The accompanying notes are an integral part
of the consolidated financial statements.
The accompanying notes are an integral part
of the consolidated financial statements.
The accompanying notes are an integral part
of the consolidated financial statements.
The accompanying notes are an integral part
of the consolidated financial statements.
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 and indirectly wholly-owned subsidiaries, Deep Down, Inc., a Delaware corporation (“Deep
Down Delaware”); Deep Down International Holdings, LLC, a Nevada limited liability company; and Deep Down Brasil - Solucoes
em Petroleo e Gas, Ltda, a Brazilian limited liability company (“Deep Down Brasil”), (collectively referred to as “Deep
Down”, “we”, “us” or the “Company”) is an oilfield services company specializing in complex
deepwater and ultra-deepwater oil production distribution system support services, serving the worldwide offshore exploration and
production industry. Our services and technological solutions include distribution system installation support and engineering
services, umbilical terminations, loose-tube steel flying leads, flotation and Remote Operated Vehicles (“ROVs”) and
related services. We support subsea engineering, installation, commissioning, and maintenance projects through specialized, highly
experienced service teams and engineered technological solutions. Deep Down’s primary focus is on more complex deepwater
and ultra-deepwater oil production distribution system support services and technologies, used between the platform and the wellhead.
Liquidity
As a deepwater service provider, our revenues,
profitability, cash flows, and future rate of growth are generally dependent on the condition of the global oil and gas industry,
and our customers’ ability to invest capital for offshore exploration, drilling and production and maintain or increase levels
of expenditures for maintenance of offshore drilling and production facilities. Oil and gas prices and the level of offshore drilling
and production activity have historically been characterized by significant volatility. We enter into large, fixed-price contracts
which may require significant lead time and investment. A decline in offshore drilling and production activity could result in
lower contract volume or delays in significant contracts which could negatively impact our earnings and cash flows. Our earnings
and cash flows could also be negatively affected by delays in payments by significant customers or delays in completion of our
contracts for any reason. While our objective is to enter into contracts with our customers that are cash flow positive, we may
not always be able to achieve this objective. We are dependent on our cash flows from operations to fund our working capital requirements
and the uncertainties noted above create risks that we may not achieve our planned earnings or cash flow from operations, which
may require us to raise additional debt or equity capital. There can be no assurance that we could raise additional capital.
During the fiscal years ended December
31, 2015 and 2014, we supplemented the financing of our capital needs primarily through debt and equity financings. Since 2008,
we have maintained a credit facility with Whitney Bank, a state chartered bank (“Whitney”); see additional discussion
in Note 7, “Long-Term Debt”, of the Notes to Consolidated Financial Statements.
Summary of Significant Accounting Policies
and Estimates
Principles of Consolidation
The consolidated financial statements include
the accounts of Deep Down and its wholly-owned subsidiaries for the years ended December 31, 2015 and 2014. All intercompany transactions
and balances have been eliminated.
Reclassifications
Certain prior period amounts have been
reclassified to conform to the current period presentation. These reclassifications have not resulted in any changes to previously
reported net income (loss) or cash flows.
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and reported amounts of revenues and expenses during the reporting period. The most significant estimates used in our financial
statements relate to revenue
recognition where we use percentage-of completion accounting on our
large fixed-price contracts, goodwill and the allowance for doubtful accounts. These estimates require judgments, which we base
on historical experience and on various other assumptions, as well as specific circumstances. Estimates may change as new events
occur, additional information becomes available or operating environments change. Actual results may differ from our estimates.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
Segments
For the years ended December 31, 2015 and
2014, 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 equivalents, trade receivables and payables, and debt instruments. The carrying values of cash equivalents and
trade receivables and payables approximated their fair values at December 31, 2015 and 2014 due to their short-term maturities.
The carrying values of our debt instruments approximate their fair values at December 31, 2015 and 2014 because the interest rates
approximate current market rates.
Accounts Receivable
Trade receivables
are uncollateralized customer obligations due under normal trade terms. We provide an allowance for doubtful trade
receivables based on a specific review of each customer’s trade receivable balance with respect to their ability to
make payments. Generally, we do not charge interest on past due accounts. When specific accounts are determined to require an
allowance, they are expensed by a provision for bad debts in that period. At December 31, 2015 and 2014, we estimated
the allowance for doubtful accounts requirement to be $150 and $498, respectively. Bad debt expense (credit) totaled $70 and
$(19) for the years ended December 31, 2015 and 2014, respectively. The change in our allowance for doubtful accounts is a
result of offsetting our 2014 accounts receivable balance of one of our subsidiaries against the corresponding
allowance of $498.
Concentration of Credit Risk
As of December 31, 2015, three of our customers
accounted for 35 percent, 26 percent and 17 percent of total trade accounts receivable. As of December 31, 2014, three of our customers
accounted for 34 percent, 26 percent and 14 percent of total trade accounts receivable.
For the year ended December 31, 2015, our
five largest customers accounted for 34 percent, 21 percent, 10 percent, 7 percent and 5 percent of total revenues. For
the year ended December 31, 2014, our five largest customers accounted for 26 percent, 19 percent, 11 percent, 7 percent and 7
percent of total revenues.
The loss of one or more of these customers could have a material
impact on our results of operations.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
Inventory
Inventory, which consists of finished goods,
work-in-progress and spare parts and materials used in our operations, is stated at the lower of cost or market, net of reserve
for obsolescence. The obsolescence reserve was $0 as of December 31, 2015 and $205 as of December 31, 2014.
Long-Lived Assets
Property, plant and equipment.
Property,
plant and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is 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
capital 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 statements of operations.
