Loading...
Docoh

Deep Down (DPDW)

Cover

Cover - USD ($)12 Months Ended
Dec. 31, 2021Mar. 28, 2022Jun. 30, 2021
Cover [Abstract]
Document Type10-K
Amendment Flagfalse
Document Annual Reporttrue
Document Transition Reportfalse
Document Period End DateDec. 31,
2021
Document Fiscal Period FocusFY
Document Fiscal Year Focus2021
Current Fiscal Year End Date--12-31
Entity File Number0-30351
Entity Registrant NameDEEP
DOWN, INC.
Entity Central Index Key0001110607
Entity Tax Identification Number75-2263732
Entity Incorporation, State or Country CodeNV
Entity Address, Address Line One18511 Beaumont Highway
Entity Address, City or TownHouston
Entity Address, State or ProvinceTX
Entity Address, Postal Zip Code77049
City Area Code(281)
Local Phone Number517-5000
Title of 12(g) SecurityCommon Stock, $0.001 par value
Entity Well-known Seasoned IssuerNo
Entity Voluntary FilersNo
Entity Current Reporting StatusYes
Entity Interactive Data CurrentYes
Entity Filer CategoryNon-accelerated Filer
Entity Small Businesstrue
Entity Emerging Growth Companyfalse
Entity Shell Companyfalse
Entity Public Float $ 8,672,205
Entity Common Stock, Shares Outstanding12,035,261
Auditor NameMoss Adams, LLP
Auditor LocationHouston, Texas
Auditor Firm ID659

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in ThousandsDec. 31, 2021Dec. 31, 2020
Current assets:
Cash $ 3,676 $ 3,745
Accounts receivable5,929 4,650
Employee retention tax credit receivable650 0
Inventory254 187
Contract assets352 189
Prepaid expenses and other current assets103 151
Total current assets10,964 8,922
Property, plant and equipment, net1,727 2,604
Intangibles, net38 44
Right-of-use operating lease assets1,861 3,174
Other assets136 195
Total assets14,726 14,939
Current liabilities:
Accounts payable and accrued expenses2,310 1,988
Contract liabilities250 730
Current portion of PPP loan payable0 863
Current lease liabilities1,306 1,261
Total current liabilities3,866 4,842
PPP loan payable0 248
Operating lease liability, long-term588 1,951
Total liabilities4,454 7,041
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, 24,500,000 shares authorized at $0.001 par value, 15,906,010 issued at December 31, 2021 and December 31, 202016 16
Additional paid-in capital73,686 73,638
Treasury stock, 3,517,145 shares, at cost(2,809)(2,809)
Accumulated deficit(60,621)(62,947)
Total stockholders' equity10,272 7,898
Total liabilities and stockholders' equity $ 14,726 $ 14,939

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in ThousandsDec. 31, 2021Dec. 31, 2020
Statement of Financial Position [Abstract]
Common Stock, Shares Authorized24,500,000 24,500,000
Common stock par value $ 0.001 $ 0.001
Common Stock, Shares, Issued15,906,010 15,906,010
Treasury stock shares3,517,145 3,517,145

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Income Statement [Abstract]
Revenues $ 17,233 $ 12,977
Cost of sales:
Cost of sales10,733 7,232
Depreciation expense663 830
Total cost of sales11,396 8,062
Gross profit5,837 4,915
Operating expenses:
Selling, general and administrative5,892 6,210
Depreciation and amortization288 252
Asset impairment0 4,490
Total operating expenses6,180 10,952
Operating loss(343)(6,037)
Other (income) expense:
Interest expense, net12 7
Other income, net(2,869)0
Loss on sale of property, plant and equipment76 0
Total other (income) expense(2,781)7
Income (loss) before income tax expense2,438 (6,044)
Income tax expense112 13
Net income (loss) $ 2,326 $ (6,057)
Net income (loss) per share:
Basic $ 0.19 $ (0.48)
Fully diluted $ 0.19 $ (0.48)
Weighted-average shares outstanding:
Basic12,389 12,495
Fully diluted12,454 12,495

CONSOLIDATED STATEMENTS OF CHAN

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in ThousandsCommon Stock [Member]Additional Paid-in Capital [Member]Treasury Stock [Member]Retained Earnings [Member]Total
Beginning balance, value at Dec. 31, 2019 $ 16 $ 73,521 $ (2,284) $ (56,890) $ 14,363
Balance at beginning, shares at Dec. 31, 201915,906
Net income (6,057)(6,057)
Treasury shares purchased (525) (525)
Share-based compensation 117 117
Ending balance, value at Dec. 31, 2020 $ 16 73,638 (2,809)(62,947)7,898
Balance at ending shares at Dec. 31, 202015,906
Net income 2,326 2,326
Share-based compensation 48 48
Ending balance, value at Dec. 31, 2021 $ 16 $ 73,686 $ (2,809) $ (60,621) $ 10,272
Balance at ending shares at Dec. 31, 202115,906

