Koil Energy Solutions (KLNG) 10-Q 13 Nov 14 2014 Q3 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 10, 2014
Document And Entity Information	'	'
Entity Registrant Name	'Deep Down, Inc.	'
Entity Central Index Key	'0001110607	'
Document Type	'10-Q	'
Document Period End Date	30-Sep-14	'
Amendment Flag	'false	'
Current Fiscal Year End Date	'--12-31	'
Is Entity a Well-known Seasoned Issuer?	'No	'
Is Entity a Voluntary Filer?	'No	'
Is Entity's Reporting Status Current?	'Yes	'
Entity Filer Category	'Smaller Reporting Company	'
Entity Common Stock, Shares Outstanding	'	15,130,601
Document Fiscal Period Focus	'Q3	'
Document Fiscal Year Focus	'2014	'

CONDENSED_CONSOLIDATED_BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)	Sep. 30, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
ASSETS	'	'
Cash	$5,987	$5,260
Accounts receivable, net of allowance of $565 and $1,222, respectively	5,241	4,979
Inventory, net	3,452	254
Costs and estimated earnings in excess of billings on uncompleted contracts	5,398	5,847
Prepaid expenses and other current assets	346	274
Total current assets	20,424	16,614
Property, plant and equipment, net	12,419	15,395
Investment in joint venture	0	468
Intangibles, net	83	119
Goodwill	4,916	4,916
Other assets	255	790
Total assets	38,097	38,302
LIABILITIES AND STOCKHOLDERS' EQUITY	'	'
Accounts payable and accrued liabilities	3,146	2,788
Deferred revenues	20	0
Billings in excess of costs and estimated earnings on uncompleted contracts	70	201
Current portion of long-term debt	945	1,716
Total current liabilities	4,181	4,705
Long-term debt, net	2,906	3,218
Total liabilities	7,087	7,923
Stockholders' equity:	'	'
Preferred stock, $0.001 par value, 10,000 shares authorized, 0 shares issued and outstanding	0	0
Common stock, $0.001 par value, 24,500 shares authorized, 15,131 and 15,261 shares issued and outstanding, respectively	15	15
Additional paid-in capital	72,402	72,142
Accumulated deficit	-41,407	-41,778
Total stockholders' equity	31,010	30,379
Total liabilities and stockholders' equity	$38,097	$38,302

CONDENSED_CONSOLIDATED_BALANCE1

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
In Thousands, except Share data, unless otherwise specified
ASSETS	'	'
Accounts receivable allowance	$565	$1,222
Stockholders' equity:	'	'
Preferred stock par value	$0.00	$0.00
Preferred stock shares authorized	10,000,000	10,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value	$0.00	$0.00
Common stock shares authorized	24,500,000	24,500,000
Common stock issued	15,131,000	15,261,000
Common stock outstanding	15,131,000	15,261,000

CONDENSED_CONSOLIDATED_STATEME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		9 Months Ended
In Thousands, except Share data, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Income Statement [Abstract]	'	'	'	'
Revenues	$8,462	$8,639	$20,472	$23,953
Cost of sales:	'	'	'	'
Cost of sales	4,649	5,806	11,974	14,735
Depreciation expense	349	358	1,072	1,057
Total cost of sales	4,998	6,164	13,046	15,792
Gross profit	3,464	2,475	7,426	8,161
Operating expenses:	'	'	'	'
Selling, general and administrative	2,181	2,082	7,121	6,311
Depreciation and amortization	47	35	130	100
Total operating expenses	2,228	2,117	7,251	6,411
Operating income	1,236	358	175	1,750
Other income (expense):	'	'	'	'
Interest expense, net	-47	-52	-156	-143
Equity in net income of joint venture	32	0	32	1
Other, net	-10	13	343	27
Total other income (expense)	-25	-39	219	-115
Income before income taxes	1,211	319	394	1,635
Income tax benefit (expense)	-32	62	-23	-8
Net income	$1,179	$381	$371	$1,627
Net (loss) income per share:	'	'	'	'
Basic	$0.08	$0.03	$0.02	$0.15
Diluted	$0.08	$0.03	$0.02	$0.15
Weighted-average shares outstanding:	'	'	'	'
Basic	15,131,000	11,691,000	15,195,000	10,728,000
Diluted	15,131,000	11,739,000	15,195,000	10,729,000