Goodwill.
Goodwill
is the excess of cost of an acquired entity over the amounts assigned to identifiable assets acquired and liabilities assumed in
a business combination. Goodwill is not subject to amortization, but is tested for impairment annually at year-end or more frequently
if an event occurs or circumstances change that would indicate a potential impairment. These circumstances may include an adverse
change in the business climate or a change in the assessment of future operations of a reporting unit.
The Company assesses whether a goodwill
impairment exists using both qualitative and quantitative assessments. The qualitative assessment involves determining whether
events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its
carrying amount, including goodwill. If, based on this qualitative assessment, it is determined that it is not more likely than
not that the fair value of a reporting unit is less than its carrying amount, the Company does not perform a quantitative assessment.
If the qualitative assessment indicates
that it is more likely than not that the fair value of a reporting unit is less than its carrying amount or if the Company elects
not to perform a qualitative assessment, a quantitative assessment or two-step impairment test is performed to determine whether
goodwill impairment exists at the reporting unit.
The first step is to compare the estimated
fair value of each reporting unit with goodwill to its carrying amount, including goodwill. To determine fair value estimates,
the Company uses the income approach based on discounted cash flow analyses, combined with a market-based approach. The market-based
approach considers valuation comparisons of recent public sale transactions of similar businesses and earnings multiples of publicly
traded businesses operating in industries consistent with the reporting unit. If the fair value of a reporting unit is less than
its carrying amount, the second step of the impairment test is performed to determine the amount of impairment loss, if any. The
second step compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If
the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, an impairment loss is recognized in
an amount equal to that excess.
There was no goodwill at any time during
the year ended December 31, 2015. For the year ended December 31, 2014, our quantitative assessment of goodwill, which was a Level
3 fair value determination (based on estimated discounted cash flows), resulted in a goodwill impairment expense of $4,916, which
eliminated the remaining goodwill balance. This result occurred primarily due to the adverse impact of recently declining oil prices
on current and anticipated future oil and gas development activity.
Equity Method Investments
Equity method investments in joint ventures
are reported as investments in joint venture on the consolidated balance sheets, and our share of earnings or losses in the joint
venture is reported as equity in net income or loss of joint venture in the consolidated statements of operations. We currently
have no remaining investment, but still expect equity distributions from time to time. Our balance sheet currently reflects $161
as part of our accounts receivable balance as of December 31, 2015.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
Lease Obligations
We lease land, buildings, vehicles and
certain equipment under non-cancellable operating leases. Since February 2009, we have leased our corporate headquarters
in Houston, Texas, under a non-cancellable operating lease. Deep Down Delaware leases indoor manufacturing space and leases office,
warehouse and operating space in Houston, Texas and in Morgan City, Louisiana, under non-cancellable operating leases. As a result
of the consolidation of Mako Technology, LLC’s operations into Deep Down Delaware in August 2012, in December 2012, we sub-leased
our leased property in Morgan City, Louisiana to a third party. Additionally, we lease space in Mobile, AL to house our 3.4 ton
carousel system. We also lease certain office and other operating equipment under capital leases; the related assets are included
with property, plant and equipment on the consolidated balance sheets. See Note 13 “Subsequent Events”, of the Notes
to Consolidated Financial Statements, for further explanation.
At the inception of a lease, we evaluate
the agreement to determine whether the lease will be accounted for as an operating or capital lease. The term of the lease used
for such an evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably
assured and failure to exercise such option would result in an economic penalty.
Revenue Recognition
We recognize revenue once the following
four criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery of the equipment has occurred or services
have been rendered, (iii) the price of the equipment or service is fixed or determinable and (iv) collectability of the related
receivable is reasonably assured. Service revenue is recognized as the service is provided, and time and materials contracts are
billed on a bi-weekly or monthly basis as costs are incurred. Customer billings for shipping and handling charges are included
in revenue. Revenues are recorded net of sales taxes.
From time to time, we enter into fixed-price
contracts. The percentage-of-completion method is used as a basis for recognizing revenue on these contracts. We recognize revenue
as costs are incurred because we believe the incurrence of cost reasonably reflects progress made toward project completion.
Provisions for estimated losses on uncompleted
large fixed-price contracts (if any) are recorded in the period in which it is determined it is more likely than not a loss will
be incurred. Changes in job performance, job conditions, and total contract values may result in revisions to costs and income
and are recognized in the period in which the revisions are determined. Unapproved change orders are accounted for in revenue
and cost when it is probable that the costs will be recovered through a change in the contract price. In circumstances where recovery
is considered probable but the revenues cannot be reliably estimated, costs attributable to change orders are deferred pending
determination of contract price.
Costs and estimated earnings in excess
of billings on uncompleted contracts arise when revenues are recorded on a percentage-of-completion basis but cannot be invoiced
under the terms of the contract. Such amounts are invoiced upon completion of contractual milestones. Billings in excess of costs
and estimated earnings on uncompleted contracts arise when milestone billings are permissible under the contract, but the related
costs have not yet been incurred. All contract costs are recognized currently on jobs formally approved by the customer and contracts
are not shown as complete until virtually all anticipated costs have been incurred and the risk of loss has passed to the customer.
Assets and liabilities related to costs
and estimated earnings in excess of billings on uncompleted contracts, as well as liabilities related to billings in excess of
costs and estimated earnings on uncompleted contracts, have been classified as current. The contract cycle for certain long-term
contracts may extend beyond one year, thus complete collection of amounts related to these contracts may extend beyond one year,
though such long-term contracts include contractual milestone billings as discussed above. See Note 12 “Restatement of Quarterly
Information (Unaudited)”, of the Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
Income Taxes
We follow the asset and liability method
of accounting for income taxes. This method takes into account the differences between financial statement treatment and tax treatment
of certain transactions. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect of a change in tax rates is recognized as income or expense in the period that
includes the enactment date.