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Cash flows from operating activities:
Net income (loss) $ 2,326 $ (6,057)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Share-based compensation48 117
Depreciation and amortization951 1,082
Loss on sale of property, plant and equipment76 0
Bad debt expense442 238
Non-cash lease (benefit) expense(4)10
Forgiveness of PPP loan(2,222)0
Loss on asset impairment0 4,490
Changes in operating assets and liabilities:
Accounts receivable, net(1,721)(433)
Employee retention tax credit receivable(650)0
Contract assets(163)625
Inventories(67)(187)
Prepaid expenses and other current assets33 (8)
Other assets41 26
Accounts payable and accrued expenses322 (216)
Contract liabilities(479)107
Net cash used in operating activities(1,067)(206)
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment229 0
Purchases of property, plant and equipment(355)(171)
Payments received on note receivable13 13
Net cash used in investing activities(113)(158)
Cash flows from financing activities:
Proceeds from PPP loan1,111 1,111
Repurchase of common shares0 (525)
Net cash provided by financing activities1,111 586
Change in cash(69)222
Cash, beginning of year3,745 3,523
Cash, end of year $ 3,676 $ 3,745

DESCRIPTION OF BUSINESS AND SUM

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES12 Months Ended
Dec. 31, 2021
Accounting Policies [Abstract]
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATESNOTE 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 direct wholly owned subsidiary, Deep Down, Inc., a Delaware corporation (“Deep Down Delaware”,
and together with Deep Down Nevada, “Deep Down”, “we”, “us” or the “Company”), is an energy
services company that provides equipment and support services to the world’s energy and offshore industries. Deep Down provides
innovative solutions to complex customer challenges presented between the production facility and the energy source. Deep Down's core
services and technological solutions include distribution system installation support and engineering services, umbilical terminations,
loose-tube steel flying leads, and related services. Additionally, Deep Down's team can support subsea engineering, manufacturing, installation,
commissioning, and maintenance projects located anywhere in the world. Liquidity Deep Down’s cash on hand was $ 3,676 7,098 3,745 4,080 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, potential
sales of PP&E, disciplined capital investments, and securing a credit facility. However, given the volatility in oil prices and the
impact on global economic activity caused by the COVID-19 pandemic, as well as recent increases in raw materials costs and ongoing supply
chain constraints, 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 alignment and limiting overhead spending and
research and development efforts to only critical items. 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, 2021 and 2020. 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, 2021 and 2020,
the Company’s operations were organized as one reportable segment. 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 which, 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, 2021 and 2020 due to their short-term maturities. The carrying values of our
notes receivable approximate their fair values at December 31, 2021 and 2020 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, 2021 and 2020, the Company estimated the allowance for
doubtful accounts requirement to be $ 525 84 442 238 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 energy industry. Customers may be similarly affected
by economic and other changes in the energy industry. For the year ended December 31, 2021, our five largest customers accounted for 44 13 11 6 6 43 10 8 8 5 As of December 31, 2021, three of our customers
accounted for 34 29 10 52 12 9 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, 2021, the Company
conducted assessments of whether impairment indicators were present that indicate the carrying amount of its long-lived asset (group)
might not be recoverable and determined that no such events or changes in circumstances were present. During the year ended December 31, 2020, the Company
recorded a charge of $ 4,490 The valuation of impaired equipment is a Level
3 non-recurring fair value measurement. Impaired assets discussed above were written down to zero value. 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 and 3,500 metric ton carousel systems. 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. 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, 2021, the Company’s shared-based compensation was in the form of stock options.
At December 31, 2020, the Company 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 did not have a material impact on our financial statements and disclosures. 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.

LEASES

LEASES12 Months Ended
Dec. 31, 2021
Leases
LEASESNOTE 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. As of December 31, 2021 and 2020, 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:
Operating lease assets and liabilities
December 31, 2021 December 31, 2020
Assets:
Right-of-use assets $ 1,861 $ 3,174
Liabilities:
Current lease liabilities 1,306 1,261
Non-current lease liabilities 588 1,951
Total lease liabilities $ 1,894 $ 3,212 The components of our lease expense were as follows:
Components of lease expense
Year Ended December 31,
2021 2020
Operating lease expense included in Cost of sales $ 1,259 $ 977
Operating lease expense included in SG&A 169 139
Short term lease expense 309 194
Total lease expense $ 1,737 $ 1,310
December 31, 2021 December 31, 2020
Weighted-average remaining lease terms on operating leases (yrs.) 1.43 2.43
Weighted-average discount rates on operating leases 5.374 5.374 For the year ended December 31, 2021, the Company did not have any
sale/leaseback transactions. Present value of lease liabilities:
Future minimum lease payments
Years ending December 31, Operating Leases
2022 $ 1,371
2023 582
2024 8
2025 5
Total lease payments $ 1,966
Less: Interest (72 )
Present value of lease liabilities $ 1,894