CONDENSED_CONSOLIDATED_STATEME1

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2013
Cash flows from operating activities:	'	'
Net income	$371	$1,627
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	'	'
Equity in net income of joint venture	-32	-1
Share-based compensation	564	471
Bad debt expense (credit)	48	-19
Depreciation and amortization	1,202	1,157
Gain on disposal of property, plant and equipment	-308	-21
Changes in assets and liabilities:	'	'
Accounts receivable	-488	101
Costs and estimated earnings in excess of billings on uncompleted contracts	449	-3,343
Prepaid expenses and other current assets	-72	-109
Other assets	128	19
Inventory	-81	-12
Accounts payable and accrued liabilities	358	-999
Deferred revenues	20	32
Billings in excess of costs and estimated earnings on uncompleted contracts	-131	-187
Net cash provided by (used in) operating activities	2,028	-1,284
Cash flows from investing activities:	'	'
Purchases of property, plant and equipment	-1,427	-451
Proceeds from sale of property, plant and equipment	906	33
Cash paid for deposits	-47	-446
Repayments on notes receivable	13	9
Distribution from joint venture	500	500
Net cash provided by investing activities	-55	-355
Cash flows from financing activities:	'	'
Proceeds from issuance of common stock, net of issuance costs	0	7,647
Cash paid for purchase of our common stock	-126	0
Proceeds from bank term loans	2,200	1,020
Cash paid for deferred financing costs	-37	-45
Compensating balance	-3,900	0
Repayments of long-term debt	-3,283	-2,562
Net cash (used in) provided by financing activities	-5,146	6,060
Change in cash	-3,173	4,421
Cash and cash equivalents, beginning of period	5,260	1,523
Cash and cash equivalents, end of period	5,987	5,944
Supplemental schedule of significant noncash transactions:	'	'
Common Stock surrendered by employees related to payroll taxes on vested restricted stock awards	178	34
Reclassification of equipment from property, plant and equipment to finished goods inventory	3,117	0
Reclassification of land and buildings purchase price from deposits in other assets to property, plant and equipment	$500	$0

1_BASIS_OF_PRESENTATION

1. BASIS OF PRESENTATION	9 Months Ended
	Sep. 30, 2014
Accounting Policies [Abstract]	'
BASIS OF PRESENTATION	'
	Basis of Presentation
	The accompanying unaudited condensed consolidated financial statements of Deep Down, Inc. and its wholly-owned subsidiaries (“Deep Down,” “we,” “us” or the “Company”) were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC” or the “Commission”) pertaining to interim financial information and instructions to Form 10-Q.  As permitted under those rules, certain notes or other financial information that are normally required by United States generally accepted accounting principles (“US GAAP”) can be condensed or omitted.  Therefore, these statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2013, filed on March 28, 2014 with the Commission.
	Preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosed amounts of contingent assets and liabilities and the reported amounts of revenues and expenses. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, then the actual amounts may differ from those included in the accompanying condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.
	Principles of Consolidation
	The unaudited condensed consolidated financial statements presented herein include the accounts of Deep Down, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.
	Segments
	For the nine months ended September 30, 2014 and 2013, our operating segments have been aggregated into a single reporting segment.
	Recently Issued Accounting Standards
	In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The guidance states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, which would be our fiscal year ending December 31, 2014. This guidance should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The impacts that adoption of the ASU is expected to have on the Company’s consolidated financial statements and related disclosures are nominal.
	In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. 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. This new standard is effective for us beginning in the year 2017. Early application is not permitted. 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.

2_LIQUIDITY_AND_FINANCIAL_COND

2. LIQUIDITY AND FINANCIAL CONDITION	9 Months Ended
	Sep. 30, 2014
Risks and Uncertainties [Abstract]	'
LIQUIDITY AND FINANCIAL CONDITION	'
	Historically, we have 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”. During the third quarter of 2013, we issued an additional 4,444 shares of common stock resulting in net cash proceeds of $7,628. As a result of our credit facility, the private placement and cash we expect to generate from operations, we believe we will have adequate liquidity to meet our future operating requirements.