We record a valuation allowance to reduce
the carrying value of our deferred tax assets when it is more likely than not that some or all of the deferred tax assets will
expire before realization of the benefit or that future deductibility is not probable. The ultimate realization of the deferred
tax assets depends upon our ability to generate sufficient taxable income of the appropriate character in the future. This requires
management to use estimates and make assumptions regarding significant future events such as the taxability of entities operating
in the various taxing jurisdictions. In evaluating our ability to recover our deferred tax assets, we consider all reasonably available
positive and negative evidence, including our past operating results, the existence of cumulative losses in the most recent years
and our forecast of future taxable income. In estimating future taxable income, we develop assumptions, including the amount of
future state, and federal pre-tax operating income, the reversal of temporary differences and the implementation of feasible and
prudent tax planning strategies. These assumptions require significant judgment. When the likelihood of the realization of existing
deferred tax assets changes, adjustments to the valuation allowance are charged in the period in which the determination is made,
either to income or goodwill, depending upon when that portion of the valuation allowance was originally created.
We record an estimated tax liability or
tax benefit for income and other taxes based on what we determine will likely be paid in the various tax jurisdictions in which
we operate. We use our best judgment in the determination of these amounts. However, the liabilities ultimately realized and paid
are dependent upon various matters, including resolution of tax audits, and may differ from amounts recorded. An adjustment to
the estimated liability would be recorded as a provision or benefit to income tax expense in the period in which it becomes probable
that the amount of the actual liability or benefit differs from the recorded amount.
Our future effective tax rates could be
adversely affected by changes in the valuation of our deferred tax assets or liabilities or changes in tax laws or interpretations
thereof. If and when our deferred tax assets are no longer fully reserved, we will begin to provide for taxes at the full statutory
rate. In addition, we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities.
We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision
for income taxes.
Share-Based Compensation
We record share-based awards exchanged
for employee service at fair value on the date of grant and expense the awards in the consolidated statements of operations over
the requisite employee service period. Share-based compensation expense includes an estimate for forfeitures and is
generally recognized over the expected term of the award on a straight-line basis. At December 31, 2015, we had two
types of share-based employee compensation: stock options and restricted stock.
Key assumptions used in the Black-Scholes
model for stock option valuations include (1) expected volatility (2) expected term (3) discount rate and (4) expected dividend
yield. Volumes are low and small trades can have a major impact on prices, so we based our estimates of volatility on a representative
peer group consisting of companies in the same industry, with similar market capitalizations and similar stage of development.
Additionally, we continue to use the simplified method related to employee option grants.
Earnings or Loss per Common Share
Basic earnings or loss per common share
(“EPS”) is calculated by dividing net earnings or loss by the weighted average number of common shares outstanding
for the period. Diluted EPS is calculated by dividing net earnings or loss by the weighted average number of common shares and
dilutive common stock equivalents (stock options) outstanding during the period. Diluted EPS reflects the potential dilution that
could occur if stock options and warrants to purchase common stock were exercised for shares of common stock. In periods where
losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their
inclusion would be anti-dilutive.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
Recently Issued Accounting Standards
Not Yet Adopted
In August 2014, the FASB issued ASU 2014-15,
“Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”).
ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s
ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required
to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as
a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective
for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted.
The Company will adopt the methodologies prescribed by ASU 2014-15 by the date required, and does not anticipate that the adoption
of ASU 2014-15 will have a material effect on its financial position or results of operations.
In May 2014, the FASB issued a new standard
on revenue recognition that supersedes previously issued revenue recognition guidance. This standard provides a five-step approach
to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty
of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in
applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract. The effective date for
this standard was deferred in July 2015 and will now be effective for us beginning in 2018. The standard permits the use of either
the retrospective or cumulative effect transition method; therefore we are evaluating the effect that this new guidance will have
on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined
the effect of the standard on our ongoing financial reporting.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). The amendments in this update require, among other things, that lessees recognize the following for all leases
(with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's obligation to make
lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents
the lessee's right to use, or control the use of, a specified asset for the lease term. Lessees and lessors must apply a modified
retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period
presented in the financial statements. The amendments are effective for interim and annual reporting periods beginning after December
15, 2018. We are currently evaluating the impacts of the amendments to our financial statements and accounting practices for leases.
The components of inventory are summarized
below:
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
Spare parts
|
|
$
|
–
|
|
|
$
|
205
|
|
Reserve for obsolescence
|
|
|
–
|
|
|
|
(205
|
)
|
Work in progress
|
|
|
–
|
|
|
|
10
|
|
Finished goods
|
|
|
3,117
|
|
|
|
3,117
|
|
Inventory, net
|
|
$
|
3,117
|
|
|
$
|
3,127
|
|
The finished goods inventory balance of
$3,117 at December 31, 2015 consists of a 3.5 metric ton portable umbilical carousel which we fabricated and bought back from a
customer in November 2013 and are currently holding for sale.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
NOTE 3:
|
|
COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS
|
Costs, estimated earnings and billings
on uncompleted contracts are summarized below:
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
Costs incurred on uncompleted contracts
|
|
$
|
3,220
|
|
|
$
|
10,500
|
|
Estimated earnings on uncompleted contracts
|
|
|
2,282
|
|
|
|
3,893
|
|
|
|
|
5,502
|
|
|
|
14,393
|
|
Less: Billings to date on uncompleted contracts
|
|
|
(4,194
|
)
|
|
|
(7,585
|
)
|
|
|
$
|
1,308
|
|
|
$
|
6,808
|
|
|
|
|
|
|
|
|
|
|
Included in the accompanying consolidated balance sheets under the following captions:
|
|
|
|
|
|
|
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
$
|
1,354
|
|
|
$
|
6,808
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
(46
|
)
|
|
|
–
|
|
|
|
$
|
1,308
|
|
|
$
|
6,808
|
|
The balance in costs and estimated earnings
in excess of billings on uncompleted contracts at December 31, 2015 and 2014 consisted primarily of earned but unbilled revenues
related to fixed-price projects.