REVENUE FROM CONTRACTS WITH CUS

REVENUE FROM CONTRACTS WITH CUSTOMERS12 Months Ended
Dec. 31, 2021
Revenue from Contract with Customer [Abstract]
REVENUE FROM CONTRACTS WITH CUSTOMERSNOTE 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.
Disaggregation of Revenues
Year Ended December 31,
2021 2020
Fixed Price Contracts $ 6,867 $ 8,664
Service Contracts 10,366 4,313
Total $ 17,233 $ 12,977 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 or 60 days depending
on the customer. 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 2021 and 2020, 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”.
Schedule of earnings in excess of billings on uncompleted contracts
December 31, 2021 December 31, 2020
Costs incurred on uncompleted contracts $ 1,312 $ 2,098
Estimated earnings on uncompleted contracts 1,485 3,153
Gross costs and estimated earnings 2,797 5,251
Less: Billings to date on uncompleted contracts (2,695 ) (5,792 )
Costs incurred plus estimated earning less billings on uncompleted contracts, net $ 102 $ (541 )
Included in the accompanying consolidated balance sheets under the following
captions:
Contract assets $ 352 $ 189
Contract liabilities (250 ) (730 )
Costs incurred plus estimated earning less billings on uncompleted contract $ 102 $ (541 ) The contract asset and liability balances at December
31, 2021 and 2020 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.

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT12 Months Ended
Dec. 31, 2021
Property, Plant and Equipment [Abstract]
PROPERTY, PLANT AND EQUIPMENTNOTE 4: PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following:
Net Property, plant and equipment
Range of
December 31, 2021 December 31, 2020 Asset Lives
Buildings and improvements $ 285 $ 285 7 - 36 years
Leasehold improvements 899 906 2 - 5 years
Equipment 11,885 12,343 2 - 30 years
Furniture, computers and office equipment 429 907 2 - 8 years
Construction in progress 60 84 –
Total property, plant and equipment 13,558 14,525
Less: Accumulated depreciation and amortization (11,831 ) (11,921 )
Property, plant and equipment, net $ 1,727 $ 2,604 Depreciation expense included in cost of sales
in the accompanying consolidated statements of operations was $ 663 830 288 252 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.

EARNINGS PER COMMON SHARE

EARNINGS PER COMMON SHARE12 Months Ended
Dec. 31, 2021
Net income (loss) per share:
EARNINGS PER COMMON SHARENOTE 5: EARNINGS PER COMMON SHARE Basic earnings per share (“EPS”) is
calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted EPS is calculated
by dividing net income (loss) by the weighted-average number of common shares and the dilutive effect of common stock equivalents (warrants,
nonvested stock awards and stock options) using the treasury method. In each relevant period, the net income used
in the basic and diluted EPS calculations is the same. The following table reconciles the weighted-average basic number of common shares
outstanding and the weighted-average diluted number of common shares deemed outstanding for the purpose of calculating basic and diluted
EPS.
Reconciliation of number of shares in earnings per share calculation
Year Ended December 31,
2021 2020
Numerator:
Net income (loss) $ 2,326 $ (6,057 )
Denominator:
Weighted average number of common shares outstanding:
Basic 12,389 12,495
Diluted 12,454 12,495
Earnings (loss) per common share outstanding:
Basic $ 0.19 $ (0.48 )
Diluted $ 0.19 $ (0.48 ) At December 31, 2021, there were outstanding options
that were vested and exercisable into 150 300

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION12 Months Ended
Dec. 31, 2021
Share-based Payment Arrangement [Abstract]
SHARE-BASED COMPENSATIONNOTE 6: SHARE-BASED COMPENSATION The following table summarizes the activity of
our nonvested restricted shares for the years ended December 31, 2021 and 2020:
Nonvested restricted stock activity
Restricted Weighted-
Nonvested at December 31, 2019 260 $ 0.72
Granted – –
Vested (110 ) 0.82
Cancellations & Forfeitures (150 ) 0.65
Nonvested at December 31, 2020 – $ –
Granted – –
Vested – –
Cancellations & Forfeitures – –
Nonvested at December 31, 2021 – $ – The following table summarizes the activity of our nonvested stock
options for the years ended December 31, 2021 and 2020:
Schedule of option activity
Shares Underlying Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years)
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
Vested (150 ) 0.51
Outstanding at December 31, 2021 50 $ 0.76 3.1
Exercisable at December 31, 2021 450 $ 0.59 3.9 For the years ended December 31, 2021 and 2020,
we recognized a total of $ 48 117 0 48 0.05

TREASURY STOCK

TREASURY STOCK12 Months Ended
Dec. 31, 2021
Equity [Abstract]
TREASURY STOCKNOTE 7: TREASURY STOCK During the year ended December 31, 2020, the Company
repurchased an aggregate of 743 524 495 248 Additionally, the Company purchased 3 0.43 1 No shares of common stock were purchased during
the year ended December 31, 2021. On December 31, 2021, the Company had 3,517 Treasury shares are accounted for using the cost
method.