3_INVENTORY

3. INVENTORY	9 Months Ended
	Sep. 30, 2014
Inventory Disclosure [Abstract]	'
3. INVENTORY	'
	The components of inventory are summarized below:
		30-Sep-14			31-Dec-13
	Spare parts	$	205		$	209
	Reserve for obsolescence		(136	)		–
	Work in progress		31			45
	Finished goods		3,352			–
	Inventory, net	$	3,452		$	254
	The finished goods inventory balance of $3,352 at September 30, 2014 consists primarily 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.

4_BILLINGS_COSTS_AND_ESTIMATED

4. BILLINGS, COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS	9 Months Ended
	Sep. 30, 2014
Billings Costs And Estimated Earnings On Uncompleted Contracts	'
BILLINGS, COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS	'
	The components of billings, costs and estimated earnings on uncompleted contracts are summarized below:
		30-Sep-14			31-Dec-13
	Costs incurred on uncompleted contracts	$	5,823		$	14,496
	Estimated earnings on uncompleted contracts		3,175			5,539
			8,998			20,035
	Less: Billings to date on uncompleted contracts		(3,670	)		(14,389	)
		$	5,328		$	5,646
	Included in the accompanying condensed consolidated balance sheets under the following captions:
	Costs and estimated earnings in excess of billings on uncompleted contracts	$	5,398		$	5,847
	Billings in excess of costs and estimated earnings on uncompleted contracts		(70	)		(201	)
		$	5,328		$	5,646
	The balances in costs and estimated earnings in excess of billings on uncompleted contracts at September 30, 2014 and December 31, 2013 consisted of earned but unbilled revenues related to fixed-price projects.
	The balances in billings in excess of costs and estimated earnings on uncompleted contracts at September 30, 2014 and December 31, 2013 consisted of unearned billings related to fixed-price projects.

5_INVESTMENT_IN_JOINT_VENTURE

5. INVESTMENT IN JOINT VENTURE	9 Months Ended
	Sep. 30, 2014
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract]	'
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 wholly-owned subsidiary, Flotation Technologies, Inc. (“Flotation”), were contributed, along with other contributions we made, to a joint venture entity named Cuming Flotation Technologies, LLC (“CFT”) in return for a 20 percent common unit ownership interest in CFT.
	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 a purchase price adjustment for working capital and potential earn-out payments).  We are entitled to 20 percent of future potential earn-out proceeds from the sale.
	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 nine months ended September 30, 2014		32
	Distribution of cash from CFT, September 2014		(500	)
	Investment in joint venture, September 30, 2014	$	–

6_PROPERTY_PLANT_AND_EQUIPMENT

6. PROPERTY, PLANT AND EQUIPMENT	9 Months Ended
	Sep. 30, 2014
Property, Plant and Equipment [Abstract]	'
PROPERTY, PLANT AND EQUIPMENT	'
	The components of net property, plant and equipment are summarized below:
		30-Sep-14			31-Dec-13			Range of Asset Lives
	Land	$	1,682		$	1,582			–
	Buildings and improvements		1,971			1,571			7 - 36 years
	Leasehold improvements		696			602			2 - 10 years
	Equipment		14,046			17,840			2 - 30 years
	Furniture, computers and office equipment		1,318			1,329			2 - 8 years
	Construction in progress		1,086			189			–
	Total property, plant and equipment		20,799			23,113
	Less: Accumulated depreciation and amortization		(8,380	)		(7,718	)
	Property, plant and equipment, net	$	12,419		$	15,395