The balance in billings in excess of costs
and estimated earnings on uncompleted contracts at December 31, 2015 consisted primarily of unearned billings related to fixed-price
projects.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
NOTE 4:
|
|
INVESTMENT IN JOINT VENTURE
|
Effective December 31, 2010, we engaged
in a transaction in which all of the operating assets and substantially all of the liabilities of a former subsidiary were contributed,
along with other contributions we made, to the Cuming Flotation Technologies, LLC joint venture (“CFT”) in return for
a 20 percent common unit ownership interest.
On October 7, 2011, CFT consummated a transaction
pursuant to that certain Stock Purchase Agreement (the “Purchase Agreement”), by and between CFT and a Houston-based
company (“Buyer”) pursuant to which Buyer purchased from CFT (i) all of the issued and outstanding shares
of capital stock of Cuming Corporation (“Cuming”), the principal operating subsidiary of CFT, (ii) the shares of 230
Bodwell Corporation, a Massachusetts corporation and subsidiary of Cuming, and (iii) certain assets that, immediately prior to
closing, were acquired by Cuming, for a purchase price of $60,000 (less certain debt and subject to purchase price adjustment for
working capital and potential earn-out payments).
The components of our investment
in joint venture are summarized below:
Investment in joint venture, December 31, 2013
|
|
$
|
468
|
|
Equity in net income of CFT for the year ended December 31, 2014
|
|
|
32
|
|
Cash distribution from CFT for the year ended December 31, 2014
|
|
|
(500
|
)
|
Investment in joint venture, December 31, 2014
|
|
$
|
–
|
|
Equity in net income of CFT for the year ended December 31, 2015
|
|
|
133
|
|
Accrued distribution
|
|
|
(68
|
)
|
Cash distribution from CFT for the year ended December 31, 2015
|
|
|
(65
|
)
|
Investment in joint venture, December 31, 2015
|
|
$
|
–
|
|
The Company accrued a distribution of $93,
which is reported in Equity in net income of joint venture and other income for the year ended December 31, 2015.
NOTE 5:
|
|
PROPERTY, PLANT AND EQUIPMENT
|
Property, plant and equipment consisted of the following:
|
|
|
|
|
|
|
|
Range of
|
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
Asset Lives
|
|
Land
|
|
$
|
1,582
|
|
|
$
|
1,582
|
|
|
|
–
|
|
Buildings and improvements
|
|
|
1,447
|
|
|
|
1,447
|
|
|
|
7 - 36 years
|
|
Leasehold improvements
|
|
|
825
|
|
|
|
696
|
|
|
|
2 - 5 years
|
|
Equipment
|
|
|
15,435
|
|
|
|
14,015
|
|
|
|
2 - 30 years
|
|
Furniture, computers and office equipment
|
|
|
1,468
|
|
|
|
1,289
|
|
|
|
2 - 8 years
|
|
Construction in progress
|
|
|
341
|
|
|
|
1,413
|
|
|
|
–
|
|
Total property, plant and equipment
|
|
|
21,098
|
|
|
|
20,442
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
(10,336
|
)
|
|
|
(8,710
|
)
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
10,762
|
|
|
$
|
11,732
|
|
|
|
|
|
Included in property, plant and equipment
are assets under capital lease of $0 and $253 at December 31, 2015 and 2014, respectively, with related accumulated amortization
of $0 and $72 at December 31, 2015 and 2014, respectively. See Note 7, “Long-term Debt”, of the Notes to Consolidated
Financial Statements for debt associated with these capital leases.
Depreciation expense excluded from cost
of sales in the accompanying consolidated statements of operations was $187 and $158 for the years ended December 31, 2015 and
2014, respectively. Depreciation expense included in cost of sales in the accompanying consolidated statements of operations was
$1,499 and $1,423 for the years ended December 31, 2015 and 2014, respectively.
Construction in progress represents assets
that are not ready for service or are in the construction stage. Assets begin being depreciated once they are placed in service.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
Goodwill represents the excess of the cost
over the net tangible and identifiable intangible assets of acquired businesses.
There was no goodwill at any time during
for the year ended December 31, 2015. The quantitative assessment of goodwill we performed as of December 31, 2014, which
was a Level 3 fair value determination (based on estimated discounted cash flows), indicated that goodwill was impaired. This result
occurred primarily due to the adverse impact of recently declining oil prices on current and anticipated future oil and gas development
activity. We recorded goodwill impairment expense of $4,916 for the year ended December 31, 2014, which eliminated the remaining
goodwill balance.
Long-term debt consisted of the following:
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
Whitney Credit Facility
|
|
$
|
2,747
|
|
|
$
|
5,560
|
|
Capital lease obligations
|
|
|
–
|
|
|
|
55
|
|
Total long-term debt
|
|
|
2,747
|
|
|
|
5,615
|
|
Less: Current portion of long-term debt
|
|
|
(2,747
|
)
|
|
|
(5,615
|
)
|
Long-term debt, net of current portion
|
|
$
|
–
|
|
|
$
|
–
|
|
Credit Facility
Since 2008, we have maintained a credit
facility (the “Facility”) with Whitney. The Facility has been amended and restated several times, most recently
effective June 30, 2015 when we entered into the eighth amendment (“Eighth Amendment”).