INCOME TAXES

INCOME TAXES12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]
INCOME TAXESNOTE 8: INCOME TAXES Income tax expense is comprised of
the following:
Provision for income taxes
Year Ended December 31,
2021 2020
Federal:
Current $ 92 $ –
Deferred 20 10
Total $ 112 $ 10
State:
Current $ 20 $ 13
Deferred (20 ) (10 )
Total $ – $ 3
Total income tax expense $ 112 $ 13 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.
Reconciliation of effective income tax rate
Year Ended December 31,
2021 2020
Income tax expense (benefit) at federal statutory rate 21.00 % (21.00 )%
State tax (benefit) expense, net of federal benefit (0.16 )% 0.01 %
Valuation allowance (0.38 )% 20.76 %
Research and development credits 0.48 % 0.21 %
Other permanent differences 0.25 % 0.24 %
PPP loan forgiveness (19.13 )% 0.00 %
Foreign withholding taxes 2.97 % 0.00 %
Other, net (0.45 )% 0.00 %
Total effective rate 4.58 % 0.21 % 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:
Schedule of deferred taxes
December 31,
2021 2020
Deferred tax assets:
Net operating loss carryforwards $ 5,191 $ 5,339
R&D and other credit carryforwards 638 650
Share-based compensation 784 774
Intangible amortization 1 6
Allowance for bad debt 115 18
Other 51 137
Total deferred tax assets $ 6,780 $ 6,924
Less: valuation allowance (6,628 ) (6,637 )
Net deferred tax assets $ 152 $ 287
Deferred tax liabilities:
Depreciation on property and equipment $ (152 ) $ (287 )
Total deferred tax liabilities $ (152 ) $ (287 )
Net deferred tax position $ – $ – We have $ 24,223 1,380 638 no

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES12 Months Ended
Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIESNOTE 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 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 was 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 December 31, 2021. 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.
On March 9, 2022, the parties convened for mediation but did not reach 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 paid GE an aggregate of $750, 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 no

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS12 Months Ended
Dec. 31, 2021
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONSNOTE 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 provided 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 15 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 occurred prior to December 31, 2021, and subject to certain other conditions. Such carousels were not sold
prior to December 31, 2021, and $ 5 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. On January 5, 2022, the Company repurchased 234 150 119

SMALL BUSINESS ADMINISTRATION_S

SMALL BUSINESS ADMINISTRATION’S PAYCHECK PROTECTION PROGRAM LOAN12 Months Ended
Dec. 31, 2021
Small Business Administrations Paycheck Protection Program Loan
SMALL BUSINESS ADMINISTRATION’S PAYCHECK PROTECTION PROGRAM LOANNOTE 11: SMALL BUSINESS ADMINISTRATION’S
PAYCHECK PROTECTION PROGRAM LOAN The Company obtained a $ 1,111 1,111 The Company obtained a second $ 1,111 1,111

Employee Retention Credit

Employee Retention Credit12 Months Ended
Dec. 31, 2021
Employee Retention Credit
Employee Retention CreditNOTE 12: Employee
Retention Credit Under the provisions of the Coronavirus Aid, Relief,
and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020 and the subsequent extension of the CARES Act,
the Company was eligible for a refundable employee retention credit subject to certain criteria. Since there are no generally accepted
accounting principles for for-profit business entities that receive government assistance that is not in the form of a loan, an income
tax credit or revenue from a contract with a customer, we determined the appropriate accounting treatment by analogy to other guidance.
The Company accounted for the employee retention credit by analogy to International Accounting Standards (IAS) 20, “Accounting for
Government Grants and Disclosure of Government Assistance, of International Financial Reporting Standards (IFRS).” Under an IAS 20 analogy, a business entity would
recognize the employee retention credit on a systematic basis over the periods in which the entity recognizes the payroll expenses for
which the grant (i.e., tax credit) is intended to compensate when there is reasonable assurance (i.e., it is probable) that the entity
will comply with any conditions attached to the grant and the grant (i.e., tax credit) will be received. The Company recognized a $ 650 650

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS12 Months Ended
Dec. 31, 2021
Subsequent Events [Abstract]
SUBSEQUENT EVENTSNOTE 13: SUBSEQUENT EVENTS We have evaluated subsequent events through the
date the consolidated financial statements were filed with the Securities and Exchange Commission. On February 22, 2022, Deep Down, Inc., a Nevada
corporation. (the "Company”), entered into an Agreement and Plan of Merger (the "Merger Agreement”) providing for
the merger of the Company with the Company’s wholly-owned subsidiary, Koil Energy Solutions, Inc. (the "Merger Sub” and,
the transaction, the "Merger”). As permitted by Chapter 92A.180 of Nevada Revised Statutes, the purpose of the Merger is to
effect a change of the Company’s name from Deep Down, Inc., to Koil Energy Solutions, Inc. (the "Name Change”). On February 25, 2022, in connection with the
foregoing, the Company filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority ("FINRA”),
requesting confirmation of the Name Change. On February 28, 2022, in connection with the foregoing, the Company filed an Issuer Company-Related
Action Notification Form with FINRA, requesting a change of the Company’s ticker symbol (the "Symbol Change”). Subject
to approval by FINRA, the Name Change and Symbol Change will not affect the rights of the Company’s security holders. The Company’s
securities will continue to be quoted on the OTC Markets. Following the Name Change, the stock certificates, which reflect the name of
the Company prior to the Merger, will continue to be valid. Certificates reflecting the Name Change will be issued in due course as old
stock certificates are tendered for exchange or transfer to the Company’s transfer agent.