7_LONGTERM_DEBT

7. LONG-TERM DEBT	9 Months Ended
	Sep. 30, 2014
Debt Disclosure [Abstract]	'
LONG-TERM DEBT	'
	Long-term debt consisted of the following:
	Whitney Credit Agreement
	Since 2008, we have maintained a credit facility (the “Facility”) with Whitney. The Facility has been amended and restated several times, most recently effective April 15, 2014. The current relevant terms of the Facility include:
		·	a committed amount under the revolving credit facility (“Revolving Credit Facility”) of $5,000, at an interest rate of 3.5 percent per annum, maturing June 30, 2015;
		·	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) starting at $8, 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.
	As of September 30, 2014, the Company’s indebtedness under the Revolving Credit Facility, the RE Term Facility, and the Carousel Term Facility was $0, $1,841, and $ 1,940, respectively.
	Our credit agreement with Whitney obligates us to comply with the following financial covenants:
		·	Leverage Ratio - The ratio of total debt to consolidated EBITDA must be less than 3.0 to 1.0; actual Leverage Ratio as of September 30, 2014: 5.12 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 1.5 to 1.0; actual Fixed Charge Coverage Ratio as of September 30, 2014: 0.49 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 September 30, 2014: $30,192.
		·	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.
	On December 31, 2013, we were in compliance with all of these financial covenants. However, at June 30, 2014, we were not in compliance with the Leverage Ratio and Fixed Charge Coverage Ratio covenants. We received a waiver from Whitney for this non-compliance and for the non-compliance with these covenants for the quarter ended September 30, 2014. In exchange for these waivers, we paid Whitney a $5 fee, and are required to maintain a minimum compensating balance of $3,900 in our existing interest-bearing account at Whitney. This requirement will continue until such time as we have regained compliance with these covenants, which is projected to be December 31, 2014.
	Other Debt
	On November 5, 2013, we entered into a Purchase and Sale Agreement (“PSA”) with a customer to buy back a 3.5 metric ton portable umbilical carousel, which we had fabricated specifically for this customer. The PSA calls for purchase price of $3,293 to be paid in 24 monthly installments of approximately $137, commencing November 5, 2013 through October 5, 2015. We used the proceeds of the Whitney Carousel Term Facility to retire this obligation, and the balance at September 30, 2014 was $0.

8_SHAREBASED_COMPENSATION

8. SHARE-BASED COMPENSATION	9 Months Ended
	Sep. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]	'
SHARE-BASED COMPENSATION	'
	We have a share-based compensation plan, the “2003 Directors, Officers and Consultants Stock Option, Stock Warrant and Stock Award Plan” (the “Plan”). Awards of common stock and options to purchase common stock granted under the Plan have vesting periods of three years and options are exercisable for two years once fully vested. Some awards of stock have performance criteria as an additional condition of vesting. Share-based compensation expense related to awards is based on the fair value at the date of grant, and is recognized over the vesting periods, net of estimated forfeitures. The value of performance-based awards is recognized as expense only when it is considered probable that the performance criteria will be met. Under the Plan, the total number of options permitted is 15 percent of issued and outstanding common shares.
	Summary of Shares of Restricted Stock
	During the nine months ended September 30, 2014 and 2013, we recognized a total of $495 and $347, respectively, of share-based compensation expense related to restricted stock awards, which is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. The unamortized portion of the estimated fair value of restricted stock awards was $873 at September 30, 2014.
	Summary of Stock Options
	For the nine months ended September 30, 2014 and 2013, we recognized a total of $69 and $124, respectively, of share-based compensation expense related to outstanding stock option awards, which is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. The unamortized portion of the estimated fair value of non-vested stock options was $0 at September 30, 2014.

9_INCOME_TAXES

9. INCOME TAXES	9 Months Ended
	Sep. 30, 2014
Income Tax Disclosure [Abstract]	'
INCOME TAXES	'
	Income tax expense during interim periods is based on applying the estimated annual effective income tax rate to interim period operations. The estimated annual effective income tax rate may vary from the statutory rate due to the impact of permanent items relative to our pre-tax income, as well as by any valuation allowance recorded.  We employ an asset and liability approach that results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial basis and the tax basis of those assets and liabilities. A valuation allowance is established when it is more likely than not that some of the deferred tax assets will not be realized.  Although our future projections indicate that we may be able to realize some of these deferred tax assets, due to the degree of uncertainty of these projections, at September 30, 2014 management has recorded a full deferred tax asset valuation allowance.