The relevant terms of the Eighth Amendment
include:
|
·
|
an extension of the maturity date of the revolving credit facility
(“Revolving Credit Facility”) to June 30, 2016;
|
|
|
|
|
·
|
a modification of the interest rate with respect to the Revolving
Credit Facility to 4.0 percent per annum;
|
|
|
|
|
·
|
a modification of certain financial covenants, specifically the
Leverage Ratio and Fixed Charge Coverage Ratio (see further discussion below); and
|
|
|
|
|
·
|
a requirement that we maintain a compensating balance of $3,900
in our existing interest-bearing account at Whitney, to continue until such time as we have regained compliance with all of our
covenants under the Facility for two consecutive quarters commencing with the quarter ended June 30, 2015.
|
Other current relevant terms of the Facility
include:
|
·
|
a committed amount of $5,000 under the Revolving Credit Facility, subject to a borrowing base
limitation based on eligible trade accounts receivable; the Revolving Credit Facility may be used to borrow cash (at an
interest rate of 4.0 percent per annum) or to issue bank letters of credit (at a fee of 1.0 percent per annum); both cash
borrowings and the issuance of bank letters of credit reduce the available capacity under the Revolving Credit Facility; the
available borrowing and letter of credit capacity under the Revolving Credit Facility at December 31, 2015 was $4,275;
|
|
|
|
|
·
|
a real estate term facility (“RE Term Facility”) of
$2,000, at an interest rate of 4.0 percent per annum, maturing April 15, 2018, with the Company being obligated to make monthly
increasing repayments of principal (along with accrued and unpaid interest thereon) at an amount of $9, beginning April 1, 2013;
|
|
|
|
|
·
|
a carousel term facility (“Carousel Term Facility”)
of $2,200, at an interest rate of 3.5 percent per annum, maturing October 15, 2016, with the Company being obligated to make monthly
repayments of principal of $65 (along with accrued and unpaid interest thereon) beginning July 1, 2014; and
|
|
|
|
|
·
|
outstanding balances under the Facility are secured by all of the
Company’s assets.
|
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
As of December 31, 2015, the Company’s
indebtedness under the Facility consisted of the Revolving Credit Facility, the RE Term Facility, and the Carousel Term Facility
was $0, $1,717, and $1,030, respectively. As of the date of this Report, all of our indebtedness has been fully repaid.
See Note 13 “Subsequent Events”, of the Notes to Consolidated Financial Statements, for further explanation.
As mentioned above, our Facility obligates
us to comply with certain financial covenants. They are as follows:
|
·
|
Leverage Ratio - The ratio of total net debt to consolidated EBITDA
must be less than 3.0 to 1.0; actual Leverage Ratio as of December 31, 2015: 0.0 to 1.0. Our compensating cash balance of
$3,900 offset our outstanding debt which resulted in our ratio of 0.0 to 1.0.
|
|
|
|
|
·
|
Fixed Charge Coverage Ratio - The ratio of consolidated EBITDA
to consolidated net interest expense, plus principal payments on total debt, must be greater than 1.4 to 1.0; actual Fixed Charge
Coverage Ratio as of December 31, 2015: 0.7 to 1.0.
|
|
|
|
|
·
|
Tangible Net Worth - Our consolidated net worth, after deducting
other assets as are properly classified as “intangible assets,” plus 50 percent of net income, after provision for
taxes, must be in excess of $16,700; actual Tangible Net Worth as of December 31, 2015: $23,508.
|
|
|
|
|
·
|
Moreover, we continue to have obligations for other covenants,
including, among others, limitations on issuance of common stock, liens, transactions with affiliates, additional indebtedness
and permitted investments.
|
As of December 31, 2014, we were in compliance
with all of our financial covenants, except for the Fixed Charge Coverage Ratio. Whitney provided us with a waiver for our noncompliance
with this covenant. As of December 31, 2015, we were in compliance with our financial covenants, except for the Fixed Charge Coverage
Ratio. We did not apply for a waiver for our noncompliance due to the full repayment of all of the Company’s indebtedness.
See Note 13 “Subsequent Events”, of the Notes to Consolidated Financial Statements, for further explanation.
Debt Maturities
Maturities of long-term debt as of December
31, 2015 were as follows:
|
|
|
|
Debt Maturities
|
Years ended December 31,:
|
|
|
|
|
2016
|
|
|
$
|
2,747
|
2017
|
|
|
|
–
|
2018
|
|
|
|
–
|
2019
|
|
|
|
–
|
2020
|
|
|
|
–
|
|
|
|
$
|
2,747
|
NOTE 8:
|
|
EARNINGS OR LOSS PER COMMON SHARE
|
The following is a reconciliation of the
number of shares used in the basic and diluted net earnings or loss per common share calculation:
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,841
|
)
|
|
$
|
(5,803
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
15,104
|
|
|
|
15,179
|
|
Effect of dilutive securities
|
|
|
–
|
|
|
|
–
|
|
Denominator for diluted earnings per share
|
|
|
15,104
|
|
|
|
15,179
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share outstanding, basic and diluted
|
|
$
|
(0.12
|
)
|
|
$
|
(0.38
|
)
|
At December 31, 2015 and 2014, there were
outstanding stock options convertible to 275 and 325 shares of common stock, respectively. As of these dates, these options were
anti-dilutive.