DESCRIPTION OF BUSINESS AND S_2

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (Policies)12 Months Ended
Dec. 31, 2021
Accounting Policies [Abstract]
Description of BusinessDescription of Business Deep Down, Inc., a Nevada corporation (“Deep
Down Nevada”), and its direct wholly owned subsidiary, Deep Down, Inc., a Delaware corporation (“Deep Down Delaware”,
and together with Deep Down Nevada, “Deep Down”, “we”, “us” or the “Company”), is an energy
services company that provides equipment and support services to the world’s energy and offshore industries. Deep Down provides
innovative solutions to complex customer challenges presented between the production facility and the energy source. Deep Down's core
services and technological solutions include distribution system installation support and engineering services, umbilical terminations,
loose-tube steel flying leads, and related services. Additionally, Deep Down's team can support subsea engineering, manufacturing, installation,
commissioning, and maintenance projects located anywhere in the world.
LiquidityLiquidity Deep Down’s cash on hand was $ 3,676 7,098 3,745 4,080 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, potential
sales of PP&E, disciplined capital investments, and securing a credit facility. However, given the volatility in oil prices and the
impact on global economic activity caused by the COVID-19 pandemic, as well as recent increases in raw materials costs and ongoing supply
chain constraints, 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 alignment and limiting overhead spending and
research and development efforts to only critical items. Summary of Significant Accounting Policies and Estimates
Principles of ConsolidationPrinciples of Consolidation The consolidated financial statements include
the accounts of Deep Down and its wholly owned subsidiary for the years ended December 31, 2021 and 2020. All intercompany transactions
and balances have been eliminated.
Use of EstimatesUse 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.
SegmentsSegments For the years ended December 31, 2021 and 2020,
the Company’s operations were organized as one reportable segment.
Cash and Cash EquivalentsCash 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 which, at times, may exceed federally insured limits.
Fair Value of Financial InstrumentsFair 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, 2021 and 2020 due to their short-term maturities. The carrying values of our
notes receivable approximate their fair values at December 31, 2021 and 2020 because the interest rates approximate current market rates.
Accounts ReceivableAccounts 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, 2021 and 2020, the Company estimated the allowance for
doubtful accounts requirement to be $ 525 84 442 238
Concentration of Revenues and Credit RiskConcentration 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 energy industry. Customers may be similarly affected
by economic and other changes in the energy industry. For the year ended December 31, 2021, our five largest customers accounted for 44 13 11 6 6 43 10 8 8 5 As of December 31, 2021, three of our customers
accounted for 34 29 10 52 12 9
Property, plant and equipmentProperty, 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, 2021, the Company
conducted assessments of whether impairment indicators were present that indicate the carrying amount of its long-lived asset (group)
might not be recoverable and determined that no such events or changes in circumstances were present. During the year ended December 31, 2020, the Company
recorded a charge of $ 4,490 The valuation of impaired equipment is a Level
3 non-recurring fair value measurement. Impaired assets discussed above were written down to zero value.
Lease ObligationsLease 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 and 3,500 metric ton carousel systems.
Lease ConcessionsLease 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.
Income TaxesIncome 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 CompensationShare-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, 2021, the Company’s shared-based compensation was in the form of stock options.
At December 31, 2020, the Company had two types of share-based compensation: stock options and restricted stock. See further discussion
in Note 6.
Earnings or Loss per Common ShareEarnings 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 StandardsRecently 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 did not have a material impact on our financial statements and disclosures. 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.

LEASES (Tables)

LEASES (Tables)12 Months Ended
Dec. 31, 2021
Leases
Operating lease assets and liabilitiesOperating lease assets and liabilities
December 31, 2021 December 31, 2020
Assets:
Right-of-use assets $ 1,861 $ 3,174
Liabilities:
Current lease liabilities 1,306 1,261
Non-current lease liabilities 588 1,951
Total lease liabilities $ 1,894 $ 3,212
Components of lease expenseComponents of lease expense
Year Ended December 31,
2021 2020
Operating lease expense included in Cost of sales $ 1,259 $ 977
Operating lease expense included in SG&A 169 139
Short term lease expense 309 194
Total lease expense $ 1,737 $ 1,310
December 31, 2021 December 31, 2020
Weighted-average remaining lease terms on operating leases (yrs.) 1.43 2.43
Weighted-average discount rates on operating leases 5.374 5.374

REVENUE FROM CONTRACTS WITH C_2

REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)12 Months Ended
Dec. 31, 2021
Revenue from Contract with Customer [Abstract]
Disaggregation of RevenuesDisaggregation of Revenues
Year Ended December 31,
2021 2020
Fixed Price Contracts $ 6,867 $ 8,664
Service Contracts 10,366 4,313
Total $ 17,233 $ 12,977
Schedule of earnings in excess of billings on uncompleted contractsSchedule of earnings in excess of billings on uncompleted contracts
December 31, 2021 December 31, 2020
Costs incurred on uncompleted contracts $ 1,312 $ 2,098
Estimated earnings on uncompleted contracts 1,485 3,153
Gross costs and estimated earnings 2,797 5,251
Less: Billings to date on uncompleted contracts (2,695 ) (5,792 )
Costs incurred plus estimated earning less billings on uncompleted contracts, net $ 102 $ (541 )
Included in the accompanying consolidated balance sheets under the following
captions:
Contract assets $ 352 $ 189
Contract liabilities (250 ) (730 )
Costs incurred plus estimated earning less billings on uncompleted contract $ 102 $ (541 )