10_COMMITMENTS_AND_CONTINGENCI

10. COMMITMENTS AND CONTINGENCIES	9 Months Ended
	Sep. 30, 2014
Commitments and Contingencies Disclosure [Abstract]	'
COMMITMENTS AND CONTINGENCIES	'
	Litigation
	From time to time we are involved in legal proceedings arising in the normal course of business. As of the date of this Report, we were not involved in any material actual or pending legal proceedings.
	Operating Leases
	We lease certain offices, facilities, equipment and vehicles under non-cancellable operating and capital leases expiring at various dates through 2023.
	Letters of Credit
	Certain of our customers could require us to issue a standby letter of credit (“LC”) in the ordinary course of business to ensure performance under terms of a contract or as a form of product warranty. The beneficiary could demand payment from the issuing bank for the amount of the outstanding letter of credit. There were $415 in LC’s outstanding at September 30, 2014 and December 31, 2013.

11_EARNINGS_PER_COMMON_SHARE

11. EARNINGS PER COMMON SHARE	9 Months Ended
	Sep. 30, 2014
Net (loss) income per share:	'
EARNINGS PER COMMON SHARE	'
	Basic earnings per share (“EPS”) is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net income (loss) by the weighted-average number of common shares and dilutive common stock equivalents (stock options) outstanding during the period. Diluted EPS reflects the potential dilution that could occur if options to purchase common stock were exercised for shares of common stock.
	At September 30, 2014 and 2013, there were outstanding stock options convertible to 325 and 945 shares of common stock, respectively. There were no dilutive securities included in the computation of diluted earnings per share for the three and nine months ended September 30, 2014 because either the average market prices of our common stock were below the option exercise prices, or if the average market prices were higher than the option exercise prices, the dilution calculation yielded a result that added no additional shares.

12_STOCKHOLDERS_EQUITY

12. STOCKHOLDERS' EQUITY	9 Months Ended
	Sep. 30, 2014
Stockholders' equity:	'
STOCKHOLDERS' EQUITY	'
	Common Stock
	The number of shares of common stock outstanding is as follows:
	Balance, December 31, 2013	15,261
	Shares purchased and retired February 28, 2014	(66	)
	Restricted stock award issued May 1, 2014	30
	Shares surrendered and retired June 30, 2014	(94	)
	Balance, September 30, 2014	15,131

1_BASIS_OF_PRESENTATION_Polici

1. BASIS OF PRESENTATION (Policies)	9 Months Ended
	Sep. 30, 2014
Accounting Policies [Abstract]	'
Basis of Presentation	'
	The accompanying unaudited condensed consolidated financial statements of Deep Down, Inc. and its wholly-owned subsidiaries (“Deep Down,” “we,” “us” or the “Company”) were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC” or the “Commission”) pertaining to interim financial information and instructions to Form 10-Q.  As permitted under those rules, certain notes or other financial information that are normally required by United States generally accepted accounting principles (“US GAAP”) can be condensed or omitted.  Therefore, these statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2013, filed on March 28, 2014 with the Commission.
	Preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosed amounts of contingent assets and liabilities and the reported amounts of revenues and expenses. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, then the actual amounts may differ from those included in the accompanying condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.
Principles of Consolidation	'
	The unaudited condensed consolidated financial statements presented herein include the accounts of Deep Down, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.
Segments	'
	For the nine months ended September 30, 2014 and 2013, our operating segments have been aggregated into a single reporting segment.
Recently Adopted Accounting Standards	'
	In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The guidance states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, which would be our fiscal year ending December 31, 2014. This guidance should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The impacts that adoption of the ASU is expected to have on the Company’s consolidated financial statements and related disclosures are nominal.
	In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. 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. This new standard is effective for us beginning in the year 2017. Early application is not permitted. 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.