NOTE 9:
|
|
SHARE-BASED COMPENSATION
|
We have a share-based compensation plan,
the “2003 Directors, Officers and Consultants Stock Option, Stock Warrant and Stock Award Plan” (the “Plan”).
Awards of stock options and stock granted under the Plan have vesting periods of three years. Some awards of stock have performance
criteria as an additional condition of vesting. Once vested, stock options may be exercised for up to five years. Share-based compensation
expense related to awards is based on the fair value at the date of grant, and is recognized over the requisite expected service
period, net of estimated forfeitures. Under the Plan, the total number of options permitted is 15 percent of issued and outstanding
common shares.
Summary of Nonvested Shares of Restricted
Stock
The following table summarizes the activity
of our nonvested restricted shares for the years ended December 31, 2015 and 2014.
|
|
|
Restricted
Shares
|
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
|
Nonvested at December 31, 2013
|
|
|
|
839
|
|
|
$
|
2.00
|
|
|
Granted
|
|
|
|
30
|
|
|
|
2.00
|
|
|
Vested
|
|
|
|
(352
|
)
|
|
|
1.96
|
|
|
Nonvested at December 31, 2014
|
|
|
|
517
|
|
|
$
|
2.01
|
|
|
Granted
|
|
|
|
600
|
|
|
|
0.38
|
|
|
Vested
|
|
|
|
(253
|
)
|
|
|
2.02
|
|
|
Nonvested at December 31, 2015
|
|
|
|
864
|
|
|
$
|
2.01
|
|
In December 2015, we granted 600 shares
of restricted stock to management, par value $0.001 per share. These restricted shares are service-based and have a fair value
grant price of $0.38 per share, based on the closing price of Deep Down’s common stock on that day (the “2015 Stock
Grant”). The restrictions on the 2015 Stock Grant will lapse with respect to 200 shares on January 1, 2016, 200 shares on
December 14, 2016 and 200 shares on December 17, 2017.
For the years ended December 31, 2015 and
2014, we recognized a total of $517 and $693, respectively, of share-based compensation expense related to restricted stock awards,
which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations. The
unamortized estimated fair value of nonvested shares of restricted stock awards was $456 at December 31, 2015. These costs are
expected to be recognized as expense over a weighted average period of 1.54 years.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
Summary of Stock Options
During the year ended December 31, 2015,
50 unexercised stock options, previously granted in June 2011, were cancelled. Based on the shares of common stock outstanding
at December 31, 2015, there were approximately 2,345 options available for grant under the Plan as of that date. We determine the
fair value of stock options on the date of the grant using the Black-Scholes option pricing model.
For the years ended December 31, 2015 and
2014, we recognized a total of $0 and $69, respectively, of share-based compensation expense related to outstanding stock option
awards, which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.
The unamortized portion of the estimated fair value of outstanding stock options was $0 at December 31, 2015.
The following table summarizes our stock
option activity for the years ended December 31, 2015 and 2014:
|
|
Shares Underlying Options
|
|
|
Weighted- Average Exercise Price
|
|
|
Weighted- Average Remaining Contractual Term (in years)
|
|
Outstanding at December 31, 2013
|
|
|
945
|
|
|
$
|
1.98
|
|
|
|
1.3
|
|
Cancellations & Forfeitures
|
|
|
(620
|
)
|
|
$
|
2.08
|
|
|
|
|
|
Outstanding at December 31, 2014
|
|
|
325
|
|
|
$
|
1.80
|
|
|
|
1.4
|
|
Cancellations & Forfeitures
|
|
|
(50
|
)
|
|
$
|
1.80
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
275
|
|
|
$
|
1.80
|
|
|
|
0.4
|
|
Exercisable at December 31, 2015
|
|
|
275
|
|
|
$
|
1.80
|
|
|
|
0.4
|
|
The aggregate intrinsic value is based
on the closing price of $0.46 on December 31, 2015. As of December 31, 2015, the aggregate intrinsic value of stock options outstanding
and stock options exercisable was $0. The total fair value of stock options vested during the year ended December 31, 2015 was
$0.
The provision for income taxes is comprised
of the following:
|
|
|
Year Ended December 31,
|
|
|
|
|
2015
|
|
|
|
2014
|
|
Federal:
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
4
|
|
|
$
|
19
|
|
Deferred
|
|
|
34
|
|
|
|
(202
|
)
|
Total
|
|
$
|
38
|
|
|
$
|
(183
|
)
|
State:
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
32
|
|
|
$
|
(9
|
)
|
Deferred
|
|
|
(34
|
)
|
|
|
202
|
|
Total
|
|
$
|
(2
|
)
|
|
$
|
193
|
|
Total income tax expense (benefit)
|
|
$
|
36
|
|
|
$
|
10
|
|
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
The provision for income taxes differs from the amount computed
by applying the U.S. statutory income tax rate before income taxes for the reasons set forth below.