PROPERTY, PLANT AND EQUIPMENT (

PROPERTY, PLANT AND EQUIPMENT (Tables)12 Months Ended
Dec. 31, 2021
Property, Plant and Equipment [Abstract]
Net Property, plant and equipmentNet Property, plant and equipment
Range of
December 31, 2021 December 31, 2020 Asset Lives
Buildings and improvements $ 285 $ 285 7 - 36 years
Leasehold improvements 899 906 2 - 5 years
Equipment 11,885 12,343 2 - 30 years
Furniture, computers and office equipment 429 907 2 - 8 years
Construction in progress 60 84 –
Total property, plant and equipment 13,558 14,525
Less: Accumulated depreciation and amortization (11,831 ) (11,921 )
Property, plant and equipment, net $ 1,727 $ 2,604

EARNINGS PER COMMON SHARE (Tabl

EARNINGS PER COMMON SHARE (Tables)12 Months Ended
Dec. 31, 2021
Net income (loss) per share:
Reconciliation of number of shares in earnings per share calculationReconciliation of number of shares in earnings per share calculation
Year Ended December 31,
2021 2020
Numerator:
Net income (loss) $ 2,326 $ (6,057 )
Denominator:
Weighted average number of common shares outstanding:
Basic 12,389 12,495
Diluted 12,454 12,495
Earnings (loss) per common share outstanding:
Basic $ 0.19 $ (0.48 )
Diluted $ 0.19 $ (0.48 )

SHARE-BASED COMPENSATION (Table

SHARE-BASED COMPENSATION (Tables)12 Months Ended
Dec. 31, 2021
Share-based Payment Arrangement [Abstract]
Nonvested restricted stock activityNonvested restricted stock activity
Restricted Weighted-
Nonvested at December 31, 2019 260 $ 0.72
Granted – –
Vested (110 ) 0.82
Cancellations & Forfeitures (150 ) 0.65
Nonvested at December 31, 2020 – $ –
Granted – –
Vested – –
Cancellations & Forfeitures – –
Nonvested at December 31, 2021 – $ –
Schedule of option activitySchedule of option activity
Shares Underlying Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years)
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
Vested (150 ) 0.51
Outstanding at December 31, 2021 50 $ 0.76 3.1
Exercisable at December 31, 2021 450 $ 0.59 3.9

INCOME TAXES (Tables)

INCOME TAXES (Tables)12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]
Provision for income taxesProvision for income taxes
Year Ended December 31,
2021 2020
Federal:
Current $ 92 $ –
Deferred 20 10
Total $ 112 $ 10
State:
Current $ 20 $ 13
Deferred (20 ) (10 )
Total $ – $ 3
Total income tax expense $ 112 $ 13
Reconciliation of effective income tax rateReconciliation of effective income tax rate
Year Ended December 31,
2021 2020
Income tax expense (benefit) at federal statutory rate 21.00 % (21.00 )%
State tax (benefit) expense, net of federal benefit (0.16 )% 0.01 %
Valuation allowance (0.38 )% 20.76 %
Research and development credits 0.48 % 0.21 %
Other permanent differences 0.25 % 0.24 %
PPP loan forgiveness (19.13 )% 0.00 %
Foreign withholding taxes 2.97 % 0.00 %
Other, net (0.45 )% 0.00 %
Total effective rate 4.58 % 0.21 %
Schedule of deferred taxesSchedule of deferred taxes
December 31,
2021 2020
Deferred tax assets:
Net operating loss carryforwards $ 5,191 $ 5,339
R&D and other credit carryforwards 638 650
Share-based compensation 784 774
Intangible amortization 1 6
Allowance for bad debt 115 18
Other 51 137
Total deferred tax assets $ 6,780 $ 6,924
Less: valuation allowance (6,628 ) (6,637 )
Net deferred tax assets $ 152 $ 287
Deferred tax liabilities:
Depreciation on property and equipment $ (152 ) $ (287 )
Total deferred tax liabilities $ (152 ) $ (287 )
Net deferred tax position $ – $ –

DESCRIPTION OF BUSINESS AND S_3

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (Details Narrative) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Product Information [Line Items]
Cash $ 3,676 $ 3,745
Working capital7,098 4,080
Allowance for doubtful accounts525 84
Bad debt expense442 238
Loss on asset impairment $ 0 $ 4,490
Total Revenues [Member] | Customer Concentration Risk [Member] | Customer 1 [Member]
Product Information [Line Items]
Concentration risk percentage44.00%43.00%
Total Revenues [Member] | Customer Concentration Risk [Member] | Customer 2 [Member]
Product Information [Line Items]
Concentration risk percentage13.00%10.00%
Total Revenues [Member] | Customer Concentration Risk [Member] | Customer 3 [Member]
Product Information [Line Items]
Concentration risk percentage11.00%8.00%
Total Revenues [Member] | Customer Concentration Risk [Member] | Customer 4 [Member]
Product Information [Line Items]
Concentration risk percentage6.00%8.00%
Total Revenues [Member] | Customer Concentration Risk [Member] | Customer 5 [Member]
Product Information [Line Items]
Concentration risk percentage6.00%5.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer 1 [Member]
Product Information [Line Items]
Concentration risk percentage34.00%52.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer 2 [Member]
Product Information [Line Items]
Concentration risk percentage29.00%12.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer 3 [Member]
Product Information [Line Items]
Concentration risk percentage10.00%9.00%