3_INVENTORY_Tables

3. INVENTORY (Tables)	9 Months Ended
	Sep. 30, 2014
Inventory Disclosure [Abstract]	'
Inventory	'
		30-Sep-14			31-Dec-13
	Spare parts	$	205		$	209
	Reserve for obsolescence		(136	)		–
	Work in progress		31			45
	Finished goods		3,352			–
	Inventory, net	$	3,452		$	254

4_BILLINGS_COSTS_AND_ESTIMATED1

4. BILLINGS, COSTS AND ESTIMATED EARNINGS (Tables)	9 Months Ended
	Sep. 30, 2014
Billings Costs And Estimated Earnings On Uncompleted Contracts	'
COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS	'
		30-Sep-14			31-Dec-13
	Costs incurred on uncompleted contracts	$	5,823		$	14,496
	Estimated earnings on uncompleted contracts		3,175			5,539
			8,998			20,035
	Less: Billings to date on uncompleted contracts		(3,670	)		(14,389	)
		$	5,328		$	5,646
	Included in the accompanying condensed consolidated balance sheets under the following captions:
	Costs and estimated earnings in excess of billings on uncompleted contracts	$	5,398		$	5,847
	Billings in excess of costs and estimated earnings on uncompleted contracts		(70	)		(201	)
		$	5,328		$	5,646

5_INVESTMENT_IN_JOINT_VENTURE_

5. INVESTMENT IN JOINT VENTURE (Tables)	9 Months Ended
	Sep. 30, 2014
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract]	'
Investment in Joint Venture	'
	Investment in joint venture, December 31, 2013	$	468
	Equity in net income of CFT for the nine months ended September 30, 2014		32
	Distribution of cash from CFT, September 2014		(500	)
	Investment in joint venture, September 30, 2014	$	–

6_PROPERTY_PLANT_AND_EQUIPMENT1

6. PROPERTY, PLANT AND EQUIPMENT (Tables)	9 Months Ended
	Sep. 30, 2014
Property, Plant and Equipment [Abstract]	'
Net Property, plant and equipment	'
		30-Sep-14			31-Dec-13			Range of Asset Lives
	Land	$	1,682		$	1,582			–
	Buildings and improvements		1,971			1,571			7 - 36 years
	Leasehold improvements		696			602			2 - 10 years
	Equipment		14,046			17,840			2 - 30 years
	Furniture, computers and office equipment		1,318			1,329			2 - 8 years
	Construction in progress		1,086			189			–
	Total property, plant and equipment		20,799			23,113
	Less: Accumulated depreciation and amortization		(8,380	)		(7,718	)
	Property, plant and equipment, net	$	12,419		$	15,395

12_STOCKHOLDERS_EQUITY_Tables

12. STOCKHOLDERS' EQUITY (Tables)	9 Months Ended
	Sep. 30, 2014
Stockholders' equity:	'
Number of shares of common stock outstanding	'
	Balance, December 31, 2013	15,261
	Shares purchased and retired February 28, 2014	(66	)
	Restricted stock award issued May 1, 2014	30
	Shares surrendered and retired June 30, 2014	(94	)
	Balance, September 30, 2014	15,131

3_INVENTORY_Details

3. INVENTORY (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Inventory Disclosure [Abstract]	'	'
Spare parts	$205	$209
Reserve for obsolescence	-136	0
Work in progress	31	45
Finished goods	3,352	0
Inventory, net	$3,452	$254

4_BILLINGS_COSTS_AND_ESTIMATED2

4. BILLINGS, COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Billings In Excess Of Costs And Estimated Earnings On Uncompleted Contracts And Deferred Revenues	'	'
Costs incurred on uncompleted contracts	$5,823	$14,496
Estimated earnings on uncompleted contracts	3,175	5,539
Gross costs and estimated earnings	8,998	20,035
Less: Billings to date on uncompleted contracts	-3,670	-14,389
Costs incurred plus estimated earning less billings on uncompleted contracts	5,328	5,646
Included in the accompanying condensed consolidated balance sheets under the following captions:	'	'
Costs and estimated earnings in excess of billings on uncompleted contracts	5,398	5,847
Billings in excess of costs and estimated earnings on uncompleted contracts	-70	-201
Total costs and estimated earnings and billings in excess of cost on uncompleted contracts	$5,328	$5,646

