TAXES (Details - Tax rates) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Income tax benefit at federal statutory rate | (21.00%) | (21.00%) |
State taxes, net of federal expense | 0.01% | (0.50%) |
Valuation allowance | 20.76% | 19.98% |
Research and development credits | 0.21% | 0.79% |
Other permanent differences | 0.24% | 0.44% |
Total effective rate | 0.21% | (0.29%) |
8. INCOME TAXES (Details - Defe
8. INCOME TAXES (Details - Deferred tax assets) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 5,339 | $ 4,521 |
R&D andother credit carryforwards | 650 | 663 |
Share-based compensation | 774 | 757 |
Intangible amortization | 6 | 11 |
Allowance for bad debt | 18 | 2 |
Other | 137 | 193 |
Total deferred tax assets | 6,924 | 6,147 |
Less: valuation allowance | (6,637) | (5,385) |
Net deferred tax assets | 287 | 762 |
Deferred tax liabilities: | ||
Depreciation on property and equipment | (287) | (762) |
Total deferred tax liabilities | (287) | (762) |
Net deferred tax position | $ 0 | $ 0 |
8. INCOME TAXES (Details Narrat
8. INCOME TAXES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Federal NOL carryforwards | $ 25,017 | |
State NOL carryforwards | 1,148 | |
R&D & other credit carryforwards | 650 | $ 663 |
Uncertain tax positions | $ 0 | |
Operating loss expiration date | Dec. 31, 2034 |
9. COMMITMENTS AND CONTINGENC_2
9. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | ||
Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Letters Of Credit Outstanding | $ 0 | $ 0 | |
Litigation liability | 420 | $ 750 | |
Severance payable | $ 245 | ||
Litigation settlement | $ 750 |
10. RELATED PARTY TRANSACTIONS
10. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2019 | Sep. 30, 2019 | |
Severance payable | $ 245 | |||
Mr. Ronald E. Smith [Member] | ||||
Severance payable | $ 42 | $ 250 | ||
Shares repurchased | 300 | |||
Mr. Ronald E. Smith [Member] | Subsequent Event [Member] | ||||
Severance payable | $ 15 |
11. SMALL BUSINESS ADMINISTRA_2
11. SMALL BUSINESS ADMINISTRATION’S PAYCHECK PROTECTION PROGRAM LOAN (Details Narrative)) - SBA Paycheck Protection Program [Member] $ in Thousands | 4 Months Ended |
Apr. 29, 2020USD ($) | |
Proceeds from loans | $ 1,111 |
Maturity date | Apr. 27, 2022 |
Interest rate | 1.00% |