LEASES (Details - Operating lea

LEASES (Details - Operating lease info) - USD ($) $ in ThousandsDec. 31, 2021Dec. 31, 2020
Assets:
Right-of-use assets $ 1,861 $ 3,174
Liabilities:
Current lease liabilities1,306 1,261
Non-current lease liabilities588 1,951
Total lease liabilities $ 1,894 $ 3,212

LEASES (Details - Operating L_2

LEASES (Details - Operating Lease Expense) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Short term lease expense $ 309 $ 194
Total lease expense $ 1,737 $ 1,310
Weighted average remaining lease (years) terms on operating leases1 year 5 months 4 days2 years 5 months 4 days
Weighted average discount rates on operating leases5.374%5.374%
Cost of Sales [Member]
Operating lease expense $ 1,259 $ 977
Selling, General and Administrative Expenses [Member]
Operating lease expense $ 169 $ 139

LEASES (Details - Minimum lease

LEASES (Details - Minimum lease payments) - USD ($) $ in ThousandsDec. 31, 2021Dec. 31, 2020
Leases
Future minimum lease payment 2022 $ 1,371
Future minimum lease payment 2023582
Future minimum lease payment 20248
Future minimum lease payment 20255
Total lease payments1,966
Less: interest(72)
Present value of lease liabilities $ 1,894 $ 3,212

REVENUE FROM CONTRACTS WITH C_3

REVENUE FROM CONTRACTS WITH CUSTOMERS (Details - Disaggregation of Revenue) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Disaggregation of Revenue [Line Items]
Revenues $ 17,233 $ 12,977
Fixed-price Contract [Member]
Disaggregation of Revenue [Line Items]
Revenues6,867 8,664
Servicing Contracts [Member]
Disaggregation of Revenue [Line Items]
Revenues $ 10,366 $ 4,313

REVENUE FROM CONTRACTS WITH C_4

REVENUE FROM CONTRACTS WITH CUSTOMERS (Details - Contract balances) - USD ($) $ in ThousandsDec. 31, 2021Dec. 31, 2020
Revenue from Contract with Customer [Abstract]
Costs incurred on uncompleted contracts $ 1,312 $ 2,098
Estimated earnings on uncompleted contracts1,485 3,153
Gross costs and estimated earnings2,797 5,251
Less: Billings to date on uncompleted contracts(2,695)(5,792)
Costs incurred plus estimated earning less billings on uncompleted contracts, net102 (541)
Included in the accompanying consolidated balance sheets under the following captions:
Contract assets352 189
Contract liabilities(250)(730)
Costs incurred plus estimated earning less billings on uncompleted contract $ 102 $ (541)

PROPERTY, PLANT AND EQUIPMENT_2

PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Total property, plant and equipment $ 13,558 $ 14,525
Less: Accumulated depreciation and amortization(11,831)(11,921)
Property, plant and equipment, net1,727 2,604
Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment $ 285 285
Range of Asset Lives7 - 36 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment $ 899 906
Range of Asset Lives2 - 5 years
Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment $ 11,885 12,343
Range of Asset Lives2 - 30 years
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment $ 429 907
Range of Asset Lives2 - 8 years
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment $ 60 $ 84

PROPERTY, PLANT AND EQUIPMENT_3

PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Property, Plant and Equipment [Abstract]
Depreciation expense excluded from cost of sales $ 663 $ 830
Depreciation expense $ 288 $ 252

EARNINGS PER COMMON SHARE (Deta

EARNINGS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Numerator:
Net income (loss) $ 2,326 $ (6,057)
Denominator:
Basic12,389 12,495
Diluted12,454 12,495
Earnings (loss) per common share outstanding:
Basic $ 0.19 $ (0.48)
Diluted $ 0.19 $ (0.48)

EARNINGS PER COMMON SHARE (De_2

EARNINGS PER COMMON SHARE (Details Narrative) - shares12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Outstanding Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount150 300

SHARE-BASED COMPENSATION (Detai

SHARE-BASED COMPENSATION (Details - Restricted stock activity) - Restricted Stock [Member] - $ / shares12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Nonvested Outstanding, beginning balance0 260
Nonvested Outstanding, beginning balance $ 0 $ 0.72
Granted0 0
Granted $ 0 $ 0
Vested0 (110)
Vested $ 0 $ 0.82
Cancellations & Forfeitures0 (150)
Cancellations & Forfeitures $ 0 $ 0.65
Nonvested Outstanding, ending balance0 0
Nonvested Outstanding, ending balance $ 0 $ 0