5_INVESTMENT_IN_JOINT_VENTURE_1

5. INVESTMENT IN JOINT VENTURE (Details) (USD $)	3 Months Ended		9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract]	'	'	'	'
Investment in joint venture - Beginning balance	'	'	$468	'
Equity in net income of CFT	32	0	32	1
Distribution of cash from CFT	'	'	-500	-500
Investment in joint venture - Ending balance	$0	'	$0	'

5_INVESTMENT_IN_JOINT_VENTURE_2

5. INVESTMENT IN JOINT VENTURE (Details Narrative) (USD $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2013
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract]	'	'
Future earn-out proceeds from the sale	20.00%	20.00%
Earn-out proceeds	$0	$0

5_PROPERTY_PLANT_AND_EQUIPMENT

5. PROPERTY, PLANT AND EQUIPMENT (Details) (USD $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Total property, plant and equipment	$20,799	$23,113
Less: Accumulated depreciation and amortization	-8,380	-7,718
Property, plant and equipment,Net	12,419	15,395
Leasehold Improvements [Member]	'	'
Total property, plant and equipment	696	602
Range of Asset lives	'2-10 years	'
Equipment [Member]	'	'
Total property, plant and equipment	14,046	17,840
Range of Asset lives	'2-30 years	'
Furniture, computers and office equipment [Member]	'	'
Total property, plant and equipment	1,318	1,329
Range of Asset lives	'2-8 years	'
Building and improvements [Member]	'	'
Total property, plant and equipment	1,971	1,571
Range of Asset lives	'7-36 years	'
Land [Member]	'	'
Total property, plant and equipment	1,682	1,582
Construction in Progress [Member]	'	'
Total property, plant and equipment	$1,086	$189

7_LONGTERM_DEBT_Details_Narrat

7. LONG-TERM DEBT (Details Narrative) (USD $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2014
Revolving Credit Facililty [Member]	'
Line of credit maximum borrowing capacity	$5,000
Credit line interest rate	3.50%
Credit line maturity date	15-Jun-15
Line of credit outstanding	0
RE Term Facility [Member]	'
Line of credit maximum borrowing capacity	2,000
Credit line interest rate	4.00%
Credit line maturity date	15-Apr-18
Line of credit outstanding	1,841
Carousel Term [Member]	'
Line of credit maximum borrowing capacity	2,200
Credit line interest rate	3.50%
Credit line maturity date	15-Oct-16
Line of credit outstanding	$1,940

8_SHAREBASED_COMPENSATION_Deta

8. SHARE-BASED COMPENSATION (Details Narrative) (USD $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2013
Stock Options [Member]	'	'
Unamortized portion of fair value of non-vested stock options	$0	'
Stock Options [Member] | Selling, General and Administrative Expenses [Member]	'	'
Share-based compensation expense	69	124
Restricted Stock Awards [Member]	'	'
Unamortized portion of restricted stock awards	873	'
Restricted Stock Awards [Member] | Selling, General and Administrative Expenses [Member]	'	'
Share-based compensation expense	$495	$347

10_COMMITMENTS_AND_CONTINGENCI1

10. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)	Sep. 30, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Commitments and Contingencies Disclosure [Abstract]	'	'
Letters Of Credit Outstanding	$415	$415

Disclosure_11_EARNINGS_PER_COM

Disclosure - 11. EARNINGS PER COMMON SHARE (Details Narrative) (Stock Options [Member])	Sep. 30, 2014	Sep. 30, 2013
Stock Options [Member]	'	'
Outstanding shares available to convert to common stock	325	945

12_STOCKHOLDERS_EQUITY_Details

12. STOCKHOLDERS' EQUITY (Details) (USD $)	9 Months Ended
In Thousands, except Share data, unless otherwise specified	Sep. 30, 2014
Stockholders' equity:	'
Beginning balance	15,261
Shares purchased and retired	-66
Restricted stock award	$30
Shares surrendered and retired	($94)
Ending balance	15,131