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
Income tax benefit at federal statutory rate
|
|
|
34.00%
|
|
|
34.00%
|
State taxes, net of federal expense
|
|
|
0.73%
|
|
|
(3.39)%
|
Return to provision adjustments
|
|
|
(1.08)%
|
|
|
2.06%
|
Goodwill impairment
|
|
|
0.00%
|
|
|
(28.86)%
|
Valuation allowance
|
|
|
(35.60)%
|
|
|
(9.16)%
|
Research and development credits
|
|
|
0.65%
|
|
|
6.49%
|
Other permanent differences
|
|
|
(0.70)%
|
|
|
(0.19)%
|
Other, net
|
|
|
0.00%
|
|
|
(1.12)%
|
Total effective rate
|
|
|
(2.00)%
|
|
|
(0.17)%
|
Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes, as well as operating loss and tax credit carry forwards. The tax effects of the temporary
differences and carry forwards are as follows:
|
|
|
As of December 31,
|
|
|
|
|
2015
|
|
|
|
2014
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
61
|
|
|
$
|
172
|
|
Net operating loss
|
|
|
5,300
|
|
|
|
4,814
|
|
Share-based compensation
|
|
|
1,206
|
|
|
|
1,071
|
|
Investment in joint venture
|
|
|
3,972
|
|
|
|
4,063
|
|
Other
|
|
|
651
|
|
|
|
579
|
|
Total deferred tax assets
|
|
$
|
11,190
|
|
|
$
|
10,699
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization on property, plant and equipment
|
|
$
|
(1,656
|
)
|
|
$
|
(1,797
|
)
|
Amortization of intangibles
|
|
|
70
|
|
|
|
58
|
|
Total deferred tax liabilities
|
|
$
|
(1,586
|
)
|
|
$
|
(1,739
|
)
|
Less: valuation allowance
|
|
|
(9,604
|
)
|
|
|
(8,960
|
)
|
Net deferred tax position
|
|
$
|
–
|
|
|
$
|
–
|
|
We have $15,356 in net operating loss (“NOL”)
carry forwards and $513 in research and development credits available to offset future taxable income. These federal NOL’s
will expire at various dates through 2035. Management analyzed its current operating results and future projections and determined
that a full valuation allowance was needed due to our cumulative losses in recent years. We have no uncertain tax positions at
December 31, 2015. Accordingly, we do not have any accruals for penalties or interest related to our tax returns. Should an examination
or audit arise, we would evaluate the need for an accrual and record one, if necessary. Our tax returns from the tax years ended
December 31, 2010 through December 31, 2014 are open to examination by the IRS.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
NOTE 11:
|
|
COMMITMENTS AND CONTINGENCIES
|
Operating Leases
We lease certain offices, facilities, equipment
and vehicles under non-cancellable operating and capital leases expiring at various dates through 2023.
At December 31, 2015, future minimum contractual lease obligations
were as follows:
|
Years ending December 31,:
|
|
|
|
Operating Leases
|
|
|
2016
|
|
|
$
|
1,361
|
|
|
2017
|
|
|
|
1,155
|
|
|
2018
|
|
|
|
1,154
|
|
|
2019
|
|
|
|
1,090
|
|
|
2020
|
|
|
|
1,080
|
|
|
Thereafter
|
|
|
|
2,610
|
|
|
Total minimum lease payments
|
|
|
$
|
8,450
|
|
Rent expense for the years ended December
31, 2015 and 2014 was $1,447 and $1,508, respectively.
Letters of Credit
Certain customers could require us to issue
standby letters of credit in the normal course of business to ensure performance under terms of contracts or as a form of product
warranty. The beneficiary of a letter of credit could demand payment from the issuing bank for the amount of the outstanding letter
of credit. Letters of credit outstanding at December 31, 2015 and 2014 under the Fifth Amendment with Whitney were $0 and $415,
respectively.
Employment Agreements
Certain of our Executives are employed
under employment agreements containing severance provisions. In the event of termination of an Executive’s employment for
any reason, the Executive will be entitled to receive all accrued, unpaid salary and vacation time through the date of termination
and all benefits to which the Executive is entitled or vested under the terms of all employee benefit and compensation plans, agreements
and arrangements in which the Executive is a participant as of the date of termination.
In addition, subject to executing a general
release in favor of the Company, the Executive will be entitled to receive certain severance payments in the event his employment
is terminated by the Company “other than for cause” or by the Executive with “good reason.” These severance
payments include: (i) a lump sum in cash equal to one to three times the Executive’s annual base salary; (ii) a lump sum
in cash equal to one to two times the average annual bonus paid to the Executive for the prior two full fiscal years preceding
the date of termination; (iii) a lump sum in cash equal to a pro rata portion of the annual bonus payable for the period in which
the date of termination occurs based on the actual performance under the Company’s annual incentive bonus arrangement, but
no less than fifty percent of Executive’s annual base salary; and (iv) if the Executive’s termination occurs prior
to the date that is twelve months following a change of control, then each and every share option, restricted share award and other
equity-based award that is outstanding and held by the Executive shall immediately vest and become exercisable.
Litigation
From time to time we are involved in legal
proceedings arising from the normal course of business. As of the date of this report, we are engaged in one material legal dispute,
arising from the non-payment of equipment rental and services by one of our customers. See Note 12 “Restatement of Quarterly
Information (Unaudited)”, of the Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
NOTE 12:
|
|
RESTATEMENT OF QUARTERLY INFORMATION (UNAUDITED)
|
In December 2014, at the request of a customer,
we delivered a carousel to the customer on a lease or purchase arrangement. We honored this request in order to support its requirement
for a critical umbilical project. At the completion of our customer’s requirement, we were advised by the customer it was
not going to purchase the carousel, so we picked up the carousel and returned it to our facility. We then invoiced the customer
on a rental basis.
The customer has declined to pay the invoices.
We are pursuing collection through arbitration.
Under SEC Staff Accounting Bulletin No.
101 – Revenue Recognition in Financial Statements (SAB 101), “revenue should not be recognized until it is realized
or realizable and earned.” Also according to SAB 101, revenue generally is realized or realizable and earned when all of
the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered,
the seller's price to the buyer is fixed or determinable, and collectability is reasonably assured.