SHARE-BASED COMPENSATION (Det_2

SHARE-BASED COMPENSATION (Details - Stock options) - $ / shares shares in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020Dec. 31, 2019
Share-based Payment Arrangement [Abstract]
Outstanding, beginning balance200 225
Exercise Price, beginning balance $ 0.57 $ 0.68
Weighted- Average Remaining Contractual Term3 years 1 month 6 days4 years 1 month 6 days4 years 8 months 12 days
Granted200
Granted $ 0.47
Vested(150)(225)
Vested $ 0.51 $ 0.59
Outstanding, ending balance50 200 225
Exercise Price, ending balance $ 0.76 $ 0.57 $ 0.68
Outstanding, exercisable450
Exercise Price, exercisable $ 0.59
Weighted- Average Remaining Contractual Term, exercisable3 years 10 months 24 days

SHARE-BASED COMPENSATION (Det_3

SHARE-BASED COMPENSATION (Details Narrative) - Restricted Stock Awards [Member] - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation $ 48 $ 117
Unamortized estimated fair value of restricted stock awards $ 0 $ 48
Unamortized expense recognition period18 days

TREASURY STOCK (Details Narrati

TREASURY STOCK (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands1 Months Ended12 Months Ended
Dec. 23, 2019Dec. 31, 2020Dec. 31, 2021
Equity, Class of Treasury Stock [Line Items]
Stock repurchases, Share743
Stock purchased, Value $ 525
Common stock held in treasury3,517,000
2019 Repurchase Program [Member]
Equity, Class of Treasury Stock [Line Items]
Stock repurchases, Share495
Stock purchased, Value $ 524
Shares authorized to be repurchase248
2019 Repurchase Program [Member] | Additional [Member]
Equity, Class of Treasury Stock [Line Items]
Stock repurchases, Share3
Stock purchased, Value $ 1
Shares price $ 0.43

INCOME TAXES (Details - Provisi

INCOME TAXES (Details - Provision for income taxes) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Federal:
Current $ 92 $ 0
Deferred20 10
Total112 10
State:
Current20 13
Deferred(20)(10)
Total0 3
Total income tax expense $ 112 $ 13

INCOME TAXES (Details - Tax rat

INCOME TAXES (Details - Tax rates)12 Months Ended
Dec. 31, 2021Dec. 31, 2020
Income Tax Disclosure [Abstract]
Income tax expense (benefit) at federal statutory rate21.00%(21.00%)
State tax (benefit) expense, net of federal benefit(0.16%)0.01%
Valuation allowance(0.38%)20.76%
Research and development credits0.48%0.21%
Other permanent differences0.25%0.24%
PPP loan forgiveness(19.13%)0.00%
Foreign withholding taxes2.97%0.00%
Other, net(0.45%)0.00%
Total effective rate4.58%0.21%

INCOME TAXES (Details - Deferre

INCOME TAXES (Details - Deferred tax assets) - USD ($) $ in ThousandsDec. 31, 2021Dec. 31, 2020
Deferred tax assets:
Net operating loss carryforwards $ 5,191 $ 5,339
R&D and other credit carryforwards638 650
Share-based compensation784 774
Intangible amortization1 6
Allowance for bad debt115 18
Other51 137
Total deferred tax assets6,780 6,924
Less: valuation allowance(6,628)(6,637)
Net deferred tax assets152 287
Deferred tax liabilities:
Depreciation on property and equipment(152)(287)
Total deferred tax liabilities(152)(287)
Net deferred tax position $ 0 $ 0

INCOME TAXES (Details Narrative

INCOME TAXES (Details Narrative) - USD ($) $ in ThousandsDec. 31, 2021Dec. 31, 2020
Income Tax Disclosure [Abstract]
Federal NOL carryforwards $ 24,223
State NOL carryforwards1,380
R&D & other credit carryforwards638 $ 650
Uncertain tax positions $ 0

COMMITMENTS AND CONTINGENCIES (

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)Dec. 31, 2021Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
Letters Of Credit Outstanding $ 0 $ 0
Estimated Litigation Liability $ 0 $ 420

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)Mar. 24, 2022Jan. 05, 2022Dec. 31, 2021Dec. 31, 2020Sep. 30, 2019
Related Party Transaction [Line Items]
Commissions paid $ 5,000
Stock Repurchased During Period, Shares743
Payments for Repurchase of Common Stock0 $ 525,000
Smith [Member]
Related Party Transaction [Line Items]
Stock Repurchased During Period, Shares119 234
Payments for Repurchase of Common Stock $ 150
Mr. Ronald E. Smith [Member]
Related Party Transaction [Line Items]
Severance payable $ 15,000 $ 42,000

SMALL BUSINESS ADMINISTRATION_2

SMALL BUSINESS ADMINISTRATION’S PAYCHECK PROTECTION PROGRAM LOAN (Details Narrative) - SBA Paycheck Protection Program [Member] - USD ($) $ in ThousandsSep. 10, 2021Jun. 29, 2021Mar. 31, 2021Apr. 30, 2020
Offsetting Assets [Line Items]
Proceeds from loans $ 1,111 $ 1,111
Forgiveness recived $ 1,111 $ 1,111

Employee Retention Credit (Deta

Employee Retention Credit (Details Narrative)12 Months Ended
Dec. 31, 2021USD ($)
Employee Retention Credit
[custom:EmployeeRetentionCredit] $ 650
[custom:EmployeeRetentionReceivable-0] $ 650