Based on the facts above and the guidelines
of SAB 101, we determined that the revenue in relation to this situation should not have been recognized in the quarters ended
March 31, 2015 and June 30, 2015. As a result, we have reversed the misstated revenue and related receivable from our unaudited
consolidated financial statements.
The following table summarizes the impact
of the revenue reversal on our unaudited consolidated financial statements each quarter:
Consolidated
Statements of Operations impact:
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March
31, 2015
|
|
|
June
30, 2015
|
|
|
June
30, 2015
|
|
|
September
30, 2015
|
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
6,839
|
|
|
|
(1,005
|
)
|
|
|
5,834
|
|
|
|
6,771
|
|
|
|
(235
|
)
|
|
|
6,536
|
|
|
|
13,609
|
|
|
|
(1,240
|
)
|
|
|
12,369
|
|
|
|
19,756
|
|
|
|
(1,240
|
)
|
|
|
18,516
|
|
Gross profit
|
|
|
2,235
|
|
|
|
(1,005
|
)
|
|
|
1,230
|
|
|
|
2,242
|
|
|
|
(235
|
)
|
|
|
2,007
|
|
|
|
4,476
|
|
|
|
(1,240
|
)
|
|
|
3,236
|
|
|
|
6,392
|
|
|
|
(1,240
|
)
|
|
|
5,152
|
|
Operating (loss) income
|
|
|
(230
|
)
|
|
|
(1,005
|
)
|
|
|
(1,235
|
)
|
|
|
172
|
|
|
|
(235
|
)
|
|
|
(63
|
)
|
|
|
(58
|
)
|
|
|
(1,240
|
)
|
|
|
(1,298
|
)
|
|
|
(634
|
)
|
|
|
(1,240
|
)
|
|
|
(1,874
|
)
|
Income (loss) before income
taxes
|
|
|
(291
|
)
|
|
|
(1,005
|
)
|
|
|
(1,296
|
)
|
|
|
214
|
|
|
|
(235
|
)
|
|
|
(21
|
)
|
|
|
(77
|
)
|
|
|
(1,240
|
)
|
|
|
(1,317
|
)
|
|
|
(719
|
)
|
|
|
(1,240
|
)
|
|
|
(1,959
|
)
|
Net income (loss)
|
|
|
(297
|
)
|
|
|
(1,005
|
)
|
|
|
(1,302
|
)
|
|
|
206
|
|
|
|
(235
|
)
|
|
|
(29
|
)
|
|
|
(91
|
)
|
|
|
(1,240
|
)
|
|
|
(1,331
|
)
|
|
|
(730
|
)
|
|
|
(1,240
|
)
|
|
|
(1,970
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per
common share
|
|
|
(0.02
|
)
|
|
|
(0.07
|
)
|
|
|
(0.09
|
)
|
|
|
0.01
|
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.08
|
)
|
|
|
(0.09
|
)
|
|
|
(0.05
|
)
|
|
|
(0.08
|
)
|
|
|
(0.13
|
)
|
Diluted
earnings (loss) per common share
|
|
|
(0.02
|
)
|
|
|
(0.07
|
)
|
|
|
(0.09
|
)
|
|
|
0.01
|
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.08
|
)
|
|
|
(0.09
|
)
|
|
|
(0.05
|
)
|
|
|
(0.08
|
)
|
|
|
(0.13
|
)
|
Notes to Consolidated Financial Statements
for the Years ended December 31, 2015 and 2014
(in thousands, except per share amounts)
Consolidated Balance Sheets impact:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
As of
|
|
|
|
March
31, 2015
|
|
|
June
30, 2015
|
|
|
September
30, 2015
|
|
|
|
As Reported
|
|
|
Revenue Adjustment
|
|
|
As Restated
|
|
|
As Reported
|
|
|
Revenue Adjustment
|
|
|
As Restated
|
|
|
As Reported
|
|
|
Revenue Adjustment
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
8,065
|
|
|
|
(1,005
|
)
|
|
|
7,060
|
|
|
|
11,153
|
|
|
|
(1,240
|
)
|
|
|
9,913
|
|
|
|
10,160
|
|
|
|
(1,240
|
)
|
|
|
8,920
|
|
Total assets
|
|
|
35,574
|
|
|
|
(1,005
|
)
|
|
|
34,569
|
|
|
|
35,885
|
|
|
|
(1,240
|
)
|
|
|
34,645
|
|
|
|
31,855
|
|
|
|
(1,240
|
)
|
|
|
30,615
|
|
Accumulated deficit
|
|
|
(47,878
|
)
|
|
|
(1,005
|
)
|
|
|
(48,883
|
)
|
|
|
(47,672
|
)
|
|
|
(1,240
|
)
|
|
|
(48,912
|
)
|
|
|
(48,311
|
)
|
|
|
(1,240
|
)
|
|
|
(49,551
|
)
|
Total Equity
|
|
|
35,574
|
|
|
|
(1,005
|
)
|
|
|
34,569
|
|
|
|
35,885
|
|
|
|
(1,240
|
)
|
|
|
34,645
|
|
|
|
31,855
|
|
|
|
(1,240
|
)
|
|
|
30,615
|
|
NOTE 13:
|
|
SUBSEQUENT EVENTS
|
We have evaluated subsequent events through
the date the consolidated financial statements were filed with the Securities and Exchange Commission.
On March 10, 2016, we completed the sale
of buildings and approximately 10 acres of land in Channelview, Texas for a sale price of $3,800.
Additionally in March 2016, we fully repaid
the outstanding indebtedness under the Facility with Whitney. See Note 7 “Long-Term Debt”, of the Notes to Consolidated
Financial Statements, for further explanation of our credit